Take these steps to match consumer expectations with what you have to offer
Previously, I introduced the concept of the Marketing Circle and the importance of understanding the value of each of its components—components that are interdependent; none should be thought of as an independent activity.
During 2015, in collaboration with industry experts, we’ll focus this article series on each Marketing Circle component, demonstrating how—by making this circle seamless and congruent—you can achieve a higher level of sales revenue.
Before anything else, you must be proactive and know why you are building, what you are building, and where you are building it. This is your foundation; the market research part of the circle. Unlike the line from the movie “Field of Dreams”—if you build it they will come—you must build homes that you can sell at an optimum rate without having overspent marketing dollars to offset improper positioning in the marketplace.
My guest this month has unparalleled credentials. Research economist Dr. Joey Von Nessen is involved in both the private sector and in academic research. He specializes in economic and marketing research in the home building industry and oversees the research activities of RESH Marketing. In addition to his full-time duties at RESH, he is a consultant with the Division of Research in the Moore School of Business at the University of South Carolina.
According to Dr. Von Nessen: As the housing industry regains its footing, builders and developers face increased competitive pressures and market changes. The housing landscape is littered with the refuse of the recession in the form of stagnant communities, abandoned foundations, and an exodus of experienced agents seeking greener pastures. A strong foundation of research upon which to base your operations has never been more important.
Sales success will come from matching consumer expectations (demand) with a product delivered at a price that supports the strategic goals of the company (supply). Securing actionable information upon which to base your operation increases chances of success and minimizes risk. In its most basic form, marketing research is an attempt to quantify a relationship among four dynamic variables: the market in which you operate; the consumer you elect to serve; the competition for your customer; and the capabilities and products of your company. In a perfect world, offering a unique product that meets or exceeds customer expectations at a price that includes a suitable profit is the ideal. However, that rarely happens.
Instead, we’re presented with the task of managing four marketing variables: the four P’s of place, product, price, and promotion. Establishing the appropriate marketing mix of these four variables and the logical progression through the process is important. I suggest five sequential steps.
1. Define the Market
It’s difficult to be all things to all people, so first decide which market is attractive to you. This is usually described as a geographic area. Realize that there are natural boundaries included in each geographic area. For example, consider counties within a state, cities within a county, or areas within a city, which can often be defined by using ZIP codes. These submarkets tend to have some consistent characteristics that predict their ability to absorb new homes, and they should be providing a level of new-home sales sufficient to make your effort worthwhile.
2. Measure Consumer Capabilities
Basic information available from U.S. Census data can help you to identify the income levels, age of housing stock, and the number, size, and age of families living in defined geographic regions. These demographic characteristics provide insight into the purchasing capabilities of potential consumers in your target market. Keep in mind that employment is the single most important indicator of housing demand, so both the volume and characteristics of jobs are critically important.
3. Determine Consumer Preferences
An examination of past sales can provide a wealth of information. The most popular builder or community is doing the best job of satisfying consumer expectations. What are the most popular results? Single-family detached or attached? How large? What amenities? What prices? All provide an image of consumer preferences. Be sure to examine changes over time. Individual snapshots are OK, but longer-run trends provide a much better predictor of future results.
4. Identify Competitive Product
As you identify and study past results, it becomes easier to establish the companies that will be your competition. It isn’t necessary to compete with every company in the target market. In most cases, you’ll observe about three competitors that will stand out based upon product, pricing, or geographic proximity to your anticipated operations. If you anticipate operating in more than one submarket, it’s likely that you will identify a different competitive mix in each.
5. Structure Your Marketing Mix
Place, product, price, and promotion: Those are the marketing variables you have at your disposal. The order of decision-making is important. Pick your location first. It’s the most permanent decision you’ll make and, therefore, the most difficult to change. Based on the information found in your analysis, determine the product you can offer and the price you will request. Then structure your communications efforts to make your targeted consumer aware of what you have to offer.
There’s one final point that’s crucial to remember: Your initial review of the situation—your market research—is a static picture of a dynamic situation. The only certainty is that things change, and often change quickly. That’s why I suggest that you regularly engage in market research, which will allow you to quickly identify changes in your market—in time for you to react appropriately. The specifics of how to react to these changes will be the subject of our next installment.
Dr. Von Nessen can be reached at email@example.com.