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IMPACT OF MARKETING STRATEGIES ON THE SUCCESS OF SMALL RESIDENTIAL DEVELOPERS By JULIA WILLIAMS A THESIS PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE INT BUILDING CONSTRUCTION UNIVERSITY OF FLORIDA 2007 O 2007 by Julia Williams To my family: Mom, Dad, and Lilly For their constant encouragement and support in all of my academic endeavors. ACKNOWLEDGMENTS I want to thank a few important people that have helped me directly and indirectly succeed in completing this thesis. Of course, this would not have been possible without the guidance and support of my committee. Many thanks go to Dr. Raymond Issa, Dr. Ian Flood, and Dr. Douglas Lucas. Dr. Issa, has been my biggest sponsor since my first day in Grad School at Rinker. He is never one to let me go a couple of days without seeing him and making sure that everything is going okay. The concern never went unnoticed and I appreciate the fact that we have teachers who care as much as he does. Dr. Flood is always a calm and collected source of supervision, despite just welcoming a new member to his family. Dr Lucas has been a great recent addition to the Rinker Family and I will miss the office visits and his great stories of a wise and experienced war veteran and business man. I want to thank Dottie Beaupied for putting up with my increasingly frequent trips to her office. Her assistance has been integral in the completion of not only this thesis, but also for the entirety of my time in Rinker. I want to thank my roommate, confidant, and partner in crime, Courtney. I never would have gotten through this without her and her insatiable desire for coffee. And last but certainly not least, I want to thank the most loving family anyone could ever hope for. Their constant support has given me the opportunity to become the person that I am today and no words could ever describe how much I appreciate everything they have done for me. I love them: Mom, Daddy, and my little Lilly-Kins! TABLE OF CONTENTS page ACKNOWLEDGMENTS .............. ...............4..... LIST OF TABLES ............ ...... ._ ...............7.... LIST OF FIGURES .............. ...............8..... AB S TRAC T ............._. .......... ..............._ 10... CHAPTER 1 INTRODUCTION ................. ...............11.......... ...... Statement of Problem ................. ...............11................ Obj ectives of Study ................. ...............11................ Overview ................. ...............11................. 2 RESEARCH METHODOLOGY .............. ...............13.... Introducti on ................. ...............13................. Basis for Research .............. ...............13.... Data Collection Medium............... ...............13. Data Analysis............... ...............14 Limitations ................. ...............14................. Conclusions............... ..............1 3 LITERATURE REVIEW ................. ...............16................ Promoting, Marketing, and Selling.................. ..................1 Construction, Not a Business of Building: a Business of People ................. ............... .....16 Marketing for Residential Builders and Developers .............. ...............17.... Defining Specialization ................ ...............17......__. ..... Developing Client Base ................... ...............18.............. Defining Profiles of Target Markets .........__. ........... ...............18.. Defining Best Practices in Reaching Target Clients .............. ...............19.... Marketing Consulting Firms Specializing in Construction .............. ...............19.... Tools Used to Reach Potential Clients .............. ...............20.... General Company Tools............... ...............20. Corporate logo development ................ ...............20........... .... Company package .............. ...............21.... Company brochure .............. ...............22.... W eb designs .............. ...............22.... Corporate advertising .............. ...............23.... Newsletters and bulletins .............. ...............24.... Relationship marketing .............. ...............24.... Development Specific Tools .............. ...............25.... Development logo .............. ...............25.... Development brochure .............. ...............26.... S al es centers .............. ...............27.... Signage ................. ...............28................. Direct m ail ................. ...............28.......... ...... Promotional events ................. ...............29................. A Complete Marketing Program .............. ...............30.... Defining Profitability of a Marketing Program ................ ........ ......... ................30 4 RE SULT S .............. ...............39.... Introducti on ................. ...............39................. Client Profile............... ...............39 Proj ect Inform ation ................... ........ ...... ... ...............40.... Analysis and Discussion by Marketing Tool ...._ ......_____ .......___ ...........4 Analysis of Marketing System by Client Profile ...._ ......_____ .......___ ..........4 5 CONCLUSIONS AND RECOMMENDATIONS .............. ...............52.... Conclusions............... ..............5 Recommendations............... ............5 APPENDIX: BUILDER INTERVIEW QUESTIONS ................. ...............54................ LIST OF REFERENCES ................. ...............56................ BIOGRAPHICAL SKETCH .............. ...............58.... LIST OF TABLES Table page 4-1 Client Profie Information, Builder A............... ...............43... 4-2 Client Profie Information, Builder B .............. ...............43.... 4-3 Proj ect Information, Builder A ................. ...............43.............. 4-4 Proj ect Information, Builder B ................. ...............43.............. 4-5 Profitability Analysis per Tool: Retirement Client Profile ................. .......................44 4-6 Profitability Analysis per Tool: Young Professional Client Profile ........._..... ..............44 LIST OF FIGURES Figure page 3-1 The Construction Business Differentiation Triangle. ............. ...............32..... 3-2 Company Logo................ ...............32. 3-3 Company Package ................. ...............33........... .... 3-4 Company Brochure. ............. ...............33..... 3-5 Typical Cost per Thousand (CPM) of Maj or Media Buys. ................ ............ .........34 3-6 Company Newsletter............... ...............3 3-7 Company Logo................ ...............36. 3-8 Development Brochure ................ ...............36........... .... 3-9 Sales Center .............. ...............37.... 3-10 Sales Center Wall Display .............. ...............37.... 3-11 Signage ................. ...............38................. 3-12 Direct Mail, Die Cut Card............... ...............38.. 4-1 Corporate Logo Development Profitability .............. ...............45.... 4-2 Company Package Profitability .............. ...............45.... 4-3 Development Logo Development Profitability ................. ...............46........... ... 4-4 Web Design Profitability .............. ...............46.... 4-5 Newsletter Profitability ................. ...............47........... .... 4-6 Relationship Marketing Profitability .............. ...............47.... 4-7 Company Brochure Profitability ................. ...............48................ 4-8 Corporate Advertising Profitability .............. ...............48.... 4-9 Development Brochure Profitability ................. ...............49................ 4-10 Sales Center Profitability ................. ...............49.......... .... 4-11 Signage Profitability .............. ...............50.... 4-12 Promotional Event Profitability .............. ...............50.... 4-13 Monthly Home Sales for Builder A ................. ...............51........... .. 4-14 Monthly Home Sales for Builder B .............. ...............51.... Abstract of Thesis Presented to the Graduate School of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Master of Science in Building Construction PROFIT POTENTIAL INT MARKETING MIXTURES FOR SMALL RESIDENTIAL DEVELOPMENT BUILDERS By Julia Williams May 2007 Chair: Raymond Issa Cochair: lan Flood Major: Building Construction The residential development industry is a profitable market if in fact the units in the development can be sold and in a timely fashion. The large residential construction firms of the twenty-first century have realized the importance of the promotion of services and defining a target market in which to advertise their services. The smaller residential development builders in today's industry are slowly catching up to the marketing bandwagon. The emergence of these specialized marketing firms is the basis for my study. My study explored the profitability of marketing mixes developed by marketing consulting firms for small residential builders. These marketing firms specialize in customizing a set of marketing tools to reach the target market most effectively for each. The profitability of the use of these firms' services is indisputable, but the extent of exactly how much profit is being obtained from the services utilized for a particular development is in question. The information collected during this study will help other builders to appreciate the profits that are realized from the services of the marketing firm. Interviews conducted with two builders comparing a pair of similar proj ects with the variable of the marketing tools were conducted to determine the amount of the added profits and the expeditious returns on the initial marketing expenditure. CHAPTER 1 INTTRODUCTION Statement of Problem In today's construction industry, there exists a fair amount of residential builders who believe that marketing and sales schemes are not necessary and the capital investment is spending on frivolous items. These are the builders who have to bid work to drive sales volume, who do not have a loyal client base, and who are more than likely to go out of business. Marketing a specialized product in the business world today is at the heart of every company. These naive builders need to realize that "a small investment in sales and marketing will generate a big return over time toward [their] bottom line" (Hedley 2006). Objectives of Study The obj ective of this study is to determine the profitability of marketing tools implemented by a marketing consulting firm for small residential development builders. A specific mixture of tools to be used for a particular proj ect can be determined after a thorough assessment of a target market is completed. Only then can a client profie be created and analyzed. The profitability of the use of these firms' customized tools is indisputable, but the extent of exactly what profit percentage is being obtained from each tool for a particular development is in question. This information will help other builders appreciate the profits that are realized from the services of the marketing firm. Overview In Chapter 2 the research methodology used in this study is described in detail. Chapter 3 contains a literature review pertaining to marketing in general, relation to the construction industry, client bases, the emerging trend of specialized marketing consulting firms, marketing tools used in residential development, applying the tools to a specific target market, and profit potential analysis procedures. Chapter 4 contains an analysis and summary of the data obtained. Finally, Chapter 5 presents conclusions from the analysis of data as well as makes some recommendations for future areas of study. CHAPTER 2 RESEARCH METHODOLOGY Introduction Today's small residential development builders are beginning to realize the importance of defining a target market and adapting a sales system to promote the differentiation of their firm in relation to the target market' s specialized needs. In efforts to try and recruit potential customers, builders are learning the added benefits of employing marketing companies which specialize in residential development promotion to ensure that pre-construction sales of homes are realized in full and often in accelerated time periods. Basis for Research The goal for this research study is to determine the profitability of marketing mixtures for small residential development builders. A new trend of firms specializing in marketing consultation for residential development builders has emerged in recent years. The profitability derived from the use of these firms' services is indisputable, but the extent of exactly how much profit is being obtained from the services utilized for a particular development is in question. Data Collection Medium It was decided that the most effective way to determine the profitability of marketing services was to interview companies who had employed a specialized marketing consulting firm on a development proj ect to create sets of data which will be used in case studies produced for each proj ect. The interviews were conducted over the phone with a builder' s representative. The two residential builders were chosen from a list acquired from one particular consulting firm who offered a wide array of services. The questions asked were directed toward data for two of the builder' s proj ects of relatively the same size and target market, the variable being that one proj ect (Proj ect B) used the marketing firm's services with the proj ect which did not employ the marketing services (Proj ect A) acting as the control for the research. Data Analysis Two separate sets of data were collected from the builders, one for each of the proj ects for each builder. After careful review of marketing tools used in the industry and offered by the consultation firm the interview questions were developed (Appendix). The questions were divided into two categories: Client Profile and Development Information. The obj ective of the Client Profile questions was to define the target market that the development is designed to attract in order to analyze the marketing techniques planned by the consultation firm. The Development Information questions were intended to highlight the factors used in determining marketing profitability. These factors are (Barr 1995)as follows: * Marketing tools used * The cost associated with each tool * An approximation of the number of prospective buyers reached by each tool * The number of homes sold, total and per month * The average price of a home in the development during the specified period The data received from these questions were constrained by a specific time period, the 18 months of pre-construction. The data from the two sets were analyzed by comparison and also the profitability of each tool relative to the total profitability was determined. Microsoft Excel was used to process the data and to create a visual representation of the results. Limitations This research focused on builders in one region and does not represent the entire population of residential development builders, but only the data from the participating companies. The other limitation of this study is rooted in the fact that some factors are approximations as the exact number of prospective clients who were exposed to marketing tools cannot be known. The approximations are discussed in further detail in the literature review portion of this thesis. Conclusions This research was conducted to determine the profitability of marketing tools customized for a small residential development builder by a specialized marketing consultation firm. This information will help other builders to appreciate the profits that are realized from the services of the marketing firm. Interviews conducted with two builders comparing a pair of similar proj ects with marketing tools as a variable were conducted to determine the extent of the added profits and the expeditious returns on the initial marketing expenditure. CHAPTER 3 LITERATURE REVIEW Promoting, Marketing, and Selling The term marketing was first defined in 1937 by the American Marketing Association as "those activities involved in the flow of goods and services from the point of production to the point of consumption." (American Marketing Association 2007). The definition was modified to read "an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders" (American Marketing Association 2007). The change in the original version is due to the fact that some believe that the point if production is far too late in a product' s life to start promoting it, marketing should influence the product being made. Conversely the point of consumption is definitely not the time to stop marketing the product in order to retain loyal clients. Developing a marketing scheme leads to using promotional mediums for a firm to elevate and accelerate sales. There is an old adage in sales that says "No sales...no company," in today's increasingly competitive construction industry, nothing sells itself (Smyth 1999). Therefore, a strong sales program, through market research and varied promotional mediums, is fundamental to the life, health and wealth of the company. Construction, Not a Business of Building: a Business of People The construction industry is driven by the people who have a want for buildings to be erected and is then realized by the individuals who coordinate the work of others to accomplish the assembly of those buildings. The product being marketed in building construction is the service of putting together the efforts of others to achieve a tangible Einal product, the building. The interactions between contractors and clients are at the heart of every transaction made to complete the new building. Mastering the acquisition and maintenance of the interactions between those two groups of people is what distinguishes a successful builder from an unsuccessful builder. Professional exchanges are only the beginning of communications that are exchanged with the client. A builder must understand that the only way to obtain and retain clients is to develop personal relationships making this not a business of building, but a business of people. Marketing for Residential Builders and Developers Home building is a specialized market in building construction. The challenge residential builders and developers face in selling homes is an intangible concept. The use of videos, renderings, and floor plans can help a client visualize the final product. Builders differ vastly in the size of the company ranging from single-person operations to companies with hundreds of employees all over the globe (Barr 1995). The larger companies have caught on to the trend of market differentiation and have employed marketing professionals or in the best case scenario created an entire marketing department. The smaller firms are beginning to adopt the new ideas to obtain new clients while maintaining existing clients. Defining Specialization In the residential construction industry, there exists a trilogy of attributes which can be found in most construction companies: superior service, low prices, and high quality (Figure 3- 1). The most profitable companies in the current business world focus on reaching an edge of the triangle while most residential builders aim for the middle making themselves known as a "j ack of all trades and a master of none" (Hedley 2006). Home builders are different than the average company in that all of the attributes are required by most clients and a push in just one direction would be quite detrimental to a company. In order to create a degree of separation from the average, a builder one must chose a specialization. This can literally be an extra focus on one of the differentiating attributes, or it can be by selecting a specific market niche such as waterfront homes with the highest attention to hurricane protection. A differentiation from the general industry allows a company to market themselves as an expert in whichever field they chose. Once the specialization of the company has been adopted, the company can focus on delivering the specialization to the best of their ability. A company can also be set apart from the rest of the competition by offering something more or something different. The main obj ective in differentiation is to make the potential customers aware of why they should only use this particular company. More than one specialization is suitable, and sometimes desirable, however, completely separate marketing schemes must be developed for each differentiated business sector within a company (Sobel 2001). The clients for each of the specialized proj ect types are different and must be tended to differently . Developing Client Base To have a successful marketing and sales scheme it is essential to know your target market. The customer for the specialized market which has been created should have been the main focus for the differentiation from the rest of the competitors in the market. The intended market must be attainable to the company and the needs of the customer should also be familiar to the employees. Defining Profiles of Target Markets The target clients should have a clear profile. In the residential building world, the demographics of the clients in a particular market will be similar enabling the marketing tactics to be focused in ways which the clients will intercept the promotional efforts. Demographic factors that should be analyzed are age, income, gender, marital status, family size, and terms of occupancy. These basic characteristics will inform rest of their personality, called their lifestyle preferences, such as the school system, infrastructure requirements, religious facilities, and development amenities for example (Sobel 2003). In residential construction, the client base is basically divided into two categories: first time buyers, such as young professionals or young families and move-up buyers, such as empty- nesters or retirees (Butera, 1987). The needs and desires of the two groups differ in that the first time buyer is looking for relations to schools, work location, playgrounds, and shopping centers along with Einancing provided while the move-up buyers might be more concerned with proximity to clubhouses, waterfront, health care centers, and a community where gatherings are fostered along with large lots and privacy. The first time buyers are more looking for economical homes and have a short but concise list of needs to be fulfilled. The move-up bu ers have a lon er list of wants that they are looking for in a home or develop ment. Defining Best Practices in Reaching Target Clients Meeting the needs of a specified client base requires different techniques in marketing. Each individual builder' s techniques should vary in term of the client base. For example, if the client base is retirees it might not be in the best interest of the company to have a strictly Internet-based marketing plan. However, if a company was trying to target young professionals, technology-based promotional strategies would be more accommodating. Marketing Consulting Firms Specializing in Construction With marketing being such an important factor in selling homes, residential builders have to stretch limited budgets to make the most profit per dollar spent. In order to achieve the highest profit potential for restricted resources, employment of marketing consultating firms specializing in new-home construction and neighborhood developments have become an increasing trend (Creative Marketing Services, Inc. 2007). The expertise of these firms can help eliminate less effective marketing tools and the use of inexperienced staff members of the builder' s team in terms of marketing. Most of these specialized firms offer a wide range of products with the builder having the opportunity to utilize the perfect combination of services to meet the needs of their marketing endeavor (Creative Marketing Services, Inc. 2007). The specialized marketing firms understand the demands of the target markets and the best way to promote the services and products the builder is trying to sell. Tools Used to Reach Potential Clients Within the world of marketing techniques, each medium has differing effects on the overall marketing plan. The diverse range of the common tools used to promote in the residential markets is broken into General Company Tools and Proj ect Specific Tools used to reach potential clients. Within these two narrowed categories each tool brings apparent advantages and disadvantages to the complete marketing program. General Company Tools General company tools are used by the company to help the client identify the company and to build a brand in the mind of the client and to emphasize the specializations offered by the company (Butera 1987). These mediums should be made to be distributed in the short term (six months to a year) and the long term (three to five years). The General Company Tools are what sparks initial interest in the company from the potential client. Corporate logo development Design of a logo or logosytle is essential in catching the attention of potential clients and appealing to existing clients. The logo should be a reflection of the individuals in the specified target market. For example if the company is trying to market themselves to a stylish, high-end user the logo should resemble that market (Figure 3-2). The use of a tag line should be incorporated with a logo. The tag line "give[s] additional emphasis to a logo or logostyle. They synthesize in a few words the company's mission, philosophy or professional specialty" (Barr 1995). The use of the logo along with the tag line should be implemented in all printed materials. The repetition of exposure in the tag line with the logo gives the symbol or name of the company something to stand for in addition to just the name. The advantages of a company logo are that one can * Imprint the brand of the company in the clients' mind * Create a common thread to be implanted within all aspects of the company's imaging * Instill a sense of pride in employees The disadvantages of logo creation are that it can * Be detrimental to the sales of the community if it is completed poorly * Become very time consuming, tedious, and stressful Company package The company package is a compilation of materials to be utilized by a company in day to day business communications. Printed obj ects to be included in the package include folders, tabs, envelopes, labels, letterhead, report papers, and marketing papers (Figure3-3). These items are only a limited list of materials that could be included, but that should include at least these items. The advantages of a company package are that it can * Create a cohesive set of materials to continuously remind the recipient of the brand * Enable the user to generate an organized packet of business materials * Allow the user to be consistent in presentation The disadvantages of a company package are that it can * Have a high cost of design * Have a high cost of printing and re-printing * Disable the company from changing anything on the materials until the resources are exhausted Company brochure The brochure made for the company "is a sales-supportive vehicle that communicates an idea of [the company's] experience, [the] staff, [the] work quality, and briefly [the ] organization's underlying philosophy" (Barr 1995). The company brochure is the centerpiece of the General Company Tools. The brochure should not only have photos and descriptions of past proj ect history, but it should convey the personality of the company and be personalized to the target audience (Figure3-4). The advantages of the brochure are that it can * Provide and introduction to new clients * Remind clients of total capabilities * Become a cross-selling tool for existing clients * Become a source of inspiration and renewed pride for employees The disadvantages of the brochure are that it can * Fail to compete with newer electronic formats * Become to broad in nature to entice a potential client * Prevent relationships from being made in just the exchange of a brochure. Web designs The emergence of the internet has created a form of marketing that has grown tremendously in the past decade. "As a business investment, the establishment of a website is one of the most cost-effective marketing tools available to a firm in terms of reach and exposure to potential clients when compared to other traditional forms of advertising, communications, and promotion" (Society for Marketing Professional Services 2000). Websites allow potential clients to gain immediate access to information about a company. The advantages of web designs are that they can * Work for the company at all hours of the day and everyday of the year. * Give the perception of a contemporary company in today's competitive marketplace * Allow changes to proj ects and company details to be made quickly The disadvantages of web designs are that * Computer literacy is still on the rise and access is still limited to those who have computer access * Complicated graphics of the construction industry are displayed differently in different systems * Maintaining a website can be costly Corporate advertising Corporate advertising is "purchased space or time...it appears when you want it to and exactly how you want it to" (Barr 1995). Advertising's most important factors are to build brand recognition, familiarity, customer retention, while maintaining market share, and improving employee morale (Ehrlich 2004). There are many media in which advertising can be distributed such as television (cable and broadcast), radio magazines, newspapers and the internet. The typical cost per thousand is the lowest for daytime broadcast television and the highest for daily newspapers (Figure 3-5). "The classic theory of advertising is that it is based on awareness, interest, desire, and action (AIDA). First you have to get the target' s attention; then you have to provide a reason to listen to your message; the message needs to stimulate the desire for the product; and finally, the target needs to buy whatever it is you are selling" (Ehrlich 2004). The most commonly used form of advertising in residential construction is in magazine subscriptions (Barr 1996). The advantages of advertising are that it can * Be tailored to audiences needs * Placement is very intentional and deliberate The dis advantages of advertising are that it can * Not be very cost effective * Become cluttered (in print) with other ads from competitors so that ads are over looked * Trends such as TiVo are eliminating commercials on television all together. Newsletters and bulletins A newsletter is defined as a publication that is distributed at regular intervals. The can have any format, focus, or frequency but they must be current and regular. (Floyd 1997). Client newsletters are produced for several reasons some of which include providing valuable information, enhancing the reputation of the company, promoting the services offered by the company, providing continuous communications, demonstrating the capabilities of the firm, rewarding clients by featuring their projects, showcasing staff and proj ect awards, to introduce new services or proj ects, and most importantly to increase sales with current clients (Society for Marketing Professional Services 2000). The information contained in the newsletter has to have relevance for the perspective reader, must be valuable and timely (Figure 3-6). A good balance of news and features is a good way to please a wide array of readers (Barr 1995). The advantages of newsletters are that they can * Update existing clients on company news * Allow the company to break into new markets * Showcase award and build client trust The disadvantages of newsletters are that they can * Rarely reach potential new customers * Seem weak if the company does not have any relevant news at that time Relationship marketing According the theory of Customer Equity, "the customer is a financial asset that companies and organizations should measure, manage, and maximize just like any other asset" (Blattenberg et al. 2001). Historically, trends in all types of management have shown that the focus has been on the management of costs or the growth of revenues. The management of customer equity balances the two, carefully evaluating the profitability and return on investment of marketing investment while creating market based growth (Davis 1999). Customer management, however, can only occur if a company has customers who repeatedly come back to the company to build their buildings. Companies must build relationships with clients through trust. Once a trust is built, the customer can be identified as a loyal customer; and once a loyal customer is determined, the profitability of that loyal customer can be assessed (Hedley 2006). Trust can only begin to be built between two people over time and personal face-to-face interaction. The more time which is invested into a relationship the more trust is to be built. When a customer finds they can trust a contractor they will have a natural tendency to want to do business with that contractor again and again. The advantages of relationship marketing are that it can * Be rewarding for employees building relationships as much as it is for the clients. * Build client trust The disadvantages of relationship marketing are that it can * Be very costly * Be time comsuming Development Specific Tools Development specific tools are designed to highlight the special characteristics and qualities which set a particular residential development apart from other similar communities. These tools are specific to a particular proj ect and entice the client to not only be interested in the company but the product that is the development' s homes. Development logo The development logo is very important to the success of the sales of the units within the community. The logo will not only be what people use to identify the development far into the future, but it will also be used to initially entice the client to consider the community. The logo should communicate graphically the core obj ectives that the development intends to achieve. Creative Marketing Services Inc., in Atlanta, Georgia, created a logo for a development which wanted to promote a natural, rustic experience (Figure 3-7) and achieved the goal by incorporating native specimen in a rustic toned logo. The advantages of development logo creation are that it can * Become the basis for all other marketing techniques implemented for the development. * Creates a brand image for the development in the clients' eyes. There really are no disadvantages to creating a development logo. It is believed to be the best tool to be implemented in a development's marketing plan. Development brochure The development brochure is similar to the company brochure in that it is used to convey not only visual representation of the product being produced, but it also has an underlying tone which is delivered to the potential client (Figure3-8). The writing and content in the brochure is extremely important. "The common wisdom is that a client will spend only a minute or two on your brochure glance at the photographs, read the heads and subheads, scan the client list, or proj ect list, and maybe read a paragraph or two. This may be true in many cases, so make the best use of these elements to give a quick and accurate picture of your [proj ect] at a glance" (Society for Marketing professional Services 2000). The advantages of the development brochure are that one can * Easily convey a brief message about the development * Give potential clients a tangible medium to take away with them The disadvantages of the development brochures are that one can: * Discourage face to face initial interaction with the sales team * Not be updated with new development proceedings at regular intervals Sales centers The sales center is a very significant portion of the marketing package in promoting the development. Creative Marketing Services Inc. defines specific minimal requirements that a sales center should encompass which give a potential buyer the best depiction of how the final product will be built. The minimum requirement they desire in sales centers they produce is that a near perfect replica of the structure and interior spaces that would be seen in a home in the development be created. The client should get an authentic feel for the aesthetics of the buildings (Figure 3-9). The furnishings should be pleasing to the touch and nothing should be too sparse or overly decorated either. The level of sophistication should warrant the appropriate tone for the development. Scale models of the development as a whole as well as models of the homes should be displayed in a central location. Other visual aids can be helpful as well, such as lifestyle pictures of potentially happy residents indulging in all that the development has to offer (Smyth 1999). These should be clear visual renderings or photographs which are accented by task lighting (Figure 3-10). A new trend in audiovisual technology called Building Information Modeling (BIM) to give clients a three- dimensional tour of a rendering of the models. "Through a combination of high-resolution photography, video, technology and architectural and design treatments, the sales center will give people a first-hand experience of what it will be like to call the development home" (Creative Marketing Services, Inc. 2007) The advantages of the sales center are that it can * Give the potential client an accurate depiction of the new homes to be built * Create space to conduct business for the development * Act as a hub for all pre-construction / construction services. Similar to the development logo the sales center does not have any substantial disadvantages. The sales center is the heart of the promotional tools for the development. Sign age Similarly to the brochure, the signage for the development has very limited space for content and has to be strategically planned. "The sign is meant to identify the property and the key obj ectives of the development while still maintaining the aesthetic integrity proposed for the overall look for the community" (Hedley 2006). The sign has to be particularly placed where it has maximum exposure to potential clients (Figure 3-11). The advantages of the signage are that one can * Mark the boundary of the development * Catch the attention of drivers passing by who might not have known about the development The disadvantages of signage are that one can * Be vague and not enticing * Show prices which may be a deterrent for potential buyers Direct mail "Direct mail allows you to target your marketing efforts to selected prospective clients" (Society for Marketing Professional Services 2000).Not only can a company target exactly who receives this information but it is extremely reliable. This is increasingly important to residential developers who have received referrals from existing customers. More than any other marketing communications medium, direct mail demands concise, convincing words that communicate in a flash and sell in no uncertain terms...direct mail is a complex blend of advertising, public relations and sales promotion showmanship. It relies on advertising's one-two punch of art and copy to snare a reader' s attention. It draws from public relations the advantage of conveying information at length and in detail. (Barr 1995) Direct mail can come in many different formats including, but not limited to, flyers, post cards, newsletters, multi-media, holiday cards, and posters (Figure 3-12) The advantages of the direct mail are that it can * Provide enormous options for effects which can be sent * Be cost effective due to the relatively low postage costs * Be very affordable because production costs are low The disadvantages of direct mail are that it can * Yield incorrect addresses * Annoy older clients on the mailing list who do not have a need for new developments * Be hard to come up with lists Promotional events Promotional events can range from open houses, ground breaking, dinners and meetings to seminars, giveaways holidays, and ceremonies. "If executed correctly, special events can cast a light on an organization' s human side, personalize the organization and pull off the printed page and out of the office building, and reveal it' s character and vitality" (Society for Marketing Professional Services 2000). Promotional events are a chance for the client to see that the community they are joining is not only about the tangible structures but also has a pleasurable face as well. The customer can see that not only are they buying a house but an experience. The advantages of promotional events are that one can * Provide a relaxing casual atmosphere for all involved * Reward existing clients while giving potential clients perspective The disadvantages of promotional events are that one can * Be very time and labor intensive * Require a space to hold events * Require large production costs A Complete Marketing Program Deciding on a complete marketing package to use in promoting the sale of units inside the residential development is the most vital part in reaching the target clients. The specialized marketing firm analyzes all the options and the market to come up with the optimal combination of services. Most companies utilize the same Development Specific Tools: logo creation, brochure, sales center, and development signage. The use of other mediums, General Company and Development Specific, is specifically tailored to each situation and profitability potential. Defining Profitability of a Marketing Program The profitability of the marketing program utilized is determined using a six step process: * Determine the number of prospects contacted over a fixed time period from a completed acquisition campaign * Measure the marketing and servicing costs associated with contacting and selling to the prospects * Determine the number of prospects who became customers * Compute the sales revenue and gross margin for the new customers' first set of purchases * Compute the acquisition equity of the entire pool of customers by subtracting the costs calculated in step 2 from the revenues calculated in step 4. Note that this equity number can be negative. * Divide the total acquisition equity by the number of customers to determine the average equity per customer (Blattberg et al. 2001). Some of the numbers used in the previous steps are approximations. According to Blattberg et al. (2001), approximations are not desirable by accountants and financial analysts. The argument is that profitability from customer acquisitions or marketing "cannot be measured because highly precise accounting numbers do not exist." The authors claim that Even when exact numbers are absent, it is better to be roughly right and to utilize the concept of [profitability] than not to measure it and to operate an enterprise using insufficient indicators....Such indicators may be more accurately measured, but they are less relevant managerially and strategically. Thus it is often necessary to approximate accounting and financial numbers when trying to measure profit levels and marketing expenses for historical cohorts of customers. (Blattberg et al. 2001) Thle Construction Businless Differentiation Trianglle Superior Selrvice Low Prices High~ Qualityr Figure 3-1 The Construction Business Differentiation Triangle. Source: George Hedley, "Construction Business Best Practices Series, Step 8: Marketing and Sales Systems," 2006, Construction Business Owner, August 2006, Birmingham, Alabama d Figure 3-2 Company Logo. Source: Creative Marketing Services, Inc. 2007 http://www. cre ativemarketi ng servi ce s.net ..br do you hav'E time to find it? Figure 3-3 Company Package. Source: Promotion Strategies for Design and Construction Firms (Barr; 1995) TR Waltestro~~ntDelpent Figure3-4 Company Brochure. Source: Promotion Strategies for Design and Construction Firms (Barr; 1995) Figure 3-5 Typical Cost per Thousand (CPM) of Maj or Media Buys. Source: Magazine Publishers of America "Readership of Advertising by Unit Type, 2003" http ://www. magiztin e.org/Adverti si ng_andPIB /Ad_Trend s_andMagazineHandb oo k/2009.cfm Typical Cost per Thousand (CPMI) of Mlajor Mledia Buys 0 Daily Newspaper Primetime Broadcast W/ Magazines Daytime Broadcast W/ $5 $10 $15 $20 $25 assualismars:ma t aI~~~PIP~llummItanammaraxa -~~~~ -am 9-na ~ ~ - PLAN i RL~fWr COM*I&IIDII~ hn~l~i*u o~,arv Undm~lhB )Kirriure Iwn~bld-~ c~,~ o,,iui~. v., 4,iu u~r 1P" 18 (I"n-r-nll..* Y.~mmiru ri r!' --t; r -'' 1$ J; s~ rdi I I it i \l 1. hI \PI P~.-; ~~ r ~;: -~ :~ - .. .-c.., ..-. ~... ~..* -. __ ii ~r. I~I.. [S IG.".:'- ' .~ .. ~ ~.;; r r~-~ ~ ..~ "'"'" ':~ '" -1 -~ .....I ,,~.,., ,..... .~. Figure 3-6 Company Newsletter Source: Promotion Strategies for Design and Construction Firms (Barr; 1995) PROCESS Amnerican Landscape: Image and Agendfa H.:. ..' .: ~E~a~~-~drr.snu~~ i~d~n~cl~odurrr Pl~i7(.lliiC I~t6j:.th-rc iFii.) V~h~l ~re :he ilrrcl in rod.lt I~crd~~i~~jr;nolibua Ir-d~ir~ocdi4rh? a PI.3,Z A. INDF**:, ill.ilR1 ..- Figure 3-7 Company Logo. Source: Creative Marketing Services, Inc. 2007 http://www. cre ativemarketi ng servi ce s.net Figure 3-8 Development Brochure. Source: Creative Marketing Services, Inc. 2007 http://www. cre ativemarketi ng servi ce s.net Figure 3-9 Sales Center. Source: Creative Marketing Services, Inc. 2007 http://www. cre ativemarketi ng servi ce s.net Figure 3-10 Sales Center Wall Display. Source: Creative Marketing Services, Inc. 2007 http://www. cre ativemarketi ng servi ce s.net 1 LI t- r Figure 3-11 Signage. Source: Creative Marketing Services, Inc. 2007 http://www. cre ativemarketi ng servi ce s.net Figure 3-12 Direct Mail, Die Cut Card. Source: Promotion Strategies for Design and Construction Firms (Barr; 1995) CHAPTER 4 RESULTS Introduction The results of the interviews conducted with the two residential development builders is presented in four sections: client profiles for each of the developments, information pertaining to each proj ect, analysis of each marketing tool used, and finally an analysis of the entire marketing systems in relation to each client profile. Client Profile The client profiles for each development under a particular builder were intended to be similar. The two builders selected for the study chose two developments which mirrored each other except for the marketing involved. The first builder' s (Builder A) client profiles for the developments defined the clients to be over 55 years of age, a married couple with older children who did not live with the couple anymore, the clients were retired or near retirement, and had low mobility or likelihood of moving (Table 4-1). These developments were targeted at elderly persons who were moving for the last time. Community interactions were meant to be high with a focus on recreation. One of the developments has a golf course specially designed for the senior golfer while the other was built on a very large lake system with a concentration on boating and fishing. The second builder' s (Builder B) client profile defined a young family or newly married couple looking to start a family. The targeted age group was 25-35 years old, first time new home owners, with at least one member of the family working full time. The mobility of these clients is moderate (Table 4-2). These developments were marketed toward the working family with a high level of community interaction also. The developments boasted extensive children's facilities including playgrounds, clubhouses, pools and sports fields. Project Information The proj ects chosen by Builder A for this study have 944 and 956 total lots available for Development 1 and Development 2, respectively. Development 1 was completed in 1999 and construction began in 1995. The 18-month preconstruction sales period this study is focusing on stretched from May 1993 to November 1995 during which 546 homes were sold. The average price of a home sold during that time period was $179,995. Development 2 was completed in 2006 and construction began in 2001. The 18-month preconstruction sales period this study is focusing on stretched from July 1999 to January 2001 during which 923 homes were sold. The average price of a home sold during that time period was $400,009. The proj ects chosen by Builder B for this study have 657 and 590 total lots available for Development 1 and Development 2, respectively. Development 1 was completed in 1999 and construction began in 1996. The 18-month preconstruction sales period this study is focusing on stretched from March 1994 to September 1996during which 389 homes were sold. The average price of a home sold during that time period was $153,637. Development 2 was completed in 2003 and construction began in 2001. The 18-month preconstruction sales period this study is focusing on stretched from November 1999 to May 2001 during which 590 homes were sold. The average price of a home sold during that time period was $227,895. Analysis and Discussion by Marketing Tool The analysis of the marketing tools produced three distinct sets of results: the marketing tools which had similar profitability percentages in both client profies, the tools which were more profitable for marketing to the younger profie, and the tools which were the most profitable for the proj ect targeted at the older age group. The profitability of each tool was calculated using the formula gathered from Blattsberg et al. (2001). The formula gives the percentage that is earned on the initial investment for each tool for example: ( oenil len xpsrefrParticular Tool X (Median Home Price -Cost of the Tool) Number of Homes Sold Total Number of Homes in the Development An example of how this formula is used in this study is: Corporate 3600 400009 1000 Logo =X Development 923 = 16.31% Profitability 956 The tools which produced roughly the same profitability on both sets of profiles include the Company Logo Development (Figure 4-1), Company Package (Figure 4-2) and the Development Logo (Figure 4-3).The tools which had higher profitability percentages for the younger clientele include: Web Design (Figure 4-4), Newsletters (Figure 4-5), and Relationship Marketing (Figure 4-6). The tools which produced higher profits for the older client base include: Company Brochure (Figure 4-7), Corporate Advertising (Figure 4-8), Development Brochure (Figure 4-9), Sales Center (Figure 4-10), Signage (Figure 4-11), and Promotional Event (Figure 4-12). Analysis of Marketing System by Client Profile The profitability of the tools used by Builder A for the older clients are higher overall (Table 4-5) then the tools used by Builder B to market to the younger customers. However the tools had a generally better impact on the homes sales when compared to the sales of the homes in the developments where no marketing tools were implemented by the marketing consultation firm (Figures 4-13, 4-14). The sale of homes was much more consistent on a month to month basis for the developments which had implemented a marketing program. Gender Mlale Femlell Marital Status rid Marriel C'ouple. C'hildlren out of Household Type iis Emloyment Retireess AbLout to restires Income Reti redl. No Reqluir~ements Table 4-2 Client Profile Information, Builder B Gender Mlale Femlell Marital Status Marr~lied nl Household Type Yuefml Employment At least one member of householdl fullltimle Income No reqauirementslt c5+ Yeasd' O~ld Table 4-3 Project Information, Builder A Construction Start/Finish Date l (-1,c Preconstruction Sales Period hlai 14,c)3~ Noi ember 1 Number of Homes Sold 51 Table 4-1 Client Profile Information, Builder A Age Company Package 650 1500 2.93% Company Brochure 10000 2500 45.31% Corporate Advertising 20000 18775 90.47% Development Logo 4500 1000 20.39% Developmnt Brochure 3000 2500 13.57% Sales Center 3000 65925 12.91% Signage 3500 4800 15.82% Direct Mail 1000 10000 4.43% Promotional Event 350 15000 1.43% Compn Package 400 1750 2.72% Company Brochure 750 3500 5.10% Web Design 10000 5000 68.65% Newsletter 300 750 2.05% Relationship Marketing 150 20000 0.69% Developmnt Logo 2000 1500 13.72% Development Brochure 1000 3500 6.81% Sales Center 1000 90000 5.35% Signage 1200 7000 8.13% Direct Mail 500 4300 3.36% Table 4-5 Profitability Analysis per Tool: Retirement Client Profile Marketing Tool Corporate Logo Development Cost | Profitability 3600 1000 16.31% Table 4-6 Profitability Analysis per Tool: Young Professional Client Profie Marketing Tool Corporate Logo Development Cost | Profitability 2500 1500 17.16% Corporate Logo Development 18 17.5 Profit17 Percentage 16.5 16 15.5 P Older Younger Client Base type Figure 4-1 Corporate Logo Development Profitability Company Package 2.95 2.9 2.85 2.8 2.75 2.7 2.65 P rofit Pe rce ntage Older Younger Client Base Type Figure 4-2 Company Package Profitability Web Design 70 60 50 Profit 40 Percentage 30 20 10 Older Younger Client Base Type Development Logo 25 Older Younger Client Base Type Figure 4-3 Development Logo Development Profitability Figure 4-4 Web Design Profitability Relationship Mlarketing 0.7 0.6 0.5 Profit 0.4 Percentage 0.3 0.2 0.1 Older Younger Client Base Type Newsletter Profit '" Pe rce ntage 1 0.5 Older Younger Client Base Type Figure 4-5 Newsletter Profitability Figure 4-6 Relationship Marketing Profitability Company Brochure 50 40 Prft 30 Percentage 20 10 0 Older Younger Client Base Type Figure 4-7 Company Brochure Profitability Corporate Advertising 100 80 Profit 6 Percentage 40 20 Older Younger Client Base Type Figure 4-8 Corporate Advertising Profitability Sa les Ce nte r Development Brochure 14 12 10 Profit 8 Pe rce ntage 6 Older Younger Client Base Type Figure 4-9 Development Brochure Profitability 14 12 10 Profit 8 Pe rce ntage 6 Older Younger Client Base Type Figure 4-10 Sales Center Profitability Sign age 16 14 12 10 P rofit 8 Pe rce ntage 6 4 2 0 Older Younger Client Base Type Figure 4-11 Signage Profitability Promotional Event 1.6 1.4 1.2 P rofit 0.8 Pe rce ntage 0.6 0.4 0.2 Older Younger Client Base Type Figure 4-12 Promotional Event Profitability I 60 m50 E 40 o I o 30 E 20 10 ; -* Development 1 -=- Development 2 1 3 5 7 9 11 13 15 17 Month Figure 4-13 Monthly Hiome Sales tor B~uilder A 40 35 Q~30 - S25 - o 20 - - S10 2 5 -* Development 1 -.- Development i 1 3 5 7 9 11 13 15 17 Month Figure 4-14 Monthly Home Sales for Builder B CHAPTER 5 CONCLUSIONS AND RECOMMENDATIONS The assumption that clients will seek out and find the services and products they need is naive and dated. The findings of this study not only reaffirmed the fact that marketing endeavors for small residential development builders are profitable but it is just not practical to go on competing for work without some promotional effort. Conclusions Upon completion of the analysis of the collected data, it has become evident that defining and truly understanding the needs of the client base being targeted for the development are the most important steps in the marketing plan. The client bases in this study impacted the selection of tools that were used to best suit their characteristics. The young professional or young family client base was much more suited for marketing tools which incorporated a more modern aspect, for example web design. They also are more stimulated by the marketing tools which instill their trust thus creating a loyal customer database such as newsletters which keep them informed of future works of the company and relationship marketing which builds rapport. This will prove to continue to be profitable for the company when these customers plan to build again or upgrade to a new home. The older client base is more stimulated by tangible products and visual aids which can help them see the final picture such as brochures, advertising, sales centers, signs, and promotional events. These marketing tools give the clients something to take with them to ponder their decision and persuade them to make the decision to buy a home in the builder' s development. These tools can also be helpful in referring other similar customers in the same situation who might be in the market. These tools are easily transferrable from one client to the next. Recommendations As it is shown from the graphs representing the monthly sales of homes during the pre- construction sales period (Figures 4-13, 4-14), the sales of homes in the developments where marketing tools were utilized have much more volume and an accelerated pace. The future of this study I believe would entail research into the cost of inflation, the state of the housing market at the time of the study periods, and the average cost per square foot of the houses to be included in the comparison. These values would give more accurate conclusions into the profitability of each tool compared to the present worth of each tool and its profitability. The need for market research is ongoing. The needs and characteristics of new or changing markets are evolving every day. A continued role in the development of new ways to reach these existing and potential clients is essential in gaining a competitive advantage while maintaining profits on marketing investments. APPENDIX: BUILDER INTERVIEW QUESTIONS SClient Profile Age Gender Marital Status Household Type Employment Income Mobility (likelihood of moving) General Information Completion Date Construction Start Date Preconstruction Sales Period (18 month period) Number of units in development or phase Number of homes sold in 18 month pre-construction period Average cost of home Marketing Tools Used Tool 1 Potential Client Exposure: Cost: Tool 2 Potential Client Exposure: Cost: Tool 3 Potential Client Exposure: Cost: Tool 4 Potential Client Exposure: Cost: Tool 5 Potential Client Exposure: Cost: Tool 6 Potential Client Exposure: Cost: Tool 7 Potential Client Exposure: Cost: Tool 8 Potential Client Exposure: Cost: Tool 9 Potential Client Exposure: Cost: Tool 10 Potential Client Exposure: Cost: Monthly Home Sales Month 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Number of Homes Sold LIST OF REFERENCES American Marketing Association; n.d. http://www.marketingpower. com/mg-dictionary- viewl862.php accessed March 5, 2007. Barr, Vilma; Promotion Strategies for Design and Construction Firms, 1995, Van Nostrand Reinhold, New York, New York. Birgonul, M. Talat; Dikmen, Irem; Ozcenk, Ismail; "Marketing Orientation in Construction Firms: Evidence from Turkish Contractors," 2004, Middle East Technical University, Ankara, Turkey. Blattenberg, Robert C.; Getz, Gary; Thomas, Jacquelyn S.; Customer Equity: Building and Managing Relationships as Valuable Assets, 2001, Harvard Business School Press, Boston, Massachusetts. Brockmann, Christian; "Modeling Customer Satisfaction for the AEC Industry," 2002, AACE International Transactions, Breman, Germany. Bryde, David J.; Robinson, Lynne; "Client Versus Contractor Perspectives on Proj ect Success Criteria," 2005, International Journal of Proj ect Management, 23, 8, 622- 629. Butera, Karen; Desinninn Sales: The Builder/ Merchandiser Handbook, 1987, National Association of Home Builders of the United States, Washington, D.C. Chinyio, Ezekiel A.; Corbett, Pauline; Olomoiaiye, Paul O.; "Quantification of Construction Clients' Needs Through Paired Comparisons," 1998, Journal of Management in Engineering, January/February, 87-92. Creative Marketing Services, Inc; n.d. http ://www.creativemarketingservices.net accessed March 5, 2007 Davis, Peter R.; "Relationship Marketing in the Construction Industry," 1999, AACE International Transactions, Perth, Western Australia. Egemen, Mehmedali; Mohamed, Abdulrezak; "Clients' Needs, Wants and Expectations from Contractors and Approach to the Concept of Repetitive Works in the Northern Cypress Construction Market," 2005, Building and Environment, 41, 5, 602-614. Ehrlich, Evelyn, The Financial Services Marketinn Handbook: Tactics and Techniqlues That Produce Results, 2004, Bloomberg Press, Princeton, New Jersey Floyd, Elaine, Marketing with Newsletters: How to Boost Sales, Add Members & Raise Funds with a Printed, Faxed or Web Site Newsletter, 1997, Newsletter Resources, St. Louis, Missouri. Hedley, George, "Construction Business Best Practices Series, Step 8: Marketing and Sales Systems," 2006, Construction Business Owner, August, Birmingham, Alabama. Henning-Thurau, Thorsten; Hansen, Ursula; Relationship Marketing: Gaining Competitive Advantage Through Customer Satisfaction and Customer Retention, 2000, Springer, Heidelberg, Germany. Maloney, William F.; "Construction Product/Service and Customer Satisfaction," 2002, Journal of Construction Engineering and Management, 522-529. Opfer, Neil; "Cost Engineering Expertise in Marketing Construction Services," 1990, American Association of Cost Engineers, Las Vegas, NV. Proverbs, David G.; Soetanto, Robby; "Intelligent Models for Predicting Levels of Client Satisfaction," 2004, Journal of Construction Research, 5, 2, 233-253. Smyth, Hedley; Marketinn and Sellinn Construction Services, 1999, Blackwell Science, Maiden, Massachsetts. Sobel, Andrew; Makinn Rain: The Secrets of Buildinn Lifelonn Client Lovalty, 2003, John Wiley & Sons, Inc., Hoboken, New Jersey. Society for Marketing Professional Services; Marketinn Handbook for the Desinn & Construction Professional, 2000, BNi Publications, Inc., Los Angeles, California. Walls, Simon; Zahay, Debra L.; Mananinn Customer Relationships, 2000, Report No. 00- 107, Marketing Science Institute, Cambridge Massachusetts. BIOGRAPHICAL SKETCH Julia Williams was born in Santa Cruz, California, on August 13, 1982. After a short lived stay in the bay area, Julia moved to the plains of Illinois, also for a short couple of years before moving to the Gateway to the West, St. Louis. At the age of nine, Julia moved to the Sunshine State and spent the rest of her childhood leading up to college in the small town of Niceville. Julia received her Bachelor of Arts in Business Administration with a concentration in management from the University of Florida in May 2005. Two years later Julia will receive her Master of Science in Building Construction from the M.E. Rinker School of Building Construction at the University of Florida to complete her academic achievements. |