Strategic Residential Marketing

When sales do not appear in the numbers anticipated and budgeted in a new home community, the prevailing solution among homebuilders is often to first blame and then change the sales staff.  If sales still do not materialize then it is time to blame and then change sales management.  And if sales still do not appear then it is time to change the advertising and promotion and then change the ad agency.

Many years ago I interviewed for a position as regional sales manager with a national homebuilder.  The position was located in their largest region which had 32 operating communities.  As part of the decision process I was invited to attend one of their regional sales meetings which were held on a quarterly basis and led by the person who would have been my predecessor in that position.  The meeting was an elaborate affair, held in the ballroom of an upscale local hotel as there were over sixty sales people in attendance and a very nice breakfast was served.

The current sales manager opened the meeting by welcoming the attendees and then said “I hope that everyone enjoyed the breakfast as for some of you it may well be your last meal”.  This company had what I believe to be the unique philosophy of terminating the two lowest performing (per budgeted sales) sale people every three months and, in what they apparently believed to be a motivating experience for the remaining sales personnel, did so at these breakfasts.

I declined the sales manager’s position when it was offered to me.  I did not disagree with the belief that there are certainly times when the sales staff should be changed nor that weak sales people should be replaced. In fact, I am an advocate of a “power line” in sales situations where applicable.  And I did not necessarily disagree that a pro-active course of action is usually far more effective than a reactive one.  But I did not (and still do not) believe that terminations should be public affairs, similar to the use of the guillotine in France during the revolution, nor that proper and positive motivation can ever be derived from fear.  More importantly, I did not believe then and continue not to believe today that the sales staff, sales management nor the advertising agency is necessarily responsible for poor sales performance. Read the rest of this entry »

There was an article in Bloomberg Business Week recently with the headline “Foreign Buyers Heat Up Miami’s Condo Market”.  The story went on to describe how rapidly the condominium market in Miami has completely turned around.

The perfect storm of overbuilding by tens of thousands of units combined with the economic and housing downturn produced a housing market in 2008 and 2009 with record numbers of foreclosures and vacant and near-vacant buildings across the skyline. What a difference two years has made as home sales jumped by a record 46 percent last year and median monthly rents are up by 30 percent from 2009, thanks in large part to Latin American buyers who have recognized and enthusiastically responded to phenomenal values.  With average prices of downtown Miami condos now at $400/s.f., down 20% from their peak in 2007 but up one-third from the bottom of $300/s.f. two years ago, that is still a 43% better value than Bogota, 64% better than Sao Paulo and a whopping 71% better than Rio de Janeiro.

Miami is admittedly a special marketplace, the “gateway to Latin America”, and thus enjoys an immense and unique potential target market far greater in numbers than could be generated by primary usage or even domestic demand.  But it took homebuilders and developers who saw the potential to pick up ground at the rock bottom market prices a few years back – they are the ones now smiling all the way to the bank.

I am not suggesting that “Karma”, with which the title of this blog is most commonly associated, is the cause of this reincarnation of the Miami condominium market nor that any other religious principle or intervention is necessarily involved.  While many homebuilders and developers certainly prayed for a return of the market, my belief is that the natural laws of causation or, as more usually referred to in our industry as “cycles”, were responsible.

I have been forecasting a return of the housing market in our country starting in 2012 for the past three years and all evidence now strongly points to the validity of that prediction.  The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury released the February edition of the Obama Administration’s Housing Scorecard on Friday and the report suggests that investors now believe that the Case-Shiller index has bottomed.  I am not a big fan of Case–Shiller as, in my opinion, this index is prejudiced by distressed sales and therefore is neither representative of the housing market as a whole nor reflective of “new” housing values. Nevertheless, investor confidence is a major contributor to a sustained recovery and should help to limit negative media coverage on housing in the future. Read the rest of this entry »

The Art of War is a 2,000 year old Chinese military treatise attributed to Sun Tzu.  Composed of 13 chapters, each of which is devoted to one aspect of warfare, it is considered to be the definitive work on military strategy and tactics of its time.  It has been translated into dozens of languages and is still read today for its military insights.

As a strategist and tactician, I respect and admire the principles of The Art of War as they are applicable to any competitive endeavor or business.  Perhaps the best example of these applications is in the auto industry where the Japanese automakers, virtually non-existent at the end of World War Two, quickly secured the “price” position worldwide through automation and other production efficiencies (plus government subsidies and incentives) at the expense of Ford, GM and Chrysler, They then attacked the quality position with Lexus, Infiniti and Acura soon also securing a major share of that market segment, again primarily at the expense of the American auto industry (Cadillac and Lincoln) while also making inroads on the German auto industry.  But inertia and lack of attention to maintaining a strong defensive position took its toll on the Japanese as the Korean automakers, with Hyundai leading the way, has made substantial inroads into the “price” position and has now also moved into the “value” position.

Following are a few selected quotes from The Art of War which, in my opinion, are especially applicable to homebuilding, along with some specific applications:

Speed is the essence of war. Take advantage of the enemy’s unpreparedness; travel by unexpected routes and strike him where he has taken no precautions.

Extensive research of the market and the competition is essential to creating a USP, a unique selling proposition that is the basis of the homebuilder’s strategy, bringing to the market what the buyers want and can afford and is different from the competition.  Most homebuilders are complacent, with inertia holding them back from making the changes in location, product, design and features and processes that the market demands.

Once you have identified the “hole in the market”, the opportunity that exists waiting to be served, then you must expeditiously provide the solution and bring it to the market while the competition is asleep. Read the rest of this entry »