Fri 4 Jul 2008
Balancing Act
Faced with the worst drop in sales for 30 years, the housebuilding industry is working its marketing tools increasingly harder to ensure its products can be all things to all buyers. So, rather than ignoring the elephant in the room, Natalia Gameson investigates how to get the right mix between price and quality in today's difficult market.After a decade in housing heaven, the industry has been roughly shoved into purgatory by the market's fiscal fondness for overlending. There it is likely to stay until at least 2010, as the bust period rattles on inexorably until reaching its inevitable conclusion, when the dawn of another boom heralds.
Those praying for a quick fix for Christmas are likely to be bitterly disappointed - banks have cut off the lending tap for the foreseeable future. The £50 billion flood made available by the Bank of England for institutions to borrow has, it is rumoured, done so little to ease the dosh drought because the sum is being used to prop up balance sheets, not first-time buyers.
Selling houses is obviously difficult in a paralysed market, but still doable as there will always be those who need to upsize, downsize or emigrate. The key to ensnaring this endangered breed of buyer is to offer them the best deal possible within your means, whether in terms of price or design, ensuring they don't skip off to the second-hand market to pick up a two-bedroom terrace at a snip of the price of a new-build studio flat. But is the industry getting this balance right? And if not, what are the solutions?
Coin of vantage: brand protection and promotion on a budget
Money always talks - and in this climate, the cheaper and more effective the method of hitting the buyer, the better. Enter Intelligent Property's text response package which delivers property information to mobiles. This can cost a mere £30 a month plus VAT, as only standard operator charges apply, and is one such product that may well supplant conventional property advertising even when the market picks itself up again.
"When someone views a property ad in the paper, they might be commuting or reading the paper at home in the evening," says David Ferguson, the group's managing director. "It might not be convenient to call a sales negotiator at this time, but a text can be sent quickly, keeping the user in control. Once they've received the information, they can follow it up at a later date, while the developer has a high quality, unique lead to go on."
Mystery shopping, an essential tool for success in the retail industry, is now making its way over to the housebuilding sector. It's a particularly good way of boosting sales for firms that haven't invested well in sales staff over the past bumper decade, says Gary Edwards, managing director of Tern Consultancy, which provides mystery shopping services for John Lewis, Specsavers and Elizabeth Arden. "When directors walk onto a site, all hands are on deck, everyone is attentive: cue smiles all round. But what happens afterwards?
"Our mystery shopping programme takes either a video or written format; we offer a mixed programme to enable video mystery shopping to be conducted where sites have performed poorly on a written visit. But no other training tool is as effective as changing staff behaviour than video mystery shopping."
Video visits start at £95, written visits at £45 and phone calls from £10 a recording.
In the know
Research is a tool coming into its own, as housebuilders' lack of sales - down to a 30-year low even surpassing sale falls of the last recession - shows how little they know about the buyers who are actually in a position to move.
"Housebuilders have failed to evolve to a true understanding of homebuyers," notes Nigel Hunter, managing director of Leeds-based marketing consultancy fuse8, which works for BioRegional Quintain, Dandara and Shepherd Homes. "They've been making hay for the past decade, but now the climate is gloomy, the model of buying land at a premium and banging out developments lacking community or character simply doesn't work."
Fuse8 has put together a market research programme called Brand Insight Generation (BIG) which works to assess how buyers perceive their builder's brand, and what they believe their market position is. "BIG has helped determine the way buildings are designed, laid out, specified and priced," Hunter continues. "It's also identified what incentives will actually work for first-time buyers and downsizers - in both cases, it's not just carpets and curtains."
Similarly, Xcite Consulting, which provides both market research and sales and marketing campaigns is calling for housebuilders to sharpen their sales skills to tackle the market. "In the current market, there is no panacea," says firm director Helen Moore, "but it's essential to offer a point of difference. You must either have the cheapest product, or the best available to buck the trend. Choose it wisely, knowing your company's and your team's strengths, and ensure this point of difference becomes embedded in company culture. Ask yourself, when faced with competing products, would I buy this property myself?"
Accessing pre-mover data could also be fundamental to secure sales, says Louise Richley, managing director of market share report provider For Sale Sign Analysis. "A solution to the simultaneous crises of developers and sellers finding it difficult to sell properties is for the builders to make direct contact with people who are trying to sell their own houses. Direct marketing enables developers to offer this solution direct to people selling their homes in a cost-effective way by using pre-mover data - the addresses of people whose houses are for sale. Taking this a step further, firms can offer part exchange solutions to people who want to move."
Picture perfect
Ensuring schemes appeal and stand out is something else that can't be neglected in a difficult market - but cutting costs to do it is definitely an option for cash-strapped firms, says Will Wright, account director at White Space Design. "Understanding the use of what channels and devices work best for different products and audiences is crucial. It's essential to aim for standout with brochures, ads and site signage work during difficult periods when the consumer will be making a more considered purchase."
White Space is currently working on a project for REAL, part of Rydon Homes, using viral marketing via free mediums such as MySpace, YouTube and Facebook. "This media is as yet untapped and untested, but there's lots of potential there, and it's essentially free," Wright continues. "As long as the approach is right for your brand, it could be a brilliant way to tap into the first-time buyer market, if your brand style is upbeat and different."
Interactive sales techniques also go down a treat with buyers and sellers alike, says Nick Pickop, director of architectural visualisation firm Tekuchi.
"Over the years, we've provided these for builders such as Berkeley Homes, Yoo, St James and Candy and Candy. Our Bezier marketing suite, designed for London-Irish developer Eamon Lyons on London's Old Street, features the built-in Tekuchi Apartment Finder Plus, a piece of software which lets sales reps or buyers search for available properties on type and price, and lists the results on screen. It also has options to display plans, specifications and relevant photos - a digital brochure, with details on a local amenities map which shows schools, shops and restaurants."
The other tack is to ensure your scheme stands out from the rest of the kids on the block. Design agency Think BDW recently put together a marketing programme for Barratt Kent's New South Quarter scheme in Croydon, Surrey, developing the theme 'The New Face of Croydon' to reflect the facelift the town is currently undergoing, and to differentiate the scheme from all the other residential buildings going up in the area. "We positioned the scheme as a new urban village, embodying the rejuvenation of Croydon," says firm director Mark Leigh. "We also designed a lifestyle magazine called Q which we felt had more appeal to potential buyers, as it promoted the redevelopment of Croydon itself."
But keeping the flag flying for pleasant, welcoming design in the marketing suite is an area that cannot be scrimped on, says Andrew Tomlinson, director of marketing suite design firm Kraft Ltd. "Our firm was created to bring a more personal and creative approach to estate agency design in 2000, and developed a series of prototypes which translate very well into designing sales and marketing centres for housebuilders. External image in the form of dynamic signage is our speciality, but equally important is creating a harmonious and welcoming interior to reflect company style and values."
Shaping the future
With sales down to a 30-year low across the UK, builders ultimately need to look closer to home for selling solutions, when clever marketing tools no longer cut the mortar.
Barratt's yearning for buyers is certainly inspiring the firm to get pretty creative. Necessity being the mother of invention in house selling as in most walks of life, the firm is currently offering buyers everything mortgage payments for 12 months to part exchange, mixed with a dollop of celebrity endorsement to lure in buyers. Barratt East Counties recently parted with a good-sized slice of its marketing budget to hire in TV presenter Charlie Dimmock to talk through creating the perfect hanging basket and potting plants with 'prospective' buyers at its Ringland Park scheme in Norwich. A bizarre choice in current market conditions, given that marketing should be a good balance of incentives both fiscal and frivolous.
One option that seems to appeal most to builders is a private form of shared ownership. Taylor Wimpey is now lending buyers 25 per cent of new homes' values interest-free for ten years across 100 of its schemes as sales drop to a 30-year low nationwide, which is reportedly the best new-build offer yet on the market. Other firms have already pioneered the concept of selling 75 per cent of a home to buyers, deferring the outstanding quarter for ten years, again interest free - Galliford Try Homes' Easy Start programme is one.
But although this may seem good in the short-term, builders are only shoring up problems for later, says Which? property expert Kate Faulkner. "As a private version of shared ownership, it isn't really worth it in the long run if it's only offered to inflate a property's value. Canny buyers will see through this faade very quickly when comparing new-build with second-hand prices in an area."
A better alternative, Faulkner maintains, would be a move into the rental sector, where rents are up by more than a quarter over the last year, according to data from findaproperty.com. McDermott Homes is one such canny developer going down this particular route, with a 'sale or return' scheme which offers buyers selected properties available for rent, which could be purchased later in the year when the market improves. "Builders should offer a 'try before you buy' deal through letting agents," says Faulkner. "This will cost thousands, but if you get into bed with a good local agent, and make sure you get good legal advice as it's a legislative minefield, you could offer places to rent for all buyers who can't get mortgages."
Another solution, says PR consultant Julia Arnold, is to up the quality of your marketing remit, not downgrade it. Arnold is part of Property Elite, a group made up of media planner Space and Time, brochure and website designers Fat Toad Design, Sky Communications (Arnold's own firm), CGI producer Oakwood Design, event management service MacGregor & Co., sales training company Selldivision and the Read Group.
Formed to offer a quality one stop shop marketing service for housebuilders, the group maintains an independent stance as separate companies, but works together on an as and when needed basis. "Our clients generally prefer to use marketing consultancies that specialise in one area, but finding a good one is very difficult," Arnold explains. "This is a fantastic solution for us, as well as for clients who use our combined services."
"But in any case, the bubble has definitely burst," Faulkner concludes. "Housebuilders would do well to accept this unfortunate truth, and bear in mind that property game is, above all, only sustainably profitable in the long-term as a long-term investment."
Posted by Show House
in Andrew Tomlinson, Bank of England, Barratt Homes, Berkeley Homes, BioRegional Quintain, Candy and Candy, Charlie Dimmock, Dandara, David Ferguson, Eamon Lyons, Fat Toad Design, Features, Galliford Try Homes, Intelligent Property, Julia Arnold, Kate Faulkner, Kraft Ltd, Louise Richley, MacGregor & Co., McDermott Homes, Nick Pickop, Nigel Hunter, Oakwood Design, Read Group, Rydon Group, Selldivision, Shepherd Homes, Sky Communications, Space and Time, St James, Taylor Wimpey, Tekuchi, Yoo on Fri 4 Jul 2008
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