Q.
Illustrate how Product Life Cycle (PLC) is seen in real estate product. You are encourage to use a project sample to illustrate how PLC affects the strategies of project marketing.
A.
Product Life Cycle is typical of 5 stages -
- development
- introduction to market
- growth phase
- maturation
- decline
It is paramount in fast moving consumable products like Shampoo or food & beverages to see how the 5 phases evolved over time. A brand of hair shampoo could have been selling like hotcake just last year, now it is on half price promotion and yet nobody is buying. It went through introduction to decline just over a year.
However, for real estate product, it is harder to see this phenomenon. Below, we use a block of condominium in a project to illustrate the various phases of PLC and what strategies could be deployed in them.
Development phase
Developer obtained planning approval and gathered all necessary manpower and finances to formulate this project in its infancy. At this time, strategies of early marketing would be marketing research and desk survey aiming to identify the rightful target customer groups. Developer may want to go back to its database or CRM (customer relationship management) to focus on readily available customers. This way, developer would strategically produce the rightful product type at the right price. Hoping that these readily available customer will be the early bird purchasers.
Introduction phase
Project papers are approved and marketing and sales permit obtained from the authority. At this phase, the project name is formalized and published in the media. The marketing research done earlier will exhibit its effect in positioning the project to a segment of target group. Media and publicity to be engaged to promote to the public at large. In addition, promotion to the specific group could be carried out by special channels. For example, relatives and friends of customers who already has database with the company. This are the early birds.
At the phase, there is heavy training for the sales force with the product brochures and price packages specific for launch. Off-site show room or mock units in display can be used although the actual project is not ready. Website capture of potential buyers can be done by social media links as well as flyers deposited at the mail box of the neighbouring houses. This is linked to the proximity of the project site to draw interest from surrounding population.
Growth phase
At this point of time, the project construction would have started some work, field clearing or piling. Big signboards and road side fishtails banners are suitable as media publicity. All print media and sales force are in full activity. Early birds are to be converted into successful purchasers with open days or sales gallery at project site.
If there is industrial expo, it would be suitable for developer to feature its progress during this exhibition with crowd drawing packages or pricing strategies. Normally, at this phase, developer could enhance the value by giving additional freebies, e.g. air-conditioning, cabinets, or waiver of management charges.
During this growth phase, developer should achieve the targeted sale by effectively implementing feature and benefits of the product. Sales force should highlight the niche with emphasis on value rather than just price. Base on feedback, developer should hold on to a stable pricing throughout the growth phase. Nevertheless, if pricing pressure from competition is not intense, developer could in fact, use the price adjustment strategy to quicken decision making for fence sitter buyers. This is anticipatory to a price increase so that prospect purchasers will come forward.
Mature phase
By this time, the project would have sold more than 70% and left with either units which are of higher price or not favourable in its build or layout. The strategy at this time would be giving better incentive to the sales force and relaunching the project with enhancement of the features of the units left. As real estate is a regulated industry, price reduction will not be a favourable approach. Despite, there are a few methods commonly deployed. One of them is to furnish the left over units with interior decoration and repackage it for sale at attractive prices.
On the other hand, there might be other competitors affecting the sale. Therefore, strategy to overcome this competition would depend on market feedback - CRM. Sales force would need to focus on either addressing these rejections or targeting new segment of customers. The marketing team needs to come out with action plans to continue the sale. Amid, being in the current focus group of target segment - with price attractiveness, or to other segments of audience with other benefits. For example, from own sales force to engaging estate agency firm in different regions (or geographically different regions) to continue selling. It could be using different media reach, from print media to broadcast media like radio or internet.
Decline phase
Typically, this can be due to internal and external factors. For example, new block of the same project is launched, the old block will face decline. Similarly, when a new competition comes out in the same area, the old project block will not have its earlier excitement.
During this phase, it is normally left over units with inherent layout defects which are still unsold or specific units (e.g. bumi lot) which could not be sold. For example, some first floor units with poor ventilation, or getting sunlight reflection from roof of parking lots, or next to the refuse bin, etc. are unsold. For the bumi lots, it requires special approval from the authority to be converted. Hence, developer has to decide on getting approval or maintain its bumi lot status. For the units with inherent layout defects, it would be natural to ask for approval for a lower price from the authority and dispose of the unit subsequently.
Conversely, developer may want to maintain its unsold units for rent instead. There could be a working relationship with an agency firm to manage them as tenancy administration. Over time, when a rightful purchaser might be interested to take over from among the tenants.
Conclusion
In spite of many strategies there are still many possibilities of projects being unsold during the declining phase of a product life cycle. Project overhang, being 9 months unsold after given CCC (certificate of completion and compliance), is a major phenomena seen in NAPIC report. And, there is no one size fit all solution. Ideally, the project should attend its total sale during the growth and maturity phases. Nonetheless, there could be other unexpected factors like COVID-19 pandemics which deter the buying decision of the properties.