Q.
a) Identify the four (4) groups of variables known as the "four Ps" of the marketing mix. (5 marks)
b) With the use of example in relation to the marketing of residential properties, explain the various marketing tools under each P. (20 marks)
(25 marks, 2011 Q5)
A.
a) Diagram below shows the '4 Ps' or the marketing mix.
b) Application of the concept of 4Ps in marketing of residential properties.
1. Product - how the developer is designing and building the houses/apartment/condominium/bungalow to a target group. In segmentation, how is the product (residential houses/apartment/condominium/bungalow) is going to appear satisfying the needs of the market segment. Is it for convenience of home makers with amenities, or exclusiveness of executives with club house and social entertainment hups. Is it big unit for a extended family or studio type for small couples, young executives?
Conceptual stage and introductory phase of product life cycle would require a lot of positioning and targeting of right customer group. There is a trend in modern living, for example, therefore during the growth phase, residential properties should gear for more such products with positioning in young executive groups who can afford these condominiums, or bungalow.
As the trend plateau with another trend of living - gated guarded communities, for example, modern living catering to young executive group would need to add on with such gated guarded features. This is a bit of line extension and increase in product features.
Moving even further, the trend may come to a decline. Modern living concept is no more new, or appealing. Young executives are going for products like studio style living, with service apartment type of maintenance and services. In such scenario, there can be extension of strategy to incorporate such services although it may not be feasible for the developer to engage into a totally new business concept. Thus, the developer may abundant the idea and move out of the market.
2. Pricing - is a strategy subjective to the market trend. A new concept usually penetrates the property market with a higher than average price. For example, a unit of single storey house, intermediate with some garden at the rear could cost RM250,000 in current market price at an average neighbourhood. When a new concept of 'Modern Living' apartment is to be launch to capture this market of similar buyers, the pricing strategy can be either low price entry or premium price penetration.
First, the low price penetration strategy (discount 10%). Such pricing strategy would entail lower price at RM225,000 for similar size of living space (e.g. 1,200 sqf) apartment. However, the selling features would be amenities like garden and parks and security. It emphasizes security as added feature not available in common single storey houses sold over time.
Second, the high price penetration strategy (premium 10%). The new concept is 'luxury living' and it has added values with security, garden and parks, with executive living environment and priced at RM275,000. The idea will attract those buyers who are tempted with extra features of security and luxury of gardens and parks, and choose to buy 'luxury living' rather than common single storey house.
As the trend plateau with competitors coming out with similar developments, the pricing strategy may include additional car park or club membership. This strategy adds value without lowering of price. However, to the existing owners, it may back fire. On the other hand, new buyers would feel confident that the management responses to market pressure (of lowering price or increase value) and not going to other projects of similar nature. Such scenarios occur with relatives or sibling buying the same property to live near to each other.
During a decline phase, nothing much can be done on pricing other than reduce price. However, strategies like bundle selling with offers like buy 3 get 1 may be deployed. It is just about everything and anything workable can be attractive to fence sitters who otherwise could not own such a property.
3. Distribution & Promotion - placing and promotion is very closely related in property selling because of three main reasons:
1. It is highly priced product as properties are usually once in a life time purchase. Hence, buyers are concerned about reputation of the developer and they want to get to see show houses and track records of the developer or agents. You just cannot sell a house merely by entrusting to a wholesaler!
2. It is usually a long term commitment which will be repaid over a long period of time. Thus, ancillary supports like bankers and lawyers to facilitate the transaction are required. Then again, all parties should avoid conflict of interest, and thus it can become complicated and impossible to be distributed over a wide network. In short, you probably won't buy a property online!
3. It can be tailored made. Hence, properties which have specifics by buyers (e.g. with or without balcony) may not be sold as 'one size fit all'. There may be 'fung shui' issues with buyers, and thus, unlikely to be sold by mass distribution.
Therefore, distribution and promotion of property is always developer directly to the buyers. Thus, distribution and promotion are usually combined into one, with more emphasis on promotion.
Introductory phase - some developer may employ strategies like appointed agents and bankers/lawyers so as to increase take up rate during launch or introductory phase. This strategy facilitate home buyers of certain kind. For example, normal government servant or middle class employees who buy 'home' like once in a life time event would not have own contacts of bankers or lawyers or estate agent. Therefore, it would be easier to shop during property fair. And, the specialized parties are all abundant during this exhibition where buyers can interact with agents and property developers. The same agent/banker/lawyer may offer various products from the same developer, thus increasing the success of the sale.
As growth and plateau phase of the property life cycle is full of completed property, the distribution channel would likely be just continuous advertisement in the press, or electronic media. Nowadays, there are also social media like facebook or twitter which are specialized in property.
Decline phase usually comes with distributing of the left-over property to secondary market agents. These are estate agents who are specialized in rental and sub-sale. As the product is matured, and the area is developed, much of the continuous sales of the properties are competing with secondary market of second hand properties and for rental purposes only.
Ref:
The 4 P’s of Marketing Applied to T&D/ Learning/ Knowledge Management