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Strategic planning for marketing.

Marketers have an old saying: "Nothing happens until somebody sells something." But while that old saying might bring lots of applause at sales meetings, the fact of the matter is this: Nobody can sell anything until somebody figures out what, and to whom, they're selling.

Enter the strategic plan, a pre-sales strategy that marketers in virtually every business develop before doing any marketing at all; no ads are created, no deals are made, until the product has been evaluated objectively and its exact place within the market defined. That is the only way, experts agree, that a product can be priced, positioned, and presented effectively.

Among real estate marketing professionals a similar strategy prevails. Indeed, before targeting any prospects or making any repairs or improvements to a property in the hope of luring tenants, most property owners and managers are sitting down with marketers and other experts to develop a comprehensive analysis of every property they handle.

According to Ken Erdman, a property manager with Trizec Properties Limited, Alberta, Canada, strategic plans have become the rule, not the exception, in today's real estate markets. "A strategic plan is simply a necessity just to survive right now," he says. "It's a necessity to get and keep your staff working in the same direction."

Erdman contends that strategic planning is the key to effective use of managers' resources, both human and cash. "No longer does the title to a property guarantee uninterrupted cash flow," he says. "The reality is that only a total commitment to marketing the building will keep your tenant." And a strategic plan is crucial to effective marketing: "It teaches you how to be an attacker, rather than a defender, of your building's market share."

Managers should regard strategic planning as a necessary stop on the marketing path: developing a game plan before spending money or possibly wasting effort on a misguided attack. According to James Mullahy, president of The Mullahy Company, a real estate marketing consulting firm based in Philadelphia, the strategic plan helps managers answer one simple question: "'Why should somebody want to lease here?' When you can answer that question," he says, "then you're getting close."

Wade Greene, senior vice president and director of marketing for Rubloff, Inc., Houston, suggests that a good strategic plan will help managers better serve both tenants and owners.

"We get everybody involved in developing a plan for positioning an asset in the marketplace and coordinating all of our strategies," he says. "It becomes a working document that just makes for better communication between ownership and management."

An effective strategic plan has several components, including an objective evaluation of the property and an indepth analysis of competing properties. In addition, the plan should contain some numbers: rent structures, a line-item evaluation of the property's budget, and capital market information. Some experts also are recommending that managers take a close look at a property's tenant profile in order to better understand its appeal to tenants or tenant companies.

Assessing the property

At the heart of any strategic plan is a thorough analysis of a building's facilities and amenities.

"Step one is to study the product," says Josh N. Kuriloff, a director with Cushman & Wakefield, New York City. "In order to know how to compete against the other properties that a prospective tenant may be looking at, you have to look at the strengths and weaknesses of your real estate. This, to me, is the most important part of strategic planning."

The first evaluation should be of the building's technical and architectural capacities, Kuriloff says. These include its HVAC systems, elevators, floorplans, ceiling heights, number of windows, bathroom facilities, and power availability.

"We have people physically walk into our buildings with a checklist of these things," he says. "With those worksheets and information from |vendors like~ the elevator companies, we can create a comparative tool to use before we ever bring the product to the marketplace."

Next, Kuriloff says, managers should evaluate the building's location and image, and the value of those qualities to potential tenants. This includes assessing the quality of ownership, the prestige of other tenants, the proximity to transportation, and other factors. This information is, of course, more subjective than the brick-and-mortar variety, but can be quantified by tracking tenant surveys and past experiences with tenant preferences.

"We interview tenants and past tenants to hear about their perceptions and experiences," Kuriloff says. "The views may be important to one tenant, while another might be more concerned with ownership. A lot of |a building's value~ is perception."

Sizing up the competition

Once they understand what, exactly, their own property has to offer, managers then can collect the same information on competing properties and then rank their building against the rest. Part of this process is collecting the same technical and tenant-perception information that was gathered on the manager's own building from competing properties.

John Magnuson, CPM|R~, president of Magnuson Management, Inc., Tacoma, suggests that managers can send out surveys to tenants of their buildings and competing properties with inhouse capabilities or via an outside surveying company, or they can hire a professional to "shop" the competition.

"It's absolutely essential to know as much as possible about competing properties because you can't operate in a vacuum," Magnuson says. This includes keeping up on any improvements that other firms are making to their properties. "As fewer and fewer buildings are being built, more opportunities for improving existing properties exist: upgrades, rehabilitations, renovations. It's just as essential to know about those things."

Erdman reports that his firm assigns six leasing agents, plus a part-time college student, to conduct its intelligence gathering. He contends that the intern, because she is young and relatively disarming, has been able to conduct in-depth interviews with tenants in competing buildings that another staffer might have a harder time accomplishing.

"|The student~ can go in with a clipboard and talk to tenants and be totally non-threatening," Erdman says. "But if we send in a 50-year-old leasing agent in a suit, the tenants will spot him." Another bonus of using an intern to do this fact-finding is the money saved by not sending a higher-salaried employee, he adds.

In addition, experts advise managers to include financial information and capital market data in their strategic plans. Magnuson, for one, outlines a plan of reviewing a property's rent structures and budget, line by line--and as much of the same financial information that can be gathered on the competition.

Greene recommends including an analysis of capital markets in strategic planning. "We always include investment people on our |strategic planning~ assignments," he says. "They help us provide all of the capital market information--where sales are going, how buildings of like type are doing throughout the region. We perform quarterly market reports that include details specific to a property's direct competitive market to help us determine our position and if we've added any value."

Putting it all together

Armed with this information, managers can put together what Kuriloff calls "a competitive matrix"--a systematic analysis of the entire marketplace, with their own property serving as "the base case.

"We rank all of the properties according to their technical and locational attributes, applying different weights to various attributes," he explains. "We are trying to figure out what we can sell by figuring out how the marketplace will look at our building. We want to exploit the positives."

Kuriloff says that the surveys his firm conducts of its own and competitors' tenants help the firm to determine which features of his buildings are the most valuable to different tenants--and thus to know how to best market the building. For example, he says, if his firm handles a building with very efficient HVAC systems and lots of offices with exterior windows, marketers know that they can target law firms as potential tenants, thanks to intelligence gathered through surveys.

"We know they need lots of windowed offices and good overtime air conditioning because there are people working in law firms 24 hours a day, plus weekends," Kuriloff explains. "There are some buildings in New York City where you pay up to $300 per hour for overtime air conditioning--that just wouldn't work for a law firm."

On the other hand, managers and marketers also must understand factors that, although positive, are not real selling points for most tenants.

For example, Mullahy says that good indoor air quality, while it is a hot topic among property managers, is not going to sway many would-be renters: "Nobody in the history of the world has ever signed a lease because of a first-class HVAC system."

Instead, Mullahy suggests, some managers may be missing out on promoting a real tenant pleaser. "Good views are a very underrated factor in a building," he says. "The first thing most people do |when viewing a property~ is go over and look out the window."

Digging deeper

Beyond the traditional analysis of the type of business conducted or a residential tenant's income level, managers are being urged to conduct in-depth studies of tenant attitudes about the building or complex to determine what, exactly, is selling them, Magnuson says.

"More and more property managers are incorporating into their strategic plan an excruciating examination of the tenant profile," he relates. "What I see being mandated today is far more attention being paid to the point-of-sale relationship with tenants. There's a recognition that their opinion is essential."

Making a concerted attempt to understand tenant likes and dislikes goes beyond the obvious benefit of increasing retention, Magnuson notes. "From a strategic planning standpoint, being able to plan on a low turnover rate irons out many of the issues in the financial analysis of the property. And," he says, "this very clearly defines the marketing strategy for the property because you can identify the characteristics of the profile on which you want to amplify."

Kuriloff contends that, despite the effort that in-depth information gathering and analysis takes, the result will be easier and more effective marketing.

"Most firms make the critical error of trying to point out their target audience first instead of going through the right preparation. There's an easy way and a hard way. But we have found that if you go through this exercise, which takes a little time and a little effort, we can really find out what we have and how we should pursue the marketplace."

Martha Schindler is associate editor of the Journal of Property Management.
COPYRIGHT 1992 National Association of Realtors
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Schindler, Martha
Publication:Journal of Property Management
Date:Nov 1, 1992
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