Real Estate Marketing

1.0 Introduction

Real estate marketing is subject to special features, that result from some characteristics of property: real estates are capital-intensive products in which long building- and advertisingprocesses are involved (J. Bindlingmaier, p.15). In addition they are on the one hand the most long-lived economic goods, on the other hand difficult to change - that is to say only under high expense. Therefore there is hardly any substitute demand, but at best new or changed demand exists, e.g. on account of family-cycle or of changed income. Real estates are not substitutable. Their sale and renting both are advice-intensive. Supplementary decisions are to be made, e.g. with regard to financing, to location or to movement.

Concerning self-users purchasing intention is very low, namely one or two times a live (Dr. M. Hellerforth, pp.13). Maintenance and preserving value of real estates are service-intensive. In addition there is a low elasticity of adaptation to market changes on the part of demander and supplier (B. Heuer, pp.27). Not only aspects of product marketing but also aspects of service marketing are important to real estate marketing (Hilke, p.210). Moreover real estate corporations are in narrow regional markets. All this makes a particular main focus on marketing necessary. It is not possible to transfer marketing conceptions of other branches to real estate business. Hence it is necessary to develop new, different and special methods and instruments (E. Murfeld, p.444).

First I will show the basis of real estate marketing, then I will demonstrate how real estate corporations use strategic marketing in order to win customers and their satisfaction and last I will depict measures with which real estate corporations or estate agents may practice their strategies.

2.0 Real Estate Marketing in Change of Time

2.1 Real Estate Market is Modifying

Globalisation in business competition has forced many corporations to change their views. Specific sectors of a company do not make a major contribution to a company's success today. The separate real estate field itself, the liquidity, the returns and the profits determine the individual success of a corporation as well.

The times when simply pure production and allocation of real estate functioned (in selling or renting) are over now. The German market has changed from lessor domination into tenant domination or from seller supremacy into purchaser supremacy (B. Falk, pp.19).

2.2 Real Estate Marketing as Philosophy of Corporations

Most of the corporations in the real estate business have not yet become fully conversant with orientation in marketing until now. A new understanding of marketing is needed to survive in the hard business in future.

Marketing trends in real estate business (Dr. M. Hellerforth, pp.15):

A7 increasing productivity, performance, service and trade-mark combined with nearly blind information overload

A7 reaching threshold of effectiveness and increasing boundary effect of classic marketing

A7 higher competition combined with stronger trade-overlapping

Only a real estate marketing that is integral (including the whole development of real estate: beginning with the idea of a real estate project, continuing with the life cycle of the property and ending in selling or demolition) is able to meet the needs and wishes of the target market, and only along those lines the corporations can serve the individual target groups effectively and economically.

3.0 Basis of Real Estate Marketing

The basis of real estate marketing describes relations between customers, products and corporations which are willing to sell or rent their goods and services.

3.1 Needs, Wishes and Demand

The starting point of real estate marketing are the different human needs and wishes. Food, water, air, clothes and housing are basic needs anchored deeply in human nature. Demands of specific real estate products and services result from fundamental physiological needs but also from endeavours to recognition and self-realisation. Wishes are often desires for satisfaction of individual needs, e.g. a young family father is in need of a flat and rents a three room apartment; another wants acceptation and recognition and thus buys a luxury penthouse (B. Falk, p.22). In having a few desires people's wishes are various. These wishes are permanently formed and altered by society. Needs or wishes may produce demand, provided that there is readiness for purchase, for renting or for claiming service. That is why real estate marketing does not only have to analyse possible needs and wishes of customers but also to find out how many people or institutions are actually willing or capable of satisfying them.

3.2 Real Estate Products

The generic term 94product94 in real estate business can have different meanings: First of all it can mean goods (plot, site, property and real estate) but also services such as facility management, consultancy, centre-management, advertising, marketing research etc. These services arise from the product property itself. Delimitation from other goods is determined by its immobile location. Property is at best comparable with goods of investigation in terms of their long livespan (B. Falk, p.22). The product property has been the centre of real estate marketing in former times. Now the customers are in focus of all entrepreneurial activities.

3.3 Customer's Benefit, Costs and Satisfaction

Marketing activities are gearing to real estate users. User-gearing in the field of real estate marketing is most easily explained by an example. A firm of lawyers from Frankfurt/Main is searching an office in order to establish themselves in the city of Munich, too. Various offices with different kinds of equipment in different locations are offered to them. Now the firm has to make a choice corresponding to their personal and personnel needs. Therefore it is essential to draw up an individual customer product profile considering the following points:

- connection to the local public transport
- parking space (here: 5 are needed)
- office space (here: 250 mB2)
- high flexibility concerning floor planning
- high-quality constructing
- modern high-tech means of communication

To classify the offered products it is necessary to compare the offered standards of equipment with the criteria preferred by the firm of lawyers. The more the offer fits the criteria, the more adequate it is for them. However, besides the use there are the costs to be negotiated.

Our firm of lawyers has to measure the use of the object against the costs before choosing one or the other. In general decisions are made by best cost-use-proportion. If our customer chooses one product, his satisfaction will be decisive for a lasting connection. This fact is very important because the advertising effort put into attracting new customers is definitively higher than the one needed for getting access to an available clientele (B. Falk, pp.25).

3.4 Real Estate Market

The real estate market has to be regarded in a more differentiated way. It consists of dissimilar regional part markets. The real estate markets or part markets do not develop similarly to national economy. In general it is recognisable that real estate markets are subject to high variations. But part markets may develop into different ways, too.

Part-markets can be subdivided into various sorts. They differ in location. E.g. one can not compare the real estate market in Geislingen to the property market in Munich. Only similar part markets like Geislingen and Eislingen or Stuttgart and Munich are comparable.

Furthermore, there are five types of different part markets:

- residential property, e.g. villas, detached houses, terraced houses, owner-occupied flats...
- commercial/factory property, e.g. office buildings
- industrial property, e.g. plants, warehouses
- agricultural property, e.g. farms
- special property, e.g. hotels, cinemas, fitness studios, discos etc.

Usually there is no nationwide transparency given to neither purchasers nor users. In analysing the markets and part markets real estate corporations will surely not be able to know them exactly because there are too many different part markets. Therefore it is necessary to specialise.

4.0 Definition and Delimitation

4.1 Basic Attitudes in Real Estate Marketing

The marketing concept says that corporations have to orientate towards market requirements as well as towards the permanently changing needs of customers. Needs and wishes should be satisfied more economically and more effectively as the competitors do (B. Falk, pp.27).

The advertising concept consists of four columns:

- market focussing: definition of a target market with a mutually agreed marketing
- orientation in customers: customers are the centre; most important: satisfaction
- advertising co-ordination: marketing departments have to communicate with all other departments of the corporation
- profit and profitability: realised by satisfying customers

4.2 Definitions

4.2.1 Real Estate Marketing

Real estate marketing is an exchange of economical and social structure. People and groups satisfy their needs and wishes by constructing, supplying and interchanging real estate products and real estate services. Therefore marketing is regarded as an entrepreneurial fundamental philosophy. The function of marketing is analysing, shaping and forming the market and maintaining it attractive. Targeted use results in achieving advantages in competition (B. Falk, p.29).

4.2.2 Marketing Management

Marketing management is the planning and carrying-out-process of conceiving, of price fixing, of promoting and of spreading ideas, of goods and services in order to bring about exchange processes which satisfy individual and organisational targets.

5.0 Strategic Marketing in View of Real Estate Corporations

Target: Developing real estates which are maximally performed and creating long-term advantages in competition by the help of customer orientated inter-connection of all entrepreneurial activities.

Strategic marketing has to combine customer orientation with optimising the finding and carrying out strategies. The technical problem, however, is to choose the appropriate instruments and methods.

5.1 Strategic Factors of Real Estate Marketing

Strategic factors of real estate marketing are location, property attractiveness, productivity and profitability (B. Falk, pp.499). These factors influence each other.

5.1.1 Location

The most important strategic factor of real estate marketing is the location. Almost every popular flop in real estate business has its origin in disregarding the importance of location. Often wrong decisions are generated in overvaluing other factors.

5.1.2 Property Attractiveness

Attractiveness concerns building architecture and interior decor. Both of these optical components have to last long. In addition property functionality and infrastructure of location connected with appropriate supply units are significant as well. Apart from that soft facts determine quality in use.

5.1.3 Productivity

Especially productivity is a relevant factor of the users' future prospects. Here lies significant entrepreneurial net product potential.

5.1.4 Profitability

Productivity depends on profitability. The higher the productivity of a property is, the higher the proceeds in rent or in purchase prices can be.

For the development of a successful real estate project the following four points should be taken into consideration:

- fixing strategic target markets or fields of product
- determining marketing strategies
- operative handling of marketing mix instruments
- budget

5.2 Characteristics of Strategic Marketing

- orientation in long-term flexible development of real estate business
- concentration on resources of attractive new business fields, e.g. ecological building
- decisions of general principles about methods of corporation activities
- real estate dovetailing with other operation fields
- gaining competition advantages of customer recognition

5.3 Basics of Strategic Marketing of Real Estate

5.3.1 Market and Competition Environment

The strategic starting point of a property marketing plan has to point in analysing weakness of competitors and to set it against significant strength in choosing location, building quality and property using conceptions.

Solutions which are practicable to react flexibly and rapidly on changing market conditions are demanded. Real estate corporations need to develop their own individual profile in strategic marketing to keep or to expand their position in market despite stagnational market or to obtain advantages in competition.

5.3.2 Real Estate Corporation Relation to Environment

In our times markets are determined by two main factors: stagnation or shrinking and purchaser domination. The strategic starting point of many real estate corporations is described as follows (B. Falk, pp.505):

There is area overcapacity and market saturation in nearly every field. Furthermore high cost and price pressures are given. In addition qualities of offers enlarge and competition of competence augments. There is an increasing significance of customer orientation and customer relations because of discrimination. Taking globalisation into account, the former role of communication and information technology changes dramatically. That is why an adequate marketing concept is needed. These days property is not in the centre of all business actions any more. Now customers rather are the most important resource of real estate corporations. Therefore customer satisfaction has the priority uppermost in philosophy. Moreover target groups are built and specific marketing strategies are developed.

5.4 Marketing Conceptions

5.4.1 Structure of Marketing Conceptions

At the beginning of developing strategic marketing conceptions it is essential to fix a target system. These aims concern three levels (B. Falk, pp.509):

- First level: entrepreneurial and marketing aims

Entrepreneurial aims are orientation and guiding principles. They are reached by basic entrepreneurial measures. Advertising aims are striving conditions such as being wellknown, changing or strengthening the firm's image, rising preferences or increasing customer spreading etc.

- Second level: marketing strategy

Marketing strategy is the connecting link between aims and operative marketing measures. Also it means a conditional and global plan to reach entrepreneurial and marketing aims.

- Third level: marketing mix

Marketing mix is an elaborated handicap of operative planning processes, of using marketing instruments and of their co-ordinate use. The use of marketing political instruments has to vary because property markets depend on economic factors. These instruments should be used corresponding to market situation and should be differentiated to target markets and target groups. During property boom or in reaching high profits marketing political activities are used rather minor than in times of recession. Therefore there is a different weightiness in using such instruments. During recession the instruments like price policy and sales promotion are often used. They concentrate on cost- effectiveness, using relations and property profitability for investors or users. However, developing recession marketing conceptions is problematic.

It is important to take into consideration that there are spill-over-effects from time to time. Firms which dump their product prices during recession can not sell them as high-quality and exclusive products in other times any more. That is why marketing must not vary gravely between booms and recessions.

5.4.2 Selling Conception

The traditional marketing concept results from the problem to attract customers to existing property products. Modern marketing is similar to the use of sales promotion and selling measure to realise sells with profit. This conception is difficult because of fierce competition.

5.4.3 Marketing Conception

Management conception takes existing and potential customers into account. One tries to reach the aim in using co-ordinated marketing programs. Main criteria are consumer orientation, proximity and satisfaction. Therefore it is necessary to develop a marketing strategy.

5.4.4 Marketing Mix and Double Advertising Conception

Real estate corporations mostly practice double advertising in combination with marketing mix. Double advertising means that the firm is:

- self-promoting = original advertising they promote themselves and their services
- advertising for customers = derivative advertising

in this case property advertising is important

Both fields aim at potential purchaser/sellers, tenants/lessors, investors and building contractors, so they aspire two market segments: the market of property suppliers and the market of demanders. Now I will explain its function in the praxis in detail, because this conception is mostly used and very important. It consists of four areas (S. Kippes, pp.413):

1. Supply Policy or Product Policy and Distribution

This policy determines which services, potential output and problem solutions are offered. For example estate agents only have consulting influence on product design. They supply or search houses, flats or sites by order of customers. They also make or suggest exploitation concepts of real estates.

2. Pricing

Here object suppliers and demanders, not estate agents, decide on conditions. Estate agents may only influence price imaginations of both market participants to make the price market- realistic. Therefore an estate agent has to be competent in advising to a certain extend.

3. Sales Policy

Customers commission estate agents or corporations in order to supply or to demand property but also to get consultancy about the range of products of the engaged company. In addition estate agents decide on which market (regional or national) the property is to supply, how the target group is to define and how to speak to them. Then they find out by which contingency and methods these customers have to be contacted.

4. Communication Policy

Classic instruments of communication policy are advertising and public relations work. Property advertising is marketing for the object to gain intended sales success. Fixing of property advertising plans is to the fore. Advertising mediums have to be chosen, contents of advertising campaigns have to be fixed and a secure advertising budget has to be granted.

5. Service Policy

Service policy means to accompany the clients before, during and after their decision on the product and to make sure that customers' benefit via comes. This policy is getting more and more important at demander markets.

In using these marketing instruments separately the positive effects on these implements may have an adverse effect on one another. That is why a systematic marketing mix of corporations has to combine and co-ordinate the advertising instruments so that a consistent marketing concept arises (S. Kippes, p.417).

6.0 Utilised Marketing Measures in the Practice

There are two different methods which are used in practice. One is the active order canvassing and the other one is the passive order canvassing. Both methods are described as follows.

6.1 Active Order Canvassing

Estate agents or real estate firms approach property supplier or potential customers about application for an order. Estate agents become active. In what way the estate agent is trying to contact their target groups is irrelevant for definition. It may concern advertisements or contacting a seller by telephone etc (E. Sailer, pp.138).

Disadvantages:

- customer does not know neither the corporation nor the estate agent
- there are often several estate agents or real estate corporations in contact with the supplier, so that competition is high
- customers are more mistrustful because they do not know anything about the service and qualities of the firm or estate agent

But there are several methods to attract customers. I will present some of them:

6.1.1 Advertisements

As there are many advertising methods, most corporations or estate agents concentrate on advertisements in printed media. With advertisements real estate corporations absolutely present themselves on the market. Potential clients recognise the advertisement before contacting the corporation. Advertisements signalise that estate agents or firms look actively after their entrusted property.

Also own employees get motivated in seeing that advertisements contribute to a positive image of their company. Professional designed advertisements also help to attract new clients and new qualified personnel (S. Kippes, pp.452).

Examples of supplying advertisements:

bad

better

6.1.2 Relationship Advertising or Networking

On the one hand relationship marketing comprises the social engagement of estate agents in organizations, associations and in local government politics, on the other hand it contains participation in official live at social events, invitations for public relations events or special occasions.

Relationship advertising is a certain life style - here resources, information and ideas are interchanged. Estate agents have to build a rather great and intensive co-operating contact network. This network is important because estate agents get information about e.g. potential clients. Besides estate agents may be recommended by other members of the network. In addition these agents can refer to this group of people while canvassing for customers or making a follow-up campaign (S. Kippes, pp.434).

6.1.3 Internet

This electronic media will be an indispensable module of integral real estate marketing in the future. Advertising through the world wide web is getting more and more popular. In the meantime the internet advertising has also an increasing value, because this network unites 60 million users world-wide today (K. Brade, pp.75). Firms can represent themselves 24 hours a day, so that they may win a better image because there are no opening and closing times. Clients are able to view the offered real estates and properties anonymously, independent of time and place. In addition customers can compare the offers directly with others. Another advantage is that the firms are able to actualise their offers rapidly. But only little potential clients have internet or are willing to use it. The mass which can be reached by internet is very small in the real estate field, because here the absolute popular advertising measure to buy or to offer a property are the printed media, e.g. daily papers with their real estate parts (K. Nielen, pp.299).

6.1.4 Direct Mail

Direct mails are mailshots aimed at individual households or at businesses en masse or selected through the post (M. Davies, p.281). Direct mails have to be orientated exactly to the target group. This measure is not very effective, because returns are not often more than 1-2 %. Therefore direct mails are used when there is no other alternative available.

6.1.7 Public Relations

Developing real estate projects particularly in phases of changes such as destruction or new building is often focussed by public interest. Public relations are determined by long-term thinking. They have the purpose to inform the public and to make sure that the public shows understanding and confidence in the project. Adequate procedures are sponsoring, guided project exhibitions, personal dialogues with the press and journalists, information seminar for the public or especially for neighbours, preview etc (K. Brade, pp.77).

6.1.6 Event Marketing

In times of intensive competition event marketing is used in order to differ from competitors and to rank the own enterprise early, above all at large-scale projects. All events are possible that concern the site, the constructing site or the fixed building, e.g. destruction ceremony, laying the foundation stone, turning the first sod, topping-out ceremony (like 94dance of the cranes94 at 94Potsdamer Platz94 in Berlin) etc (J. Zentes, p.112).

6.1.5 Signs

Signs are also a fashionable advertising measure. So potential clients become easily attentive. Signs are very popular abroad, but not in Germany (here they are not very usual). That is why putting up signs is very effective because one can stand out from competitors. Signs should be designed as follows:

A7 few text; coloured, not only black and white

A7 big telephone-number so that everybody can see it even from far away

A7 only one sign for one property

A7 just one real estate corporation on the sign - otherwise readers will be confused or irritated

- big and readable letters
- if possible: illumination
- pictures better than text

But obviously the signs should regularly be controlled and cleaned, because they may be destroyed or become dirty (K. Nielen, pp.241).

6.2 Passive Order Canvassing

Property suppliers or clients engage estate agents or corporations. The estate Agent is the passive part of both parties. There are many cases why property suppliers can not sell their products themselves, e.g. large distance to property or the client is too busy to carry out different viewings etc (E. Sailer, pp.138).

Passive order canvassing is the better alternative compared to active order canvassing. Advantages:

A7 estate agent or corporation is consulted solely

A7 there is mostly no competition at all

A7 customers show their confidence in the estate agent or the firm

A7 client is open for price negotiation

However, firms and estate agents have to wait until the clients come to their office and engage them. In bad times the firms or the estate agent will perhaps wait in vain. To prevent this, there should be a healthy mix of both methods.

7.0 Summary

Marketing is often equated with advertising or communication. But basically marketing contains more. It consists also of service policy, pricing, product policy and distribution. Targeted use of marketing instruments results in achieving competitive advantages. Marketing in the field of real estate business is very important today, because of the immense competition. In our times clients decide which comfort is important for them and which real estate or flat they will buy or rent. Their satisfaction is the first entrepreneurial target. Marketing instruments are various. Now it is on the corporations to choose the right ones to optimise their strategy. I have set the focus on strategic marketing and marketing instruments in my seminar paper. Surely the corporations apply marketing research in order to get important information about the market and the customers. I have abstained from explaining this method. In my opinion marketing research should be elucidated in a separate seminar paper because of its complexity.