Apply Niche Marketing for Greater Success in Real Estate

Gone were the days of our ancestors living in caves for only the basic need of a shelter. Man's real estate needs and wants today whether for places to stay, for commerce, for industrial outputs or for warehousing are far too multi-faceted. To market real estate well today, we have to be really discerning in our marketing approach and strategy. To be discerning, real estate marketer must apply what is known as niche or target marketing.

Niche or target marketing involves three (3) sets of activities:
1) Market Segmentation;
2) Market Targeting; and
3) Market Positioning.

1) Market segmentation is the process of dividing a market into distinct subsets of customers, with each consisting of people with similar needs and characteristics that lead them to respond in similar ways to a particular product offering and marketing program. Each subset will therefore differ from the others in some aspects.

Why segment? A market for our product and services is usually crowded and heterogeneous - one that has too many customers with too wide a variety of needs and wants and with customers' decisions based on different personal, social and environmental factors. By dividing such a market into relatively homogeneous subgroups or segments, a real estate firm will be able to, among others, create market niche(s) for itself and be dominant player in a smaller market segment rather than in the big overall market which would have been difficult - a firm can then compete better by focusing on smaller market segments than by taking on the whole market

Criteria for Effective Segmentation:
To be effective, segmentation must fulfill the following requirements:
o The market segment must be measurable in terms of buying power and size;
o Firms must be able to effectively promote and serve it;
o The segment must be sufficiently large to be potentially profitable;
o The segment size must match the firm's marketing capabilities.

Methods & Techniques of Market Segmentation:
The five (5) commonly used bases for market segmentation of real estate properties are:
1. Geographic - dividing the overall market on the basis of population locations has been used for years;

2. Demographic - dividing according to consumer characteristics such as age, gender, income, occupation, education, household size, and stage in family life cycle: For example, for the yuppies (young urban professionals) and newly married - smaller affordable properties; for established families, the bigger and thus more expensive properties;

3. Psycho graphic - dividing on the basis of behavioral and lifestyle profiles: For example, if we aim to serve the residential market, its segments can be landed properties or high-rise condominium apartments with a range of "wants-satisfying: common facilities;

4. Product-related - dividing on the basis of customer's benefits that can be satisfied by the product: For example, should we offer residential, commercial, industrial, agriculture properties or simply "Building" lands;

5. Tenure-related - dividing on the basis of consumer's preference for purchase or letting.

2) Market Targeting refers to the evaluation and selection of the market segment(s) - identified by market segmentation process - at which the firm intends to target its products offering and marketing programs so as to meet customers' needs and firm's objectives. Market targeting results in target market(s).

Evaluating & Selecting Market Segment(s)
For evaluation, two (2) factors are important consideration, namely:
.1 the segment's overall attractiveness - size, profitability, risk level, demand;
.2 the firm's objectives, and resources - is the segment consistent with the firm's long term objectives, available resources and competencies?

Having evaluated the different segments, the firm can then select five (5) possible patterns of target market:
o Single-Market Concentration: This allows the firm to apply concentrated marketing; gain a strong knowledge of the segment's needs; enjoy operating economies through specialization in production, distribution and promotion; and earn a high return if it captures segment leadership. However, concentrated marketing - like putting all eggs in one basket - involves high risks: that particular market can turn sour with total loss.

o Selective Specialization: The firm selects a number of segments - each objectively attractive, appropriate, and promises to be moneymaker. This multi-segment strategy diversifies the firm's risks.

o Product Specialization: The firm makes a certain product that it sells to several market segments. The downside risk is that the product may be entirely supplanted by an entirely new product.

o Market Specialization: The firm concentrates on serving many needs and wants of a particular customer group. An example would be a real estate agency that serves an assortment of real estate agency services - sales & rentals by private treaties, tender, etc - to, say, only the expatriates. The downside risk is that the customer group may be attracted elsewhere, discouraged by economic, budgetary, or diplomatic constraints.

o Full Market Coverage: The firm aims to serve all customer groups with the products they need. Only very large firm can undertake such a strategy.

3) Market Positioning refers to the process of designing the firm's products offering and marketing programs to occupy a distinctive place in the minds of prospective customers in the target market. The end-result of market positioning is the successful creation of a customer-focused value-proposition - a cogent reason why the consumers in the target market should buy or consume the product or patronize your firm.

Positioning is not what you do to the product. It is what you do to the mind of the prospects - that is, you position the product and the firm's image in the mind of the prospects.

Positioning strategies that can be adopted are:
1. Strengthen Your Current Own Position;
2. Grab An Unoccupied Position: A smaller firm, noting that bigger firms were usually slower in service due to administrative red-tapes, may position itself as "the fast-moving firm".
3. De-position or Re-position Competition: a Realtor firm may position itself as tech-savvy in presentation in contract to those practicing conventional "face-to-face" presentation;
4. Be The Product Leader:
5. Be The Operationally Excellent Firm:
6. Be The Customer Intimate Firm

Strategies 1, 2 or 3 are based on the belief the mind usually knows brands in the form of hierarchical ladder, such as GT Realty - ERA Realty - 21st Century Realty, with the top firm remembered best. The strategy therefore is to be number one: if the number one spot is already occupied by another firm, the number two firm must use the strategy to re-invent and lead in a newly differentiated category - 'nobody remembers No. 2; people only remember No.1.' is as telling a truth as when you ask "Who was the 2^nd person to discover America?" Nobody knows - that is the reality!

Strategies 4, 5 or 6 are based on the notion that in every market there is a mix of three (3) types of customers:
1. Those favoring the firm that is advancing on technological frontier (product leadership);
2. Those wanting highly reliable performance (operational excellence); and,
3. Those seeking high responsiveness in meeting individual needs and wants (customer intimacy).

Due to scarcity of resources or corporate design, a firm normally cannot be best in all three. For example, McDonald is top in operational excellence but cannot go out of its standard operating procedures to cultivate customer intimacy by serving according to individual customer tastes and preferences nor could it lead in new products as that could change its product range and over time radically change its image as a leading hamburger fast food franchise chain.

Marketing gurus propose four (4) rules to be followed for business success, namely:
1. Become best at one of the above three areas;
2. Achieve an adequate performance level in the other two areas;
3. Keep improving one's superior position in the chosen area so as not to lose out to the competitors;
4. Keep becoming more adequate in the other two disciplines, because competitors keep raising customers' expectations.

Positioning - how many central benefits to promote?
In trying to position a product or firm as No. 1 in a target segment, some leading marketing gurus believe that the firm should develop a unique selling proposition (USP) that promotes only one (or, not more than three) central benefit of the product or firm to the customers and stick to it.

A USP is based on the belief that "if a promotion tool tries to tell too much, it may fail because of the problems of human memory..." and that "The customer tends to remember just one thing from an advertisement - one strong claim, or one strong concept". As such, effective positioning and promotion is best secured by making a single, strong, and motivating proposition.

To be totally effective, a USP must have these characteristics: -

1. Beneficial: that the product delivers a high value benefit - that is either quantifiable or justifiable to a large extend - to a sufficient number of customers;
2. Significant: that the benefit is deemed significant by a large number of customers;
3. Different: that the benefit is not offered by others or is now offered in distinctively better manner by the firm;
4. Superior: that the USP is perceived as superior to other ways of obtaining the same benefits;
5. Communicable: that the USP is capable of being communicated and is visible to the buyers;
6. Innovative: that the USP is completely new and cannot be easily imitated by your competitors, at least in the short run.

If a firm consistently hammers home the USP in its positioning statement and delivers on it, it will probably be best known for this benefit.

Applications of Niche-Marketing for Real Estate Marketers:
Real estate marketers may apply niche or target marketing in three (3) fundamental areas, namely:
1. in marketing their firms to property clients (Owners, Developers, Bad-Property-Loans recovery agencies and the likes);
2. in marketing their firms to property customers (Buyers and Tenants);
3. in marketing their firms to prospective marketing staffs.

The key to greater success in today's sophisticated real estate market lies in niche or taget marketing!

GT TANHALIM

Related links:
www.GT-iBiz.com (under construction) for your real estate marketing e-booklets and networking;
http://groups.yahoo.com/group/est_agy_msia (author's background information)
http://groups.yahoo.com/group/gt_realty_kl (the author's real estate firm)

Special thanks to the many marketing gurus notably Mr. Philip Kotler whose many books on marketing have made many of us wiser marketing-wise!