4: Market research & analysis, Marketability Flashcards
Mention 6 criticisms (potential problems) of market studies! How can this be avoided/ameliorated?
- Market analyst-client relationship
- The data
- Analytical technique / statistical analysis
- Unwarranted assumptions
- Unnecessary limitations
- Unwarranted recommendations
- Avoided through: Awareness of potential, constructive discussion of the problems
Explain the 3 category of 4 problems with the market analyst-client relationship, and how to avoid them!
CLIENT OBJECTIVE cannot be determined because the client already determines the best alternative before the analysis is conducted.
- To avoid: No pre-determined alternative/results to have market analysis useful for decision making
OVEROPTIMISM; analyst is too emotionally involved that the analysis becomes less objective
- To avoid: Analyst to withdraw from the project, OR providing the analysis results in probability statistic or in best-most probable-worst conditions to reduce the ‘too optimistic’ results.
ANALYST PROFESSIONAL EXPERIENCE AND SKILL LEVEL
- Professionalism: The analyst only provides confirmation of the result that the client ‘requested’ prior to the analysis (e.g. positive results)
- To avoid: Analyst reject client’s requested results. To avoid only presenting the requested positive-results (as above)
- To be professional: Insert relevant disclaimers as there is a possibility of delay before the beginning of development (entrance of new competitors, changes in growth rates, incomes, customer preferences)
- Skill: Whether the analyst possess the education quantity-quality, experience and training required to carry out a specific task
- To avoid: Analyst tell client if they have no prior experience in the field
Explain the 4 problems about the data used in market studies, and how to avoid them! What do these imply?
Unreliability due to inconsistency of the time/period used in comparing data sets
- To avoid: Ensuring all data sets are consistent: from the same time/period, source/database
Use of historical and aggregate data for an entire metropolitan/different area than the investigated area.
- To avoid: Discuss the relationship of any data in the report to the project (to ensure data relevance)
Data provision without thorough and complete source identification
- To avoid: Cite sources including those provided by the analyst
Exclusive reliance on data with most convenient source and form may over/understate market magnitude
- To avoid: Use supplemental data, OR if cannot be resolved by doing so, analyst should address problems with secondary data relevant to artificially-created areas (census tracts, local authority areas) used to represent market areas
Implication: The necessity to use relevant and up to date primary data, not using only secondary data
Explain the 2 problems regarding inappropriate analytical techniques in market studies, and how to avoid them
Using statistical procedure without making judgements about potential significant changes.
- Economic condition predictions with well- reasoned judgements an eyeball analysis on economic trends > nonsensical regression analysis
- To avoid: Use well-reasoned judgements and reliance on outcomes of statistical techniques (and their projections).
Might focus on a single issue
- To avoid: Include relevant factors to the site (e.g. movement channels, zoning, construction costs)
Explain the unwarranted and unspecified assumptions, unwarranted limiting conditions, and unwarranted recommendations in market studies. How to avoid them?
Using ASSUMPTION that are not well-reasoned, such as assuming unchanged inflation throughout the years of the project. This problem can be in the form of assuming that (1) management is capable,
- (2) UNNECESSARY LIMITING CONDITIONS to reduce analyst’s liability if a lawsuit is filled, and;
- (3) UNWARRANTED RECOMMENDATIONS that are unsupported, lax in reporting the logic of achieving the results, not discussing/exploring cause-effect relationship, merely confirming client’s initial opinion about the project.
- To avoid: Have realistic assumptions throughout the analysis, ensuring sensical interpretation.
Explain what it means by “market research can be described as a tool for generating ideas” in the context of property feasibility analysis!
- Widens KNOWLEDGE about the project’s industry and markets from specific sources, increase INSIGHTS for generating ideas, ENHANCING a property development PLAN.
- ASSESS property’s POSITION in the marketplace and developer’s GOAL REALISM, which also help CONTROL RISK partially.
- A successful development responds to the needs of SPACE USERS and (to a lesser extent) the requirements of GOVERNMENT AND NEIGHBOURS, which can be understood by conducting the market research.
Explain 4 reasons why market research should be conducted!
- Cannot assume supply will create its own demand
- Need to pay close attention to potential customers
- Non-pecuniary reasons (ego, image, e.g. social housing) need to be realistic
- Demonstrate customers with UNFULFILLED NEEDS AND WANTS to gain PUBLIC SUPPORT (community as a part of strategy to obtain planning permit) and FINANCIAL BACKING (investors/bankers)
Explain business primary purpose & market research as a sub-set of marketing as a business concept! Why production, product, and selling concept are less preferred than marketing concept?
Business primary purpose: identify customers and SATISFY their NEEDS COMPETITIVELY (better than others)
Business concept: marketing - market research
MARKETING:
- Concept: foundation of a good business: Start from target customers’ NEEDS AND WANTS to (achieve business primary purpose)
- Develops strategies to target customers to purchase product/service
MARKET RESEARCH identifies customers
Alternative concepts are less supporting the business primary purpose:
- Production concept: efficient production and wide distribution to keep low price
- Product concept: continual improvement in quality
- Selling concept: sales and promotional effort to stimulate consumer’s latent demand
Explain what marketers and developers do! What are the 4 important attributes of a developer, and what is the main thing that they should prepare in terms of marketing?
- Analyse MARKET OPPORTUNITIES at MACRO (society-institution/taste, demographic, legal, technology) and MICRO (industry-project/suppliers, customers, competitors, public entities/regulators) levels.
… - through MARKET RESEARCH:
○ SEGMENTING THE MARKET (defined socially-spatially-behaviorally with distinctive people-lifestyle-purchasing power-place) in search for one attracted to product, through PSYCHOGRAPHICS study
○ SELECT TARGET MARKET: collecting intelligence on CUSTOMERS’ taste-lifestyle expectations, MARKET CONDITIONS AND TRENDS in past-present-future uses, and POTENTIAL COMPETITIORS with price-quality-location attributes) - Developer attributes: reputation, expertise, financial depth, market share
- Developer prepares a DYNAMIC MARKETING STRATEGY to be continuous, flexible, evolve with time and over full life cycle of a project (initial concept - final completion) as markets are moving targets that has TACTICS, IMPLEMENTATION, and CONTROL
Compare and explain classic and real estate marketing mix!
- Product - PACKAGING: property type, quality attributes, layout, design, brand
- Place - location and linkages
- Price - sale price, special allowances for tenants, rent-free periods, renewal options, payment terms for purchase, credit terms
- Promotion - advertising and selling
Explain the process of property development ideas!
(Practical experience, read-answer - knowledge) - (entering new market (increase risk) - assess objective - risk analysis - assess position and goal realism) — interacting LOGIC and CREATIVITY
Previously tried ideas to be re-done exactly the same, altered, or abandoned
Define and differ disaggregation-segmentation, and primary-secondary data!
- Disaggregation: breaking the market into various PROPERTY TYPES (5) and introduce further analysis for each
- Segmentation: Different categories of POTENTIAL USERS (Gen Y, X, baby boomers)
- Primary data: specific research on a particular location done by researcher
- Secondary data: Available general information from government, universities, trade groups, consulting firms
Is real estate market efficient? Provide 3 reasons of your answer!
No, because:
- Information is costly and difficult (of primary data to have a thorough site investigation)
- Transaction cost are high (large econ. units)
- Differentiated products
Define market analysis, its purpose (in that, define a strategic gap), its 2 concerns, and its activity
- Market analysis is the evaluation of AGGREGATE demand-supply factors in A GEOGRAPHIC AREA to identify UNMET CONSUMER NEEDS for A PARTICULAR PROPERTY TYPE, attempting to quantify the amount of RE required to satisfy demand
- Purpose: Measure the depth/lack of MARKET SUPPORT (broader demand level, probable income/recurrent/sales forecast) for a PARTICULAR USE and find a STRATEGIC GAP (in the market that we can exploit with our RE product, e.g. existing demand>supply, demand>existing captured supply)
- Concern: Underlying determinants of investment PROFITABILITY (e.g. population, households, employment, income, psychographic/attitude-taste-preference) and EVENT in the market place
- Activity: Projection and analysis of DETERMINANTS for SUPPLY (availability & inventory of competing sites and projects, land & building costs, availability of financing) and DEMAND (population-demographics-consumer preference, sales volume-vacancy-turnover, sales price-rents) determinants
Mention 4 limitations of market analysis!
- In interpreting data, must recognise the LIMITATIONS of the data and perhaps LOOSELY ASSUMED/SPECIFIED INTERRELATION of the factors studied;
- Analysis of CURRENT conditions and a FORECAST of an uncertain future based on IMPERFECT DATA (thus must have a cause-effect in projections to make sense);
- Forecasting nature; INHERENT UNCERTAINTY, thus;
- Market Analysis should be viewed as more PROBABILISTIC rather than deterministic (defined).
