COMMERCIAL REAL ESTATE MARKETING
AN ANALYSIS OF THE USE OF THE MARKETING THEORY AND PRACTICE
EVOLVED IN THE CONSUMER AND INDUSTRIAL PRODUCT INDUSTRIES IN
THE MARKETING OF OFFICE BUILDINGS
by
RICHARD G.
NEWMAN, JR.
B.S., Industrial Engineering
Stanford University
(1985)
Submitted to the Department of Urban Studies and Planning
in Partial Fulfillment of
the Requirements of the Degree of
Master of Science in Real Estate Development
at the
Massachusetts Institute of Technology
July 1989
Q)Richard G. Newman, Jr. 1989
The author hereby grants to MIT permission to reproduce and
to distribute copies of this thesis documents in whole or in
part.
Signature of Author
Richard G. Newman, Jr.
Department of Urban Studies and Planning
July 19, 1989
Certified by
Senior Lecturer, Dep
I/I
tm
Accepted by
Michael Bii-Ckley
t of Architecture
Thesis Supervisor
Michael Wheeler
Chairman
Development
Estate
Real
in
Program
Degree
Interdepartmental
Page 1
EILH5
SEP 2 5 1989
F?A R _
)
COMMERCIAL REAL ESTATE MARKETING
by
RICHARD G.
NEWMAN, JR.
Submitted to the Department of Urban Studies and Planning
on July 19, 1989 in partial fulfillment of the
requirements for the Degree of
Master of Science in Real Estate Development
ABSTRACT
This thesis examines the marketing theory and practice
industries and
products
the customer and industrial
of
The
relates them to the marketing of commercial real estate.
author believes that although developers diligently plan all
other facets of the office development process, the marketing
is often left to chance. The marketing of an office building
must start at the beginning of the development process and be
present throughout the life of the building. The marketer of
an office building should start the marketing process by
selecting a target market and developing a position within
marketing process
and then approach the
that market,
plan. It
marketing
comprehensive
a
creating
by
systematical
thesis
this
that
steps
these
through
moving
is the process of
and
understood
be
must
feels
author
the
will examine and that
today's
in
successful
be
to
utilized by the developer
competitive market.
Thesis Supervisor: Michael Buckley
Title: Senior Lecturer of Architecture
Page 2
TABLE OF CONTENTS
page
Chapter One, Introduction........
Chapter Two, First Things First.. ..
.
.
.
..
.
. .
.page
5
11
Market Segmentation
12
Market Selection
17
Positioning
21
Chapter Three, The Marketer's Tool Box...............page 31
Product
33
Price
46
Distribution Policy
52
Communication Policy
58
Chapter Four, The Marketing Blueprint.. ..............
page 80
Chapter Five, Conclusion: The Marketing Mandate.. ....
page 91
Page 3
......
FIGURES
Figure 2.1,
Factors Affecting Positioning.........
Figure 3.1, The Total Product Concept... .........
...
.
Figure 3.2, Factors Affecting the Price Decision .....
Figure 3.3,
IBM's Pricing Strategy...... ...
....
Figure 3.4, Dynamics of the Pricing Decision.. ......
page
22
. page 36
page 47
page 48
page 51
Figure 3.5, Stages of Consumer Buying Cycle... ....... page 60
APPENDICES
Appendix One, Three Print Advertisements.............page 95
Page 4
CHAPTER ONE:
INTRODUCTION
With vacancy rates for office space in virtually every
in
market
major
for tenants
competition
and
increasing,
and
effective
occupancy in
the
has never
on marketing
focus
fierce, the
industry
States
United
the
been
greater in the commercial real estate industry.
Based on a
commercial
developers
survey
Lewis &
conducted by
100
top
nation's
the
of
were spending fifty percent more
the respondents said they
years ago.
they did five
and marketing then
on promotion
two-thirds of
Associates, more than
(Lewis 1987, 10)
Although
the
has
theory
and
not very well
theory as
examine marketing
thesis will
This
industry
the
in the industry are
techniques of marketing
developed.
estate
marketing,
on
spending
its
increased
real
commercial
taught for other products and services and relate it to the
competitive
commercial
competition
for
understanding
consumer
difference
and
in
of
office
tenants
marketing
industrial
whether or
Theodore Levitt wrote
estate
real
theory
industry.
as
evolved
in
the
may
be
the
product industries
not
a
project is
about the need for
successful.
marketing in the
introduction to his book The Marketing Imagination:
Page 5
sound
a
increases,
As
No
business can
clear
view
customers
of
want
strategies and
the
how
to
and
need,
give
competitors
in
function effectively
get
them,
without a
customers,
and
and
what
options
without
explicit
programs focused on what
market
place
rather
than
what
goes on
on
what's
possible in the factory or what is merely assumed
at headquarters.
An editor of a 1988
(1986, xxiii)
article on the marketing of commercial
real estate made
this point in saying "you
best building in
town, but if the right
might have the
people don't hear
about it, it won't lease."
After the construction boom of
early 1980s, there suddenly
too
few tenants.
office
In
existed too many buildings for
the late
was
development
the late 1970s and the
true marketing
1970s
almost
of
Then
nonexistent.
Houston-based developer Gerald D. Hines Interests created a
marketing
differential
renowned architects and
identities.
At
the
consistent marketing
sleek,
by
buildings
commissioning
by
creating buildings with individual
same
time,
program that
four-color brochures,
Hines
put
together
included such
tools as
architectural models,
Page 6
a
and a
display
choreographed
building
of
elaborate
and multi-screen audiovisuals that
building models
the industry as a
known to
finishes,
"marketing center."
is now
(Gustafson
1986, 31)
In
this
thesis
by
as "the act of leasing or
some in the real estate industry
selling."
is mistaken
real estate
of commercial
Marketing
marketing is
defined
not
as
leasing or selling, rather as defined by Rod Kimble, a real
estate marketing strategy consultant:
"the sum total of all
actions or processes that motivates people to take action."
The marketing effort should not be seen as competition
community, which
the brokerage
In contrast,
brokerage community.
with the
between the
is an indispensable emissary
developer and the tenant, should be targeted as the primary
recipient of
user,
tenant, will
the
efforts.
the marketing
The direct
campaign efforts.
be
also
a target
of
marketing
theory recognizes that the
Yet, industry selling
more aware and knowledgeable the salesmen is of the product
the more successful they will be in their sales.
of the
marketer of
public
relation
real estate,
campaigns,
will
themselves.
Page 7
such the
not
The tools
advertising or
lease
space
of
many consumer
Unlike
products,
large
is a
leasing
purchase decision and demands a personal "one-on-one" sale.
Due
tenants, most
of the time
to
process
leasing
Yet,
by making
the office
help increase
a
the potential
product.
investment in
should be considered an
Marketing therefore
the
office building.
through the brokers,
in,
not
also
canvassing that
will motivate
interested
of, and
aware
them
necessary to fill an
marketing efforts
successful
components are
the active and aggressive
replacement for
is most often
its
and
strategy
marketing
decision, the
the leasing
characteristics of
to the
velocity
of
approach to
be
a review
of
the
leasing.
marketing theory
The
discussed
thesis is
in this
texts.
several marketing
marketing
Place,
marketing
of
framework
Promotion--
and
this time
at
unified theory.
and structural
generated from
the
"Four
popularized
not
does
thesis will
presenting
illustrating
Ps"--Price,
by
and
these
theories
with
Page 8
overarching,
task of marketing
(Shapiro 1987, 5)
discuss marketing
marketing theories
Product,
McCarthy,
E.J.
have one
(Shapiro 1987, 5) "The
is a blend of both art and science."
This
utilize the
Although most texts
as a
"blend" by
frameworks while
also
gained
from
examples
real estate industry.
research of the commercial
practices will reveal that in
the theories and the current
order to
real
be successful
estate industry
utilize
a
systematic
marketing like that
in today's
the
Together
developer
and
competitive commercial
must understand
comprehensive
which has been developed
the consumer and industrial product industries.
Page 9
approach
and
to
over time in
WORKS CITED IN CHAPTER ONE
Gustafson, Karen.
"Real Estate Marketing: A Brave New
World?." Corporate Design _ Realty March 1986:
Levitt, Theodore.
The Marketing Imagination Rev.
30-35.
ed.
New York: The Free Press, 1986.
Lewis, Richard.
"Developers get more from Promotional
Dollars with a Marketing Plan." Real Estate Review
Summer 1987:
Shapiro, Benson.
10-11.
"An Introduction to Marketing --
1987,"
Boston: Harvard Business School Case Services 1987.
Page 10
CHAPTER TWO:
FIRST THINGS FIRST
CHAPTER SUMMARY: The first steps the commercial
real estate marketer must take to successfully
market a product is to segment the market,
target a market void, identify the end user's
needs, and position the product against
the
competition.
The first
and possibly
marketing process
of
consumers
addressed.
by
is the selection of
with
or
opportunities.
a
reaction
Rather,
the
to
the
developer
recognize the different segments
the real estate
requirements--
to be produced should
hasty
to
be
not be chosen
present
must
market
isolate
and
of the market, and position
product to answer the needs
that segmentation.
of the
"the market"--the set
similar purchase
The product
default
most important decision
(Corey 1978, 3)
and problems of
"A market segment may be
defined as a set of potential customers that are alike in the
way
that
they
patterns of
perceive
buying, and
(Corey 1978, 3)
determination of
and
value
in the way
a
product---in
they use
the product."
The term "positioning" has come
exactly what segment or
product is intended to fill and
their
to mean the
"niche" the firm's
the way in which the product
is placed, in contrast to other products, to attract customer
attention.
one
David Ogilvy,
American
advertising,
important
decision in
positioning strategy
once
the
of the
wrote
the
that
marketing of
for that product.
Page 11
best-known names
a
single
product is
(Levinson
in
most
the
1984, 21)
The following chapter will
the market,
first discuss the segmentation of
the targeting of
a market segment and
then the
positioning of the product within that segment.
MARKET SEGMENTATION
Unlike some
universally
products, real
used by
all types
estate products can
of tenants,
for users
differing business practices and requirements.
must
identify and
requirements for
target a
group of
the product--a
not be
have
The developer
tenants with
similar
whose needs
market segment
and desires have not been met-- and address the needs of this
group.
The first step in market selection is identifying the
various
market by
The second
market segments.
the developer
strategy for
to target
a
the segments and
then selecting
for the developer to enter.
At this point
first evaluating
the best "niche"
step is
the positioning
can then address constructing
the product within that
market.
(Reeder 1987,
197-8)
One can identify
view of
a segment by studying
the market: 1) what
they want; 2) what
three points of
those in the market
those in the market do; and
Page 12
are saying
3) who is in
the market.
(O'Shaughnessy
1984, 93) To be
a useful market
segment, a segment must exhibit four characteristics: it must
be
1) measurable place to
the developer must have
measure the quantity and
the means in
type of tenancy
in a market;
- the
2) accessible
segment of
office user
must be
able to be reached and served;
-
3) substantial
segment
no
that is
developer should
not
large
build
enough or
for
a
profitable
enough for a given product size; and
4) actionable - the marketer must be able to formulate
ways of attracting or serving the segment.
1986,
The
the
276)
successful developer
understand the
will be
market segments
the one
produce the
that is
and their demand
determine which
local market,
meet, and
(Kotler
able to
factors in
needs the
developer can
for the
office market
right product
segment.
Segments of the Office Market
character and layout of
The design,
will
usually limit
accommodate.
An
the
office
types of
users
building's
Page 13
an office building
the building
characteristics
will
of
location, size,
and architectural
the basics in creating a
product
available.
characteristics will
design can
be considered
segmentation of the office building
Different
appeal to
combinations
of
different users.
these
Such
as a
major law firm will want a downtown location, a building with
small
floor
plates so
the
maximized, and a building
the same way,
can
number
of window
by
are
with a prestigious reputation.
the user market segments of
be divided
offices
the company
In
the office market
location,
size, and
type.
(Roberts 1986, 75)
Location
It can not be disputed
geographic
segments.
location
is one
searched
responding
of
neighborhood
must
buildings
in the
What
the needs
clubs, or
substantial
the
most important
market
that eighty percent of the tenants
for
their
developer
Are
of
In a 1988 Building Owners and Managers Association
(BOMA) study it was found
developed.
that preference for a particular
within
building.
(BOMA
therefore
labor pool?
as food
need access
53)
The
in
the
site to
health
to the freeway
also realize the potential
be
in this location?
services and
When segmenting
Page 14
immediate
1988,
surrounding the
are the customer's needs
amenities such
the
tenancies
understand
neighborhood
is the primary
marketer should
space
by location,
and a
the
of the location:
as example, a
site near local or federal
or a site near the
courts for lawyers
local hospital for medical practitioners.
(Roberts 1986, 76) Once
recognized, these elements then need
to become part of the marketing strategy for the project.
Size
The second basic market segmentation relates the size of
the user
to the office
building design.
The design
of the
office building can be developed to house and cater to either
the
smaller professional
floor
users.
Since the
office
users or
the larger
full
smaller
tenants
can create
more
property management "headaches" and the large tenants tend to
now seek a preponderance of
demand concessions, "some owners
neither
small nor
companies."
large
medium-sized
but prefer
tenants,
(Roberts 1986, 77)
Type
Office tenants form four major groups of users:
government, institutional, corporate,
not
a perfect
segmentation of
and service.
the office
Although
market, each
of
these groups will perceive different needs for a building and
will value the design and amenities of the office development
differently.
Each
group
should
therefore
be
differently in developing the marketing strategy.
Page 15
considered
Differentiation by Segmentation
Any segmentation of the office tenant market, except the
basis of price alone, entails
segmentation on the
differentiation.
O'Shaughnessy
writes
in
a form of
his
text
on
competitive marketing that something is differentiated "if it
is preferred by some buyers
to similarly priced rival brands
on the grounds of differences in" one of four areas:
1) physical aspects,
2) services offered,
3) the convenience in using, or
4) the image projected.
(O'Shaughnessy 1984, 91)
sub-classes but
into
is not to
of segmentation
The goal
to distinguish
just divide
"want-categories" that
relate to distinct demands of various groups.
1984,
the market
(O'Shaughnessy
91)
If O'Shaughnessy's theory of
the commercial
real estate industry, the
estate
an intangible
market.
package or
Tenants
mixture of
office market goes
areas of differentiation.
beyond O'Shaughnessy's four
is therefore,
segmentation is applied to
commercial real
segment to the
have
a "reaction"
the location, size
to
the
will have
identifiable needs
Page 16
total
and architectural
design, as well as to the created image of the project.
segment
There
and desires
Each
for such
as
characteristics
image, or
the
office
the
fifth,
constitute a
project
concept,
perceptions of
set of intangible
This
prestige.
name,
building's
subtle, element
very
of
differentiation.
MARKET SELECTION
market, the next step is
and
the
how
marketing
plan,
developer
must
conditions)
and
analysis
consider
the
factors
developer)
is
it
the
of
market
the
both
(the
internal
discuss more
Four will
important to
relating
represents the
"target" that
Although Chapter
best opportunity.
fully
to select among the market segments
the particular
to select
segments of the
out of the different
After the sorting
to the
fits
note
within
the
that
the
here
external
(the
capabilities
market
segment
market
of
the
being
considered.
Focus Groups
To better understand the segments in the consumer
products
markets,
groups", the
consumer
informal yet
group of consumers.
product
firms
utilize
targeted interviewing of
"focus
a small
The interviews are carefully designed to
Page 17
produce qualitative research of preferences.
firm to
gain a
view of
what the
think of, a particular product.
research allow for
This allows the
consumers want
Focus groups and qualitative
the firm to form a hypotheses
consumers' perceive and use
from, and
of the product.
on how the
(McCarthy 1988,
124)
In field
have
research it was found
successfully utilized
qualitative research
tenants
building
in
the concept
to understand
their market.
suburban office
that several developers
The
of focus
the needs of
Irvine
buildings the
groups or
the office
Company, active
in
Southern California
market, has successfully used what it calls "buyer awareness"
studies.
These studies
interview
small
groups of
office
tenants to understand who is aware of their product, what are
the items
the
developer's office
market.
customer to relocate, and
that motivate a
(Cannon 1983,
tool, The Irvine
perceived by
product
14-16) By
those in
routinely utilizing
Company, keeps an understanding
well the developer's product fits
how is
its
this
of the how
the wants and needs of the
office tenant in the market.
In Long
IDM, a
Beach, California,
diversified real
estate firm,
and Kajima
international commercial builder,
Page 18
Southern California
International, an
are developing The Greater
Los
Angeles
World
Center.
have more than
development will
commercial space.
office space
Trade
in Long Beach
to
the
realized that
Angeles live
Long
a large
completed
current demand for
would not be sufficient
to fill
firm had to add new market
Beach market.
The
percentage of
developer
all executives
Verdes area of Los
in the Palos
the
feet of
2.5 million square
IDM realized that the
the development and therefore the
segments
When
also
in Los
Angeles, only
minutes from Long
Beach; and more than fifty
percent of all
executives
live
within
acceptable
commute
therefore
in
a
thirty
minute
commute
Los Angeles
terms.
The
groups
created focus
Palos Verdes
to understand what
development (and
in Long Beach)
of executives
from the
amenities, image
focus
and life
working with the city of
image
for
the city.
writing of this
of
whether or
leading to the
style for
in
the IDM
at The
From the information
developed the
their project
required
and are
Long Beach to create the prescribed
Unfortunately,
at
thesis it is to early to
not
who live
for firms to locate
groups, IDM
an
developer
needs to happen at
Greater Los Angeles World Trade Center.
gained
-
these efforts
have
the time
Page 19
the
reach a conclusion
been successful
leasing of the entire project,
two phases have been successfully leased.
of
in
but the first
In
San Francisco,
strategies
firm, was
Rod Kimble
hired to
Associates, a
assist in
marketing
the marketing
of
Marathon Plaza, an empty one million square foot development.
The
qualitative
firm utilized
needs of the
were
project and
to understand
office market and the negative
the project by
market
research
the office tenant market.
interviewed to
gain
to quantify their
their
needs in an
the
images held for
Executives in the
perception of
the
office building.
This research allowed the firm
to realize six key issues the
project
the
had
marketable.
to
The
address
for
project marketer
office
building
had to create
to
be
a positive
position for the building in regards to the building's:
1) location slightly
outside of the
Central Business
District;
2) extremely large floor plates
(up to almost 100,000
square feet);
3) height --a ten story building in downtown;
4) accessibility;
5) neighborhood's services and amenities; and
6) on-site amenities.
These issues and needs were addressed in a marketing plan for
the
project
that
included
the use
of
several
types
of
marketing communication (advertisements, special events, etc)
to help build the correct
image for the building.
image the project began to lease.
Page 20
With this
As illustrated
by the previous
first the
need and desires of
the "want
categories" of
will allow
examples, understanding
a market as a
whole and then
individual segments of
the developer to market
the market
its product effectively.
In this process the marketer is forced to "think backward" by
picturing the
the
point
purchase
mind of
the
the perspective customer
customer
(lease).
(tenant)
(Levinson
makes
1984, 35)
the
(tenant) at
decision
to
"Thinking backward"
allows the marketer to realize the needs and desires that are
crucial to the motivation of the customer to make a purchase.
(Levinson 1984,
35)
POSITIONING
Once
customer
can
the marketer
to make
a
what motivates
understand
purchase
and has
chosen
a market
the
to
target, the next step is the positioning of the product.
Positioning
starts
positioning
is
Positioning
is what
prospect.
not
with
what
you
a
product.
you do
do to
to
the
...
a
But
product.
mind of
the
That is, you position the product in the
(Reis 1982, 2)
mind of the prospect.
Page
21
In order
should
claim,
to identify what
the
position.
should be examined
market.
Both
that
of view (figure
opportunities, attributes of the
project, competition, and significant
project's
positioning
factors
four
from a positioning point
2.1): market conditions and
a project
that will effect the project's
are generally
There
a
perform
marketer should
analysis of the major factors
market
the best position
positive
business trends in the
and negative
perceptions
should be identified for each of these factors.
Figure 2.1: Factors Affecting Positioning
MARKET OPPORUTNITIE!
& CONDITIONS
BUSINESS
TRENDS
POSITIONING
ANALYSIS
COMPETITION
Page 22
PROJECT
ATTRIBUTES
In
commercial
product
will be
product.
real
estate,
through the
The project name
the
positioning
of
unique characteristics
the
of the
and location figure significantly
among the factors creating a position for the product.
Other
factors would include the reputation of the project's backers
or
developer,
the
physical
appearance
of
the
site
or
building, the building's key features, architecture, quality,
project's created intangible image.
rental structure, or the
(Strategem Consultants)
The 1988 BOMA nationwide
Moves
and
Changes"
development
that
responding
the
had
office
revealed
(377
tenants
reluctant
respondents also
to
the
greatest
consider their office building
therefore
of
some
noted
The study
satisfaction.
tenant study on "Office Tenant
elements
influence
that two
a
tenant
thirds of
were
firms
on
of
the
questioned)
their "business home" and are
leave
indicated that
it.
(BOMA
if the
1988,
31)
The
community perceived
their office building as a landmark, the tenant would be more
likely to consider the building a business home.
33)
These
positioning
responses
of the
comprised of just
from
office
the tenants
indicate
building product
the tangible elements of
(BOMA 1988,
that
should not
the
be
the project, yet
the positioning strategy should also position the building in
the mind of
the prospective tenant (and
Page 23
the community) with
the intangible elements that make
up the emotion of a "home"
and a "landmark."
Rod Kimble stated that
people select an office building
much in the way they buy a home, with emotion and expectation
of a
"promise of a
lifestyle." The position chosen
office building product
to convey or conjure
needs to play on
for the
these emotions and
up the idea of what it
will be like to
be in the project.
The Positioning of Atlanta Plaza
Recently in Atlanta, Vantage
The
Vantage Companies,
strategy
that
a $225-million
feet
of
emphases
building's
the
the
space,
of
project
as
excellence" in
a
life
2 million
positioned
and
A
and
as
the
the
a
square
with
an
of
the
building's
own
amenities
to establish
The developer wants
landmark
the city.
been
of
The Atlanta Plaza,
of over
than upon
rather
tangible characteristics.
the
has
positioning
qualities
building itself.
quality
location
utilized a
intangible
multi-use complex
commercial
on
Dallas, has
stresses
project rather than the
Southeast, a subsidiary of
"new
standard
series of advertising
of
copy has
been developed that will not even show the building structure
itself, but will
of photographs of
position the product by
utilizing a series
an elegantly dressed woman
Page 24
in the project
The first
area.
station at the project site,
hat walking through the transit
suggesting
the
to
access
direct
building's
The impact
designer clothes promenading in the neighborhood.
of
upscale-pedestrian
the same type
More of
future to
location.
the building's
environment of
urban
the
emphasize
to
is
advertisement
this
and
transit
show the same woman in
A later advertisement will
downtown.
in a red
advertisement features the woman
of advertisements are planned
in the
intangible aspects
of the
to the
draw attention
(National Real Estate Investor)
project.
The Positioning of Crocker Center
The positioning of an office building with an image must
an effort of
be combined with
at times
"re-positioning" an
image of the building's location in the audience's mind.
office
complex
Maguire Thomas
with two
Angeles, a
in Los
Center development
Crocker
towers,
office
$400 million
was developed
Partners in a redevelopment
The
by
zone of downtown
Los Angeles called "Bunker Hill."
The area that is called Bunker Hill is the area north of
the
flat
downtown
history
area
of
land that
Los Angeles.
Bunker
Hill had
For
become
had
much of
been
adjacent to the downtown area.
Page 25
a
the
traditional
downtown Los
Angeles'
seedy
district
poor and
In 1955 a redevelopment plan
to take 132 acres
Redevelopment Agency (CRA)
office
1975
development until
was in
Bank
hill for its own use.
Thomas Partners purchased
1978 that Maguire
no
there was
Security Pacific
when
developed an office complex on the
of Bunker Hill
1973, but
in
residential developers
private
City
the
on the Hill was by
The first development
for redevelopment.
for
approved
funding
and
established
was
It
the two
redevelopment lots and obtained the development rights to the
Crocker
Center
on
location
was already
Pacific complex
Security
downtown
Hill.
on Bunker
makers perceived
Although
the
on the
Hill, it
was
task of convincing other major tenants
bank did not have the
locate
Hill.
therefore when it was developed the
anchored by the bank and
to
Bunker
Bunker Hill
This
Los Angeles.
major tenant's
Most
decision
flatlands of
as "outside" the
critical perception
was a
to
overcome, for not only was Bunker Hill "outside" downtown but
these decision
makers also perceived
Bunker Hill as
a long
walk from both the Jonathan Club and the California Club, the
two
major business
clubs in
downtown
and two
of the
few
appropriate places for a business lunch in downtown.
In
positioning
the
Crocker
Center
project,
Maguire
Thomas Partners jumped to a head start by acquiring as equity
tenants
both
Crocker
National
Bank
and
Gibson,
Crutcher, a large and prestigious Los Angeles law firm.
Page 26
Dunn,
This
action
instantly
developer
gave
still
had
the project
to
downtown Los Angeles
credibility.
convince more
office
that Bunker Hill was
Yet
tenants
the
in
the "direction of
the future." This was accomplished by positioning the project
by
utilizing
its
unique
features
granite towers, views from the
(architectural
design,
highest location in city atop
the Hill), its amenities (public space, sculpture gardens and
restaurants in a
purposefully
three story glass atrium
promoting
a
pavilion), and by
national reputation
for
Maguire
Thomas Partners for quality and reliability.
The project
excellence
was positioned
that would
positioning
of
the
as a
place of
redefine downtown
project
is
quality and
Los Angeles.
evident
in
some
of
The
the
headlines of articles written about the project: "L.A.'s high
Towers bring look of Wall
rise Mansion" (LA Times), "Granite
Street
to
Bunker Hill"(LA
City"(Downtown News).
the
bring
and
"A City
within
a
Although just one way of communicating
all of
building's position,
to the
Times),
mind of
the
these articles'
reader the
images of
headlines
activity,
prestige, and excellence.
Positioning is more difficult for the office building as
a product
than
it
is
for the
positioned directly through
consumer
advertising.
Page 27
products
we
see
In the positioning
of
its products,
the marketing
efforts of
commercial real
estate are much more
like industrial marketing then consumer
products marketing.
Industrial marketing can be
the "human activity directed
needs
of organizations"
individual consumer.
and
trade shows,
to
sustained
1987, 8)
effort
as advertising,
put into
projects across
the
important key
developer, similar
utilizes its
Center, a
developing
Partners as a reliable and quality firm.
Tramell Crow
and through
(Reeder 1987, 221) An
At Crocker
was
the
through personal selling, publicity,
product firm,
a product.
rather than
positioning in the industrial
the commercial real estate
an industrial
position
(Reeder
as well
company's performance."
difference is
toward satisfying the wants and
As such,
market "is accomplished
defined as
own image
to
substantial and
Maguire
Thomas
The Gerald Hines or
the country capitalize
on the
developer's name associated with an image of the character of
the
product
various
means
they will
of
produce.
How
this and
communication position
communicate the image
chosen for a project
the
the
product
and
will be examined
next in Chapter Three's discussion of the marketing mix.
Page 28
other
WORKS CITED IN CHAPTER TWO
Building Owners and Managers Association International.
Office Tenant Moves and Changes.
Washington:
Building Owners and Managers Association
International, 1988.
Cannon, Richard.
"Brainstorming with the Leading National
Marketing Experts." Marketing Office and Industrial
Parks.
National Association of Industrial and
Office Parks, 1983.
Corey, Raymond.
"Marketing Strategy - An Overview."
Boston: Harvard Business School Case Services, 1978.
Foxall, Gordon R. Strategic Marketing Management.
London:
Biddles Ltd, 1981.
Kotler, Philip.
Principles of Marketing.
3rd ed.,
New Jersey: Prentice-Hall, 1986.
Levinson, Jay Conrad.
Guerrilla Marketing.
Boston: Houghton
Mifflin Company, 1984.
MacCarthy, Jerome, and Perreault, William D.,
of Marketing.
4th ed.
Homewood:
Jr. Essentials
Irwin, 1988.
"National Real Estate Newsletter." National Real Estate
Investor April 1988:
O'Shaughnessy, John.
Approach.
32.
Competitive Marketing: A Strategic
Boston: George Allen & Unwin, 1984.
Page 29
Reeder, Robert R.,
Brierty, Edward G.,
and Reeder, Betty H.
Industrial Marketing: Analysis, Planning and Control.
New Jersey: Prentice-Hall, 1987.
Ries, Al, and Trout, Jack.
Mind.
Rev.
ed.
Positioning:
The Battle for Your
New York: McGraw-Hill Book Company,
1986.
Roberts, Duane F. Marketing and Leasing af Office Space.
Rev.
ed.
Chicago: The Institute of Real Estate
Management of the National Association of Realtors,
1986.
Page 30
CHAPTER THREE:
THE MARKETER'S TOOL BOX
four
The marketer
has
Chapter
Summary:
controllable means with which to meet market
demand:
the
product,
the
price,
the
distribution
channels through
which the
product is sold, and the communication policy
The developer needs to
for the product.
understand how each of these four tools
individually
and
collectively
as
the
marketing mix,
can increase the velocity of
the leasing of the developer's building.
After the selection
of a market and
the positioning of
the firm's product
within that market, the
marketing strategy
can be
marketing
tools
to
be
seen as
used --
formation of the
a choice
"the
of the
marketing
mix of
mix."
As
Professor Neil Borden of Harvard Business School described:
the elements of marketing
in
many ways.. .The
apportionment
of
designing, and
basis of
given time.
the
refers to
the
combination,
the
program
elements of
which on
or "mix"
of the market
the
forces, will
enterprise at a
(Borden 1957)
after a decision
most all
mix
the objectives of an
The mix used will vary
selection,
effort,
an appraisal
best achieve
plan, but
marketing
the integration of the
into a
marketing
programs can be combined
from marketing plan to marketing
has been made
marketing
Page 31
plans then
concerning market
have four
basic
elements.
E.J.
McCarthy popularized
a way to
group these
four elements by labeling them the "4 Ps of Marketing":
1. the Product,
2. the Price,
3. the Place (distribution channels),
4. and the Promotion (communication).
(McCarthy 1984, 46-49, and Shapiro 1987, 2)
This thesis
will use
"communication
the terms "distribution
policy" rather
than "Place"
channels" and
and "Promotion"
for these respective elements of the marketing mix because it
is
felt that
elements
for
the
first two
marketing
terms
in
the
better represent
commercial
these
real
estate
industry.
The
defined
"product"
all of
as
customer receives.
intangible
package
the
financial cost
information
policy" is
the way
flows
the most
to
of
the customer
The
to
can
that
be
the
part
total
of the
acquires when
they
"price" refers to
the product's
The
"distribution
the
customer.
and means
its
mix
the product
product as
the
that
product.
the marketing
include both the tangible and
This is to
of benefits
channels" are
of
aspects
elements of
purchase the
total
element
end
through which
user.
visible part of
Page 32
The
the product
"communication
the marketing
mix and
represents all of the methods and actions used to let the
customers or
their agents know about
the product.
(Shapiro
1987, 2)
All of these
back
into the
market.
product's positioning,
Through the integration
create
must
tools must be managed to
a
competitive
fit together and
strategy, and
target
of these four, the marketer
distinction
and
maintain
a
continuity of image for the product.
THE PRODUCT
A product, as a combination of both intangible and
tangible goods, is bought by
the purchaser in order to solve
1986, 74) As such,
a problem.
(Levitt
should not
be seen as
just a physical
"bundle of qualities" that
the product produced
entity, but it
is a
promise certain physical, social,
psychological, and economic satisfactions to the buyer of the
(Foxall 1981, 71) In developing the product, a firm
product.
must be aware
in the
of what the total product
mind of the
prospective buyers.
package consists of
(Reeder
1987, 232)
The definition of the total product package was formed during
the
first phase
selection and
text will
of the
marketing process
product positioning decisions.
examine the
product's qualities
Page 33
with the
market
The following
and role
in the
positioning
of the
building and
the accomplishment
of the
been declared
office
firm's objectives.
Location
has
traditionally
building's only important
is
still
one
of
buildings, today
project,
exist.
the most
it might
for there
building can not
location,
services, on
parking, public
tenant
mix,
should
be
Although location
factors
not necessarily
many other
19-41)
The
size,
make or
viewed
as
building,
this
areas,
elevators,
and
neighborhood's amenities,
like
desires.
pool, prestige,
any other
set
complex
intangible characteristics and qualities
meet the user's needs and
estate
basic elements: the
transit access, local labor
The
break a
of a building also includes
site amenities,
etc.
marketing
commercial real
public
The product
in
considerations that
be defined by just its
mechanical systems.
its
crucial
are too
(Roberts 1986,
building's
characteristic.
the
of
product,
tangible
and
that are created to
(Roberts 1986, 19-41 and
Kotler 1986, 298)
Differentiation of the Product
Even after the office product has been tailored to meet
the
requirements of
estate
firm must
a
target market,
compete
within that
the commercial
market "niche".
real
In
order to compete successfully within the niche, the firm must
Page 34
differentiate its product in a way to attract a superior
number of
customers to
their product.
(Levitt
1986, xxiv)
This competitive differentiation is most often sought through
distinctive product
features.
While
measurable or identifiable elements
also
the
attributes
promise
of
the
of certain
different than
product.
value
are the
of the product, some are
qualities
"intangible"
some of these
that
These
are
the
attributes
or results
that
the competitor's product.
claimed
include
are greater
(Levitt
a
or
1986, 72)
The uniqueness of the product will always be realized in this
comparison to the competition's product and will be contained
in the
"things" that make
generic
product.
differentiated to
market segment chosen.
In
order to
the needs
Levitt
understand the
developed a
the levels of
of a
firm
differentiate their
and
beyond the
the product
will
is added to
desires of
the
(Levitt 1986, 75)
Imagination (1986,
and explain
ability
meet
ways in
which the
is useful to
developed by Theodore
the framework
Marketing
core" of
be differentiated, it
product can
product.
"generic
competitive viability alone, it
seldom have any
and
The
the product transcend
78-85)
work within
Levitt in his
for
product from the
Page 35
a
(figure 3.1)
the product that account
product
book The
what comprises
way to visualize
(producing any
office
for the
or service)
to
competition's product.
He
describes
product"
any
core.
"rudimentary
product
This
represents
thing" to
estate industry
as starting
be
sold.
the existence of
with
the basic
For
the
"generic
product or
the commercial
an office building
the
real
is the
generic core to the product.
Figure 3.1:
"The Total Product Concept"
NOTE: DOTS INSIDE EACH RING REPRESENT
SPECIFIC ATTRIBUTES OR ACTIVITIES.
(figure from Levitt 1986,
Page 36
79)
Expected Product Differentiation
The next level of the total product concept is the
"expected product": the minimal expectations of the customer.
These expectations will vary
by market
conditions, but
sold if these expectations
by customer market segments and
the generic
product can
are fulfilled.
only be
Since competitors
will met these expectations in different ways, the means used
to fulfill the expectations
will distinguish the competitive
offerings from
In this
of
the
each other.
products
expectations.
offered
will
way the differentiation
follow
the
customer's
the commercial
real estate
(Levitt 1986, 78-80)
The "expected
product" for
industry continues to expand as the tenants' demand more from
their work environment.
meet
the
basic
needs
The "expected product" must at least
for
such
attributes
as
a
space
configuration, parking, quality of mechanical systems, timing
of delivery, location, and
basic amenities.
Thus, these are
some of the elements that are used to differentiate competing
office products.
Of
course,
for a
premium professional
market
segment
office space,
like class
these items
'A'
or
alone would
not be sufficient to meet the minimum demands or to allow for
the differentiation of the
product.
Page 37
Maguire Thomas Partners
of the Crocker Center on
(MTP) as developers
office
"expected
product"
to the
the chosen target
"expected product" of
a
there exists more
Although
a good location.
statement, and
as
architectural
an
building,
quality
high
and
prestigious
tenants'
such
attributes
include
would
the
users for
prospective
These
towers.
project's
target these
chose to
Los Angeles
downtown
Bunker Hill in
market than
these attributes, it was evident
in the marketing of Crocker
the basics of MTP's
approach to differentiating
Center that
its
product
premier locati on was instantly
with
prestigious:
Crutcher
Crocker National
firm.
law
The
product"
as a
the project
accomplished by MTP acquiring
that
tenants
two
leases
equity
"expected
these
to differentiate
The effort
attributes.
least
at
included
are
utilized
also
firm
as
Dunn,
the Gibson,
and
Bank
recognized
quality
architecture t o differentiate the office complex as an unique
space user.
location for t he professional office
the
product"
"expected
differentiation
was
recommendations written
as
also
the
of
basics
evident
in
by Casey and Sayre,
the
the
The use of
project's
marketing
the advertising
and public relations firm used by MTP on Crocker Center.
The
that
the
firm
stated
that
marketing effort
it
was
through the
their
recommendation
media be "focused
prestige and location."
Page 38
on quality,
Augmented Product Differentiation
The
"augmented product"
is the
next level
of product
attributes and consists of the
qualities of the product that
are
but that
offered to
customer
the
customer
thinks they
need.
are
The seller
more than
creates a
the
greater
differentiation by giving the customer more than they expect.
Levitt noted that although nearly all firms employ "augmented
product",
it
is seldom
used
as
part
systematic program of differentiation.
of a
conscious
or
(Levitt 1986, 81-82)
The amenities that the real estate industry has recently
utilized
as
buildings
"augmented
product"
to
includes both
the more
active amenities
health clubs and day care,
atriums, or
child
splendor
the
care centers
office market.
for currently
years are in
or a
of
displays of
such as
gardens, and interiors that
grand
marble
entrances,
original artwork.
is currently
The
the "hot"
glass
addition of
amenity in
the
This amenity is most probably a growing trend
over 50%
child care.
nation's children
of the
(Meals 1989) It is
collection of attributes
product" that
office
and the "quiet" amenities such as
extensive landscaping, sculpture
feature
differentiate
that are added
allow the developer
the office product in the
to create a
under six
most often one
as "augmented
position for
mind of the potential tenants with
a specific theme or concept.
Page 39
The Greater Los Angeles World
IDM in its development of
Trade Center created several "augmented products" to position
its product
its
as an unique
was
market
target
developer
differentiated
amenities
for
project
its
market.
target
this
"Greater
the
established
international
Association" (GLAWTC),
Los Angeles
become members.
get additional
services such
world markets.
"augmented
products"
For
example,
World
as access to
Trade
the tenants
an international
a conference
including
All
Center
has other additional
capabilities, a
for the project site), a
and an athletic club.
IDM
dedicated to
theater
with
full service
Postal Station (the developer
international U.S.
of
services, and informational
The project
language translation
code created just
the
With membership
networking database, translation
reports on
use
with
the
trade, of which all tenants
the development of international
advanced
firms,
trade
an organization that is
automatically
Since
market.
opportunity in the
had a zip
day care center,
of these project attributes allow
the project to differentiate itself from anything else in the
market and they therefore, if
convinced that
the prospective tenants can be
these "augmented
products" are
needed, make
the project more competitive in the office market.
Page 40
The firms that "sell" or create the "augmented products"
of the office product have come to realize their value to the
developer.
In the
field
creates the
health club
research performed,
and business dining
for developers was interviewed.
the developer
will have
and
that their services as
value to
they bring
argues that the
club amenities
an "augmented product"
the developer's project
the developer.
addition of the extra amenity
higher rents, and
The firm
will help the
velocity, achieving
by accelerating lease up
office product
that
The firm routinely argues to
three positive effects on
as such
a firm
mitigating tenant turn over
in the future
years.
creating "augmented product" the
Through the process of
seller educates
from the product.
until the
part
Therefore
product in
to expect
attributes are "augmented" only
expect them as being
customer begins to
of any
is reasonable
on what
the buyer
the market.
Then the
a normal
seller must
develop additional creative elements to the product to "sell"
as "augmented product".
This process
of "augmented product"
very
evident
industry.
Samuel
Budwig
Structures
stated
that
product"
is
(Levitt 1986, 81-82)
in the
of
tenants
Page 41
becoming "expected
commercial
Chicago-based
looking
for
real
estate
Metropolitan
space
who
considered
their
Illinois
Center,
an
83
acre
mixed-use
project in downtown Chicago, exhibited this trend:
In the
beginning we
would tell
about the various amenities
did not see the need
potential tenants
at the center and some
for them.
However, once they
were in, they didn't want to give them up.
(Meals 1989)
Potential Product Differentiation
The final level of the total product is the "potential
product".
This
represents all that is
to attract and hold customers.
is all that has or is
potentially feasible
So as the "augmented product"
being done, the "potential product" is
what remains to be done or what is possible.
(Levitt 1986, 83-85)
It should be
"augmented" product
noted that the examples
of "expected" and
for a specific
discussed here have been
the various "levels" of
the product must
be viewed in relation to the market chosen.
The best fit for
market segment and
any office market will be
defined in the market segmentation
and selection stage of the marketing effort.
Economic
conditions,
business
strategies,
customers' wishes, competitive conditions, and much
Page 42
more
can
determine
product....
may
one
another.
sensibly
What's "augmented"
be "expected"
under
what
for one
by another;
circumstance
defines
the
customer
what's "augmented"
may
be
"potential"
in
(Levitt 1982, 83-91)
As shown in the 1988
BOMA study Office Tenant Moves and
Changes, this was found to be the case in the commercial real
estate industry.
correlation
The report
between the
noted that
type of
tenant and the type of tenant.
there was
a large
amenities expected
by the
The study was also careful to
note that generalizations can not be made about the amenities
desired
the
"because
to the
strongly related
(BOMA 1988,
preferences
nature of
for
amenities
are
so
particular respondents."
37-41)
The Product's Tangible & Intangible Elements
In utilizing
intangible goods
product, it
product
the product's combination of
that
ability to
be
can not
advance of purchase.
the
the competition's
to differentiate it from
is significant
to note that
truly
tangible and
the building
tested or
experienced
is a
in
The marketing literature indicates that
inspect
a developer's
building in
another
location and to study the detailed proposal and design of the
future product are not enough.
For though a customer may buy
Page 43
a product whose generic tangibility ....
palpable as
have
the primeval rocks, and
agreed
after
negotiation to
great
a cost
study
is as
though he may
and
that runs into
expensive
millions of
dollars, the process of getting built on time, ....
and then smoothly operational involves an awful lot
more
than
the
generic tangible
product
itself.
What's more crucially at stake are usually a lot of
complex, slippery,
and difficult
intangibles that
can make or break the "product's" success.
(Levitt 1986, 95)
The
marketer
must make
these
intangible
product tangible to the prospective customer.
the firm to reassure
product intangibles
the
commercial
purchase.
increasing
real estate
Even
The ability of
during the marketing process
is crucial
(Levitt 1986, 96-97)
pre-leasing requirements
industry, the
product
see or test the
can not
the
the prospective tenant concerning these
to the success of the product.
With
elements of
those who sign
in
in
the
prospective customers
operation in
leases once the
advance of
building is
complete, although they have the ability to walk the project,
they can
not actually
know what
will
be like
the experience
of working
before "purchasing"
the
within
the building
lease.
The developer is asking the commercial tenants to buy
Page 44
"promises of satisfaction" of
made more tangible with the
name, the
a lifestyle.
The promises are
images created through a project
choice of amenities, building
design, renderings,
and graphics.
The product, as part of the marketing effort, must stand
as a
reassurance of the
secure
a sale.
intangible elements that
Marketing theory
product like an
explains that
office building lease, which
will help
a tangible
will require a
continuing relationship after the "sale" and which performs a
function that is crucial to
company, will
the effectiveness of the buyer's
depend heavily
and implications that are made
the
commercial real
much the same way a
the promises
must be
Thus
"packaged", in
consumer product is packaged, to display
of "packaging"
project
site, the
The
customers.
to the prospective
being made
of the
condition
the assertions
in advance of purchase.
estate product
and character
quality
for success on
elements such
as the
responsiveness of
the
representatives of the project, the brochure, and any project
will all become part
communication vehicles,
and
itself
decides
therefore
to buy
expectations
of
part
or reject.
For it
both intangible
product that the customer
1986,
of what
and
the
is a
of the product
customer
cluster of
tangible
Page 45
value
parts to
is attempting to satisfy.
97-99)
finally
a
(Levitt
THE PRICE
The price
mix tools
of a product
that a
objectives.
The
is the second of
company can use
price
of
customer will
the
attach a value
perceived ability
problem.
(Kotler 1986,
the amount
will
of latitude
largely
depend
to achieve
the product
function of the other elements
is
its marketing
most
often
a
of the marketing mix, for the
to a product in
of the
product to
368 and
the
in its
degree
proportion to
help solve
Levitt 1986,
a firm has
on
the marketing
to
77)
their
In this way
pricing decision
which
it
can
differentiate its product in the minds of the buyers.
The
marketing theory
of
pricing
factors
internal
objectives, the
(figure 3.2) The
price of a product.
be considered
marketing mix
include
strategy, and
the
marketing
the production
The external factors that effect the pricing decision
costs.
include
the market
restraints
1986,
to
pricing
of the internal and external
decision into the consideration
factors effecting the
divides the
in the
demand, the
marketplace.
368)
Page 46
competition, and
(Dolan
1984, 2
any legal
and Kotler
Figure 3.2: Factors Affecting Price Decisions
The first element to be considered in creating a pricing
framework
is the
produce the
product is
sets a lower
costs for a
also
a key
costs.
marketing program
The
price
to
it usually
will sell below
penetrate a market).
Yet the firm can not base
considered.
The cost
consideration for
period of time in order to
the overall
be
factor of
bound on the price (some firms
(Dolan 1984, 2)
alone,
internal
price on the cost
for the
must
product must
fit with
the
other
elements in the marketing mix.
The "IBM marketing
pricing of
the product
marketing strategy.
service to the
strategy" is a clear
fitting within a
(Figure 4.2)
larger coordinated
The firm will deliver high
customer and therefore creates
Page 47
example of the
high value to
the
customer, permitting
higher prices,
and thus
creating
good margins that fund the higher service.
Figure 3.3: IBM's Pricing Strategy
HIGH VALUE
TO CUSTOMER
HIGH
SERVICE
I
HIGH PRICE
OBTAINABLE
GOOD
MARGINS
(Dolan 1984, 2)
Consumer products
product
often utilize price
positioning process
product's market.
products'
firm
performance,
by
as a key
using price
to define
the
Through its marketing effort, the consumer
will
and other
stress
nonprice
the
product's
factors and
368-70)
Page 48
quality,
will allow
higher price to position the product as prestigious.
1986,
in the
a
(Kotler
Although the cost
the lower bound
decision (rent
for the rent required,
level) of a
well within the other
presents.
is
Since
located in
achieve in
of an office building
will often set
the pricing position
office building does not
internal factors that marketing theory
the office building product
it can
specific external
upon the
be based
to be marketed
price that
location, the
solely one
rents must
fit as
factors of the market that its exists within.
This is unlike
that can allow price to
set its market
the consumer product
and which
can consequently be
delivered to the
market that
fits that price.
After the
firm has looked
internally at its
step in making the
objectives, the next
costs and
pricing decision is
to examine the external or market factors that will influence
The major external factor will be
the price of the product.
the demand
for the product
place on the product.
or the value the
consumers will
Marketing theory identifies three key
features to the demand and value for a product:
1) it varies across customer segments,
2) for a given customer it will vary over time as
perceptions of the product change, and
3) it is to some extent controllable by the marketer.
(Dolan 1984,
Page 49
3)
In
relation to
evident
that the
product
by
these
features of
consumers
accessing
will evaluate
both
benefits of the product.
the
the
The
market, it
the
tangible
is
price of
and
a
intangible
marketer can control the value
a product is demanded at by utilizing the intangible elements
to create
a value that
will be
total cost of the product.
The
demand for
equal to the
"elevated" or
(Kotler 1986, 374-5)
a firm's
product does
not exist
in a
vacuum, but the consumer will also consider the competition's
product offerings.
In evaluating
competing suppliers
of a
product, the prospective customer will access the benefits of
the total offering, including augmented product, of competing
firms
price quoted
to the
in relation
by each
firm.
The
dynamics of the pricing decision in relation to the marketing
mix and
to the value
and price for competitive
products is
added to
the pricing
shown in figure 3.4.
An
additional dynamic
strategy in
factor is
the commercial real estate
products, unlike a
Since the
used by the tenant to produce
product being produced will be
its own
industry.
consumer product, the
price set
for the office building rents will influence both the buyer's
and
the seller's
building
profits.
product is
In addition,
immobile,
Page 50
the
since the
existing and
office
potential
competition within the building's market area will inevitably
affect
upper
the pricing
limit to
strategy _f
the price
o
the product
_the product
by setting
in that
(Reeder 1986, 440)
Figure 3.4: The Dynamics of the Pricing Decision
(figure 3.4 was adapted from Dolan 1984, 4)
Page 51
an
market.
THE DISTRIBUTION POLICY
The distribution policy
the
marketer
product.
of
The
firms
has to
control
the
the four means
"marketing mix"
"distribution channel" is defined
and individuals
transferring title, of
that
Marketing theory
take
the consumer."
establishes that
examining two
of
the
as "the set
title, or
the particular good or
moves from the producer to
developed by
is the third of
assist
in
service as it
(Kotler 1986, 410)
a distribution
questions about the
policy is
product and
its distribution:
1) How long should the channel be to the customer?;
2)
How wide
should the
channel be
to the
customer?.
(Corey 1978, 7-8)
Before
looking at
these questions,
must
an efficient system of distribution.
realize the criteria of
Harvard Business School Professor
distribution
efficient
the marketer
system
Robert Dolan wrote that an
will
provide
for
four
activities:
1. the selling of the product by providing information
to the customer through various means;
2. the actual physical distribution of the product;
3. the service of the product after sale; and
4. the receipt
market
of information
so that
the
and feedback
producer
Page 52
from the
can understand
the
customer
acceptance and
reaction to
the product.
(1984, 2)
The
distribution
policy
development will
marketer deciding
what parties involved in
the
be
product will
activities.
For
responsible for
start
with
the
the marketing of
which
of these
most commercial real estate
four
projects these
tasks will be accomplished in a division of labor between the
development firm and the project's
circumstances
and
the project's
financial
partner
agent or broker.
architect, general
will
also
play
a
In some
contractor,
role
as
a
"distribution channel."
The
in the
first question
channel design
question of "channel length", is
sell
indirectly through
based on
customers
agents.
whether the firm
large enough to
in
decided by choosing to sell
has a
decision is
usually
sales volume base
that is
The
support its own sales effort,
the
market,
or to
firm's own sales force
directly with the
the product
decision, a
and
the
the number of
concentration
of
the
customers within the market.
Marketing theory also dictates
that the higher the product's
price and the more complex the
buying decision,
be.
the more direct
the sale channel
tends to
(Corey 1978, 7-8)
Along with the "channel length" issue, the firm needs to
Page 53
set a distribution
policy in regards to
the second question
of "channel breadth." There exist three basic alternatives in
marketing
theory
with respect
intensity of market coverage.
to
the
channel breadth
or
There is
1) "intensive distribution": selling through all
responsible agents who will sell the product;
2) "selective distribution": selling through only
middlemen who will give the product special
attention; and
3) "exclusive distribution": selling through one
middleman per geographic area.
(McCarthy 1988, 232)
General marketing theory states that a firm should utilize an
distribution if the
selective form of
exclusive or
cost to
sell the product is high and buyers seek out experts in order
to purchase
An intensive
the product.
used if the product
should be
convenience is
is a low cost
the securing
key to
distribution system
of a
item and buyer
purchase.
(Corey
1978, 7-8)
There
channel
two
exists
to increase
establish a "push
ways to
motivate
the velocity
the
of sales.
(through the channel)" policy
policy of motivation.
The
distribution
The firm
can
or a "pull"
push policy will concentrate most
promotional activities on the distributor and will stress the
Page 54
the product "team."
distributor as a member of
pull policy would utilize
end
user to
ask
aggressive promotion to entice the
the distribution
Although
locating,
all
of
the
reaching, and
all depends
commercial
distribution
marketing
member for
upon the
real
is
the
a
"push"
at
this
to personally
to the potential tenant.
with
aimed
space users,
agents' ability
estate project's
channels
rather than a "pull."
effort
securing office
sell the office building
most
channel
(McCarthy 1988, 232)
product.
effort
In contrast a
will
Therefore
motivate
distribution
the
policy
(Roberts 1986, 114)
In addition, the
office building lease, as
priced industrial product, requires
does a high
a hybrid of distribution
The developer must create a distribution policy that
policy.
personal sales, in order to solve
will allow for both direct
each potential
requirements for
customer's specific complex
the product, and a somewhat broader reach of distribution, in
order
to
market.
contact
developer
potential customers
in
the
target
(Reeder 1987, 290-293)
Since the
greatest
all
commercial real estate project
exposure
must
be
through
sure
the
brokerage
to choose
Page 55
the
will gain the
community,
broker
which
the
has
experience in leasing their kind of building in their kind of
market
and
has had
experience
representing
tenants that the developer has targeted.
the kinds
of
(Hollander 1985)
The developer must still make the decision of whether to
utilize
the entire
product
type (intensive
brokerage
community
distribution),
involved in
to
select a
their
few to
represent the project (selective distribution), or to give an
exclusive arrangement to one broker (exclusive distribution).
There
exists
arrangement
a
drawback
with one
to
establishing
particular broker
The developer must be concerned
commitment to the
other projects
exclusive
or brokerage
firm.
about the brokers' focus and
There also exists
the brokerage
interest when
market.
project.
an
firm or broker
which are competing
a conflict of
also represents
for tenants in
the same
(Carnahan 1987, 49)
The field research indicated that the brokers' focus can
be
better
meetings,
developer.
maintained
status
with
reports,
and
An additional concern
might not
push as hard as
happen at
the project.
tenant at the project
that makes
regular
daily
scheduled
contact
with
the
was that an outside broker
an inhouse broker to
The
marketing
outside broker might
make a deal
place the
with the least resistance--the project
completing the
transaction the
Page 56
easiest-- rather
than
the project
maintain a
was
of
best
strong commitment
recommended that
fit with
the
tenant.
by the brokerage
the developer
maintain a
help
community it
competitive
commission schedule and instant commission policies.
Page 57
To
THE COMMUNICATION POLICY
if the target customers are not
specific need, can not do so
aware of the
product, what it can do for
can purchase
it.
them, and how they
communication policy, the
The
satisfy a
product, intended to
best designed
Even the
process of
informing the public about the product and persuading them to
buy,
fourth
is the
controlling the marketing process.
ways
to
the
inform
product--personal
about
audience
public media
the
direct mail,
relations,
for
Although there exist many
target
sales,
marketer's tool
visible
and most
advertising,
of these
exact mix
the
public
different
types of communication will depend upon the way the product's
(Corey 1978, 8)
consumers purchase the product.
type
of customer,
the
throughout
policy will
the communication
customer
phases a
different
during the purchase decision.
insure that
vary across the
will the communication policy
Not only
the customer is
also vary
goes
through
The communication policy must
reached and influenced
at each
stage of their decision.
Consumer Buying Cycle
Figure
Associates),
customer
of Consumer
3.5, "Stages
will
shows
begin
this
the
Buying Cycle"
effort
diagrammatically.
buying
cycle
Page 58
by
(Jaffe
The
"information
gathering";
reveal
at
this
to the
point the
customer that
communication
the product
would serve the customer's needs.
a state
of "confusion"
several product
this
stage
as the
the
differentiate the
marketing
must
is available
and
The customer then moves to
customer is
options of how
policy
confronted with
to solve their
communication
problem.
policy
developer's product and services
At
must
from the
competition's offerings.
Although the following stage,
"point of sale", does not
have a communication need identified on figure 3.5, for large
purchase
items
like
an
office
building
lease,
communication policy must still be very interactive.
at this
point-of-sale, the developer and
the
Exactly
prospective tenant
attempt to solve the tenant's specific problems and needs.
stage is often overlooked
The fourth
real
estate
industry.
point the
client that
satisfied
the choice
customer is
The
purchase.
of product was
also be included as part
final
stage
of
the
buying
buyers
It is
the best
the product's
one of
that
must continue to
communication policy
agents and should
process.
Theory identifies
remorse" after a
through "buyer's
in the commercial
at this
insure the
choice.
A
best marketing
of the marketing
cycle
customer's identification of additional requirements,
Page 59
go
is
the
STAGES OF
CONSUMER
INFORMATION
GATHERING
BUYING
CYCLE
rt
0
0
CD
0
AFTER MARKET
'-
NEEDS
CONFUSION
0
POINT OF SALE
BUYERS
REMORSE
titled on the
maintain
primary
a
client over
and
understand
diagram as "after market needs".
secondary
these
the
long
base
term through
terms,
"after-market
In order to
the
needs"
successive
developer
and can
do
keeping continuous contact with the client over time.
1978,
must
so
by
(Corey
8-9)
Determinants of Communication Policy
Although the product, the price
and
the
channels through
perform a
cycle,
which
it
at which it is offered,
is brokered
communication function during the
marketing
developing
a
theory
defines
comprehensive
and
policy for a product.
six
will
all
customer buying
determinants
appropriate
communication
(Quelch 1975, 4-12)
1) OBJECTIVES: The type of demand to be stimulated,
i.e., create awareness, knowledge, or
preference.
2) TARGETS: The recipients of the message--will the
message "push" the product through the
brokerage community and/or "pull" it by
stimulating end user demand.
3) MESSAGE: The information to be communicated, i.e.,
distinguishing characteristics, features, or
benefits, and how to get more information.
Page 61
to
4) INTENSITY: The amount and frequency of information
to be communicated to the customers: usually
a function of the other determinants.
5) MEANS: The way the message will be communicated, i.e.,
print advertising, direct mail, personal
selling, point of purchase displays, etc.
6) PROFITABILITY: The marketer must insure that the
results of the communication policy are
profitable in relation to the costs.
Advertising v. Personal Selling
In the development of the communication policy the
greatest debate is often the choice between the wide range of
possible
various
means
of
In
communication.
communication media,
it
among
the
to find
the
choosing
is important
communications medium that will reach the target audience and
that can communicate the message.
Generally, the
use
of
advertising
media is divided
choice of
and
(Quelch 1975, 7-9)
personal
selling.
between the
Advertising
includes both media advertising (e.g., magazines, newspapers,
outdoor
billboards)
and
point-of-purchase displays,
usually less
use
of
nonmedia
brochures, direct mail),
per person reached
expensive in cost
personal
selling.
advertising
Each
Page 62
media
offers
(e.g.,
and is
than the
unique
opportunities to the
marketing of any product.
complete communication policy for
building
the
marketer
To create a
the marketing of an office
must utilize
both
advertising
and
personal sales.
Marketing theory identifies personal selling as offering
the marketer the ability to:
*
identify prospective customers,
*
provide personal reassurance of the rightness
of a purchase
* establish a "two-way communication" with the buyer,
rather than just giving a generic set of information,
and
* develop tailored solutions to the customer's needs.
The use of personal selling
is therefore most helpful to the
communication efforts when:
*
difficult or complex information must be delivered,
*
tailored purchasing solutions are required to
satisfy the buyer's needs, or
* it is important for the prospective customer to
"feel the goods."
Since
the office
which
the
building lease
customers
marketer of the
(Corey 1978, 9-10)
have
is a
very user
complex product
specific
office building lease must
needs,
for
the
rely on personal
selling, despite its costs, for the bulk of the communication
Page 63
effort.
The
use of
decision maker is
the message
personal selling
will insure
exposed to the message,
is custom tailored
that the
make certain that
to the information
needs of
the individual customer, and allow the marketer to respond to
(Quelch 1975, 9)
needs and objections.
Most
effort here at
marketing
stop the
developers will
book on industrial
the
communication
is not complete
with personal
explained that
Reeder
a complex product
effort for
In his
personal selling.
Robert
marketing communication
selling as the sole communication medium.
complex ...
and
products, coupled with buyers' expectations
information
unique
needs,
personal
requires
contact... [It is] not possible however, for sales people
indicated
on
that
influencers, a
...
all individuals...
contact with
to make
average
for
every
Studies have
salesperson reaches only three
Advertising
creates
awareness,
buying
ten
to four.
enhances
the
effectiveness of the selling effort, and is an important
ingredient
in creating
and maintaining
demand at
distributor level.
(Reeder 1987, 399)
Page 64
the
Marketing theory identifies that advertising (both media
and nonmedia)
can be
useful to
the commercial
real estate
marketer in its ability to:
*
introduce the product and create awareness;
*
assure quality, reliability, and credibility;
*
create a prestige image;
* position against competition;
and
* develop interest among the brokers.
(Corey 1978,
9 and Monroe 1985, 7-8)
These abilities allow the developer to utilize advertising to
Since the target tenant
accomplish two different objectives.
population will be receiving
needs through
through
the broker
the
in an
brokerage
community, the majority
effort
communication
marketer's
emphasize
the brokerage
the majority of its information
"push" the
Yet it
community.
will
advertising
with
attempt to
of the
should
project
not
be
ignored that the marketer can accomplish two important tasks,
getting
broker's
the
customer
job, by
to
the broker
also utilizing
advertising campaign.
and
simplifying
an effective
This advertising will be
the
"pull" media
intended to
stimulate the need for information by potential tenants which
the broker will provide.
The use
only
if the
(Quelch 1975, 9)
of advertising will
specific
be useful to
advertising medium
Page 65
the marketer
gets the
message
across, the
are
open
(Corey
target audience can
to
receiving
1978,
9)
Communications,
commercial
A
the
message
recent
1986)
real estate
of
be reached, and
through
study
advertising.
(Peabody
advertising
the buyers
Fitspatrick
practices
industry indicates
in
the
that prospective
commercial building tenants are being reached and are open to
receiving the
advertising message.
assistance.
properties
prospective
identifying
This
percent of
began their search for office space
the tenants in the study
by
Almost fifty
allows room for the
without
broker
marketer to influence
these prospective tenants with advertising, public relations,
and other marketing communication vehicles.
One third of the
tenants indicated that some advertising marketing tool played
a role in their
time.
first
going to see their present
The
awareness of their project within
tenants
went to
a
over forty
for
community,
brokerage
the developer
emphasized that
study also
must raise and sustain the
the
building for the
broker
percent
without identifying
of
all
prospective
buildings.
There
exist
audience through
examined here
marketer's
newspapers),
many ways
advertising.
for their
The
use in
communication
outdoor
communicate
to
Page 66
following media
the commercial
policy:
signage,
to the
print
brochures,
target
will be
real estate
(magazines
direct
and
mail,
newsletters, marketing
centers and
audio visual
shows, and
public relations.
Print
The print medium consists
journals.
is
advertising
Newspaper
these media,
expensive of
of newspapers, magazines, and
but it
the
generally
has the
least
disadvantages of
having a very general audience and a very short lifetime.
can reach a specific target
contrast, magazines and journals
audience
and
have a
longer
life
than a
newspaper.
The
the use
generally does not understand
development community
In
of print advertising:
There
is a
great debate
owners about
between marketing
people and
Owners say, 'You
want me to
advertising.
[But]
advertise, but I never get much of a response.'
(Monroe 1985, 76)
you don't advertise to get responses.
print
advertising
distinctive
advertising
medium will be
primary
thrust
(Gustafson 1986,
Page
67
a
in the
for most
of the
through the
community.
"address issues of
building features."
establish
the project
as it is
to alert the brokerage
advertisements should
and
Just
to
be
identity for
mind.
effort, the
often
most
will
and memorable
prospective tenant's
The goal of
going to close a deal.
Advertising is not
print
The print
location, ambience
34) Appendix
One
contains three of the print advertisements that were used for
Marathon Plaza
to the six
in San Francisco.
advertisements relate
issues and needs that the project
for the building
the sole
The
to be marketable.
dimension to
If
had to address
personal selling was
this project's
communication policy,
the message regarding these six issues could not have reached
the audience
that it needed to
reach and that it
did reach
through print advertising.
The responses to a recent study of advertising practices
in the
commercial real estate industry
Communications 1986)
newspaper is
new
office
indicated that
number of
Black's
the city's
the publication most often
both the
this
tenants and the
publication
that
the
best
office buildings are those
brokers.
brokers and corporate location
Guide,
major daily
consulted to locate
noted
study also
The
space.
publications for advertisement of
that target
(Peabody Fitzpatrick
was
Due
to the
managers that read
singled
out
as
a
publication that can efficiently reach a large portion of the
target audience.
Outdoor Signage
The marketing communication objective usually chosen for
outdoor signage is to convey a brief message and to suggest a
course of
action.
Outdoor
signage consists
Page 68
of billboards,
transit
displays,
on-site
billboards have been used
new
large office
leasing
signs,
etc.
Although
effectively to help recognition of
complexes
adjacent to
the major
roadway
where the display is located, billboards and transit displays
are
generally
less useful
to
the
commercial real
estate
marketer than they are to the marketer of a consumer product.
On
the other
hand, on-site
a
communicating
audience.
brief message
on-site
Although
an
important
part
communication policy.
its
greatest
marketer is
been
in
the
Recently the
of
real estate
the
signage
useful in
is
the
because
real
with
estate
on-site
the recipient
assured that
target
which
stationary
developer's
On-site signage's limitation
benefit,
market
to
be very
who will see it, on-site signage
limits the number of people
is
signage can
location and
construction barricade
has
signage
the
message has
of the
seen
is also
the
project.
has been realized
as a
unique opportunity to communicate to the target audience in a
(Roberts 1986, 91-2)
creative, unusual manner.
Brochure
The
brochure
advertising
The brochure
is
media in
one
of
the commercial
allows the marketer
information and
the
to present
most
frequently
real estate
to convey a great
an image
for the
used
industry.
deal of
project.
The
objective generally chosen for the brochure is to establish a
Page 69
prestigious image for
the
the project and to
unique attributes
tenant.
It
should
permanence, and
still
of
communicate
capture the
communicating
architectural
the project,
the
information,
making the
etc.
the
floor plate
In
brochure
feeling
information
elements, the
systems,
to the
prospective
of
character of the
elevator system, the developer's
safety
a
"sell the sizzle",
quality,
project while
required:
the
configuration, the
experience, the fire, life,
communicating
has the
all
additional
uncompleted project appear more
of
this
quality
of
tangible or real
to the target audience.
Direct Mail
to promote a project in
Direct mail allows the marketer
detail
to
directly
community.
communication is
directly with the target
the project
mail it is
the
brokerage
in great
detail.
When
crucial that the mailing list
target
audience
to communicate
its ability
audience and to deliver information
that the mailing is creative so
of
and
prospects
Direct mail's greatest advantage over other forms
of advertising
about
tenant
the
Page 70
is appropriate and
that it is given the respect
and not
(Roberts 1986, 93-97)
utilizing direct
considered
"junk
mail."
Newsletters
Due to its editorial style
carries
nearly as
written
about
advantage
of
message and
of the
is in
informed about
or
newsletter
the timing
greatest use
policy
much credibility
the project
a
and its format, a newsletter
an
the
is the
as a
development firm.
The
marketer
the
of the release
newsletter as
attempt to
controls
of the
part of
"story." The
a communication
the brokerage
keep
If the
the project.
newspaper article
community
delivery of newsletters
to the brokerage community is consistent, the newsletter will
also help establish a loyalty among the brokers as they "feel
a part of the team."
(Murry 1988, 26)
Marketing Centers/AudioVisual Shows
The
marketing center
used in the marketing of
real
estate
and audio-visual
to
answer
industry's
Although a
marketing
elaborate models, and "high-tech"
from an
are
office buildings are the commercial
display and merchandizing performed
industry.
shows that
audiovisual show, the
the
point-of-purchase
by the consumer products
center generally
includes
imagery that sets it apart
two deliver many of
the same
attributes to the marketer's communication policy.
The
marketing
center
or
Page 71
audiovisual
show
give
the
marketer
of
office
space
the
ability
to
tell
the
development's "story", reinforce an image of quality, instill
trust, and help tenants visualize the intangible.
1986, 35) Many tenants are
not see,
let alone walk
reluctant to lease space they can
through, the marketing
try to persuade the prospective
will be
like.
tools take
Unlike any
other form of
and into an environment that
"to a
(Gustafson
For
30-35)
the
critical
marketing
center
is
developer
a
to communicate
without the
prospective tenants
to the
all
credibility
perspective
on
the
needing to travel
to other
communication tool.
He said,
other projects.
an audiovisual show
help get
the marketer speak
Chuck London, the
of
marketing
producer of
placed the
centers
"The show doesn't
show is the twinkle on the chrome." (Guenther 1984)
Page 72
the
offers
prestige
marketing centers,
use
of
and
to the site and help
Hines'
of Gerald
It
asset.
are tools that will
sell space, but they
intangible elements.
number
local credibility, the
either a marketing center or
the target audience
and illusion."
increasing
ability and
the developer's
to see
The use of
will not
way
a
away from work
of reality
who do not have
out-of-town builders
cities
advertising, these
is completely controlled by the
magical blend
1986,
center will
tenant what the real project
the prospective tenant completely
developer--
(Gustafson
right
as
sell.
a
The
The
production
of
either
audiovisual show is very
a marketing
expensive.
center
or
an
If the development firm
wants to utilize these tools, it is advisable for the firm to
carefully examine
their communication policy to
see if this
means of communication is in line with the chosen objectives,
targets, and message,
and is a profitable
marketing of the project.
investment in the
(Taylor 1988, 13)
Public Relations
Public
tenants
relations
and
establishes
publicizing the
tenancy,
tools
giveaways,
an
the
interest
image
for
important aspects of the
features,
relation
arouses
or
creators.
including
ceremonies
There
press
a
of
potential
building
by
building's design,
are
many
releases,
public
promotional
(groundbreaking, topping
out,
grand
openings), business entertainment, and community involvement.
101) Most marketers utilize
(Roberts 1987,
the objective of
to accomplish
relations'
credibility
project
power
it
as well
encompass.
creating a public
project's prestige
the
of
awareness
as
a
as
the
or
communication
creates for
the
Page 73
of
image and
Public
quality.
tool
development
broad reach
(Murry 1988, 25-29)
public relations
in
the
firm and
the
is
audience it
will
WORKS CITED IN CHAPTER THREE
THE PRODUCT
Borden, Neil H.
"Note on Concept of Marketing Mix,"
Boston: Harvard Business School Case Services 1957.
Building Owners and Managers Association International.
Office Tenant Moves and Changes.
Washington:
Building Owners and Managers Association
International, 1988.
London:
Foxall, Gordon R. Strategic Marketing Management.
Biddles Ltd, 1981.
Kotler, Philip.
Principles of Marketing.
3rd ed.,
New Jersey: Prentice-Hall, 1986.
Levitt, Theodore.
"Industrial Purchasing Behavior: A Study
of Communications Effects." Boston: Division of
Research, Harvard School of Business, Harvard
University, 1965.
Levitt, Theodore.
"Marketing Success Through Differentiation
of Anything." Harvard Business Review January-Febuary
1982.
Levitt, Theodore.
Rev.
The Marketing Imagination.
ed.
New York: The Free Press, 1986.
McCarthy, Jerome, and Perreault, William D.,
Marketing: A Managerial Approach.
Irwin, 1984.
Page 74
Jr. Basic
8th ed.
Homewood:
Meals, Cynthia M.
"Amenities: Amenities' Importance Soars in
Competitive Market; Tenant's Expectations become more
Sophisticated." National Real Estate Investor March
1989:
104-106, 143,
Reeder, Robert R.,
194.
Brierty, Edward G.,
and Reeder, Betty H.
Industrial Marketing: Analysis., Planning and Control.
New Jersey: Prentice-Hall, 1987.
Roberts, Duane F. Marketing and Leasing of Office Space.
Rev.
ed.
Chicago: The Institute of Real Estate
Management of the National Association of Realtors,
1986.
Shapiro, Benson P.
"The Marketing Mix."
Business School Case Services, 1984.
Page 75
Boston: Harvard
THE PRICE
Dolan, Robert J.
"Marketing Management: Pricing." Boston:
Harvard Business School Case Services, 1984.
Principles of Marketing.
Kotler, Philip.
3rd ed.,
New Jersey: Prentice-Hall, 1986.
Levitt, Theodore.
The Marketing Imagination.
Rev.
ed.
New York: The Free Press, 1986.
Reeder, Robert R., Brierty, Edward G.,
and Reeder, Betty H.
Industrial Marketing: Analysis, Planning and Control.
New Jersey: Prentice-Hall, 1987.
Roberts, Duane F. Marketing and Leasing of Office Space.
Rev.
ed.
Chicago: The Institute of Real Estate
Management of the National Association of Realtors,
1986.
Page 76
THE DISTRIBUTION POLICY
Carnahan, Jay.
"Brokers Play a Key Role in the Marketing of
Commercial Properties Illustrated (1987):
Office Space."
49.
"Marketing Strategy - An Overview."
Corey, Raymond E.
Boston: Harvard Business School Case Services, 1978.
Dolan, Robert J. "Marketing Management: Channels of
Distribution." Boston: Harvard Business School Case
Services, 1984.
Hollander, Richard E.
"Marketing Office Space in the
Suburbs." The Journal of Real Estate Development
1.1
(1985).
Kotler, Philip.
Principles of Marketing.
3rd ed.,
New Jersey: Prentice-Hall, 1986.
McCarthy, Jerome, and Perreault, William D.,
of Marketing.
4th ed.
Homewood:
Reeder, Robert R., Brierty, Edward G.,
Jr. Essentials
Irwin, 1988.
and Reeder, Betty H.
Industrial Marketing: Analysis, Planning and Control.
New Jersey: Prentice-Hall, 1987.
Roberts, Duane F. Marketing and Leasing of Office Space.
Rev.
ed.
Chicago: The Institute of Real Estate
Management of the National Association of Realtors,
1986.
Page 77
THE COMMUNICATION POLICY
Corey, Raymond E.
Boston:
"Marketing Strategy - An Overview."
Harvard Business School Case Services, 1978.
Garber, David J. "Maximizing Your Advertising Dollar."
Journal of Property Management July-August 1984.
Guenther, Robert. "Builders Using Fancy Marketing
Centers to Draw Tenants to Commercial Projects."
Wall Stree Journal 8 July 1984.
Gustafson, Karen.
"Real Estate Marketing: A Brave New
World." Corporate Design and Reality March 1986.
Monroe, Linda. "Merchandising: Positioning Your Building
Stage Center." Buildings May 1985.
Murry, Robert H. "Public Relations -
Your Neglected
Marketing Tool." Journal of Property Management
July-August 1988.
O'Shaughnessy, John. Competitive Marketing: A Strategic
Approach.
Boston: Allen & Unwin, 1984.
"Communications Policy."
Quelch, John A.
Boston: Harvard
Business School Case Services, 1975.
Reeder, Robert R.,
Brierty, Edward G.,
and Reeder, Betty H.
Industrial Marketing: Analysis. Planning and Control.
New Jersey: Prentice-Hall, 1987.
Page 78
Roberts, Duane F. Marketing and Leasing of Office Space.
Rev.
ed.
Chicago: The Institute of Real Estate
Management of the National Association of Realtors,
1986.
Taylor, Richard. "Video: A Potent Tool with Plenty of
Headache Potential." Urban Land December 1988.
Page 79
CHAPTER FOUR:
THE MARKETING BLUEPRINT
Chapter Summary: With an understanding of the
market selection, the positioning of the
product within the market, and of the ability
to utilize the marketing mix to achieve
a
maximum
market share
of the
available
tenants, the commercial
real estate marketer
must understand how it all fits together into
a comprehensive marketing plan.
a
Before
commercial
real
estate
enterprise
can
be
successful at marketing its product, the developer must start
out
with
a
developer's
crafted
marketing
blueprint to
marketing
systematic
approach
plan
plan.
The
marketing
the marketing
allows
toward
the
realizing
plan
process.
developer
its
is
The
to
target
the
well
have
a
market,
analyzing the factors and trends in the market, and designing
a marketing program to best meet market conditions.
A study by
Charles Ames showed three
major pitfalls in
the marketing planning process by companies:
1) failure to fit the marketing concept to the
abilities of the developer;
2) overemphasis on information collected at the
expense of content;
3) failure to recognize alternative creative plans
due to continuation of current policies.
(Dolan 1984, 9)
Page 80
Although
the
study
was
conducted
for
industrial
products, the characteristics of the office building lease as
a product and the office tenant as a customer fit better into
the characteristics
market.
As such
of an industrial market
it is important for
than a consumer
real estate developers
to understand the three pitfalls
found and to understand the
systematic process
marketing plan in
to forming a
order to
avoid these pitfalls.
The first failure
found by the study was
traced to the
fact that companies would try to borrow the marketing plan of
another organization.
the characteristics
and in relation
time the
The marketing
of the
introduced.
real estate firm must be
produce a
market at the
1984, 9)
marketing concept on
in the market has
that concept
plan that
(Dolan
the product
Thus the
careful not to introduce a specific
type and its
that another developer
leasing with
developer marketing
to the characteristics of the
product is
office product
plan must be based upon
and product.
will match
the basis
been successful in
developer must
The
the company's
abilities to
produce a product for the users in that market segment.
The second point
data
on
a
market
understanding the
speaks to the collection
without
paying
attention
factors that really make
Page 81
of masses of
to
and
the market work.
(Dolan
1984, 9)
The commercial
fails on this point.
vacancy
effect
Developers
and absorption
external
factors,
the
real estate
will collect static data on
without looking
political,
office market.
social,
Some
The market
understanding of where
at how
and
all of
economic,
developers
market almost automatically when the
certain level.
industry often
the
will
will enter
a
vacancy rate falls to a
commitments are made
the demand is coming
without an
from (e.g.,
job
creations in the area, regional job shifts to the area, etc.)
or without
taking into consideration the
competition.
This
failure is evident in the overbuilt office markets throughout
the nation.
The final pitfall occurs when a firm creates a marketing
plan for a product by
merely updating an old marketing plan.
Ames reminds
us that the market
changing and
that a
plan should
"straight-line extrapolation
environments are constantly
not be
of the
based on
past."
a simple
(Dolan
1984, 9)
With the increasing competition in the commercial real estate
industry this might have never been more true than today.
three pitfalls the commercial real
To avoid the study's
estate firm
must therefore
achieve a marketing plan.
similar
step
by
step
process to
utilize a systematic
Most all marketing texts discuss a
process
Page 82
to
achieving
a
complete
marketing plan.
five step
The remainder of this chapter will examine a
process that
can help
the real
create a comprehensive marketing plan.
estate developer
The five steps to be
addressed are:
1) Situation Analysis,
2) Problem/Opportunity Statement,
3) Objectives,
4) Strategy, and
5) Action Program (with a marketing budget
calendar).
(Dolan 1984,
2,
and Roberts 1986, 12-18)
Situation Analysis
The situation
required
market
information for
that market.
the research required to
market
selection, and
Chapter Two.
the
is going
its building
position in
to understand
developer
to be
in and
the
the building's
analysis represents
The situation
accomplish the market segmentation,
product positioning
as discussed
in
The realization of what this research tells the
marketer will be
marketing plan: the
the second part of the
opportunity and problem statement.
The
plan gathers the
analysis of a marketing
situation
analysis
(Roberts 1984, 13)
should
Page 83
be
broken
into
two
distinct
parts:
analysis of
the
external
factors on
the
market, and analysis of the firm's internal factors that will
influence the
marketing of
The analysis of the
of
the
primary
the
competitors,
A marketer should be
of consumers,
1981, 31)
for
the
and
the
market
aware of the key segments
their buying behavior,
demand
(Foxall
external factors should include analysis
consumers,
environment.
the product.
and the trends
product.
In
in the
analyzing
the
competition, the developer should know who is servicing which
segments in the
market, and what are
their
In
product.
order to
the characteristics of
avoid the
third pitfall,
the
developer must also understand the environmental factors that
will
influence
the
market
by
researching
the
economic,
political, social, and legal factors that could influence the
market.
for
more
(Dolan
and
1984, 2) With communities
more
concessions,
these
asking developers
factors
have
an
increasing importance in today's political climate.
By examining
factors that
the internal
the developer will avoid the
the marketing of their product,
first pitfall.
capabilities,
The firm must
and goals
to
will influence
look at their
see if
market opportunity being presented.
Page 84
these
own resources,
factors fit
(Dolan 1984, 2)
the
Problem/Opportunity Statement
After formulating
market, the next
understand the
step of the marketing plan
and summarize this data
exist for the
the data necessary to
is to interpret
into problems and opportunities that
developer in the market.
Duane Roberts wrote
in his book on the marketing of office space that:
Accurate recognition of
forms the
foundation of the rest
plan, allowing
on
the agent
the opportunities
problems.
problems and opportunities
of the marketing
[marketer]
and
avoid
to capitalize
or overcome
(Roberts 1984, 13)
A problem would be, for example,
a building with large floor
plates and a market that consisted of only smaller users.
opportunity would be the realization
grow into
analysis
over the
covered
surrounding the
the problems
developer's
next few years.
both
the internal
product and
strengths
that
deficiencies to be remedied.
Just as
and
are
to
exploited
(Dolan 1984, 3)
Page 85
factors
realization of
not forget to
be
space to
the situation
external
its market, the
and opportunities must
An
of a growth industry in
needing office
will be
market that
the project's
the
note the
or
its
Statement of Objectives
The
objectives should
should be put
in writing.
be
By doing this it
the process of marketing the
in nature
and
insures that as
product moves on it will always
be clear what the marketing
product.
quantitative
goals or objectives were for the
Such tangible goals
for an office building product
would be the square footage to be leased in a period of time,
to be achieved ,
rental rates
absorption to
be captured
or the share of
by the building.
the market's
(Roberts 1984,
14)
Marketing Strategy
originated from a military
Although the word "strategy"
context,
it is
widely
Harvard Business
marketer's
used in
business context
a
described a
School Professor Raymond Corey
strategy
to
be
very
much
like
today.
the
military
commander's strategy in that military strategy was:
based on what was known of the enemy's strength and
positioning,
the physical
characteristics of
the
battleground, the friendly or hostile sentiments of
those who
the
occupied the
strength
and
territory and,
character
available to the commander.
Page 86
of
the
of course,
resources
(Corey 1978, 1)
The marketer's
strategy is
the competition
upon
found
in
the
similar in the
analysis
and
strengths and resources in the market.
The
marketing
interrelated
element is
strategy
elements,
and
the market
will
therefore
its first
many
be
achieve
the firm to
securing
The strategy should be a
statement of how the
success
(Roberts 1984, 14) The strategy
can tailor
and
specifically attracting
broad conceptual
firm's resources will
in
the
market
chosen.
can therefore be seen as the
fulfill its objectives
taking advantage
problems while
and
include
market, the developer
customers from the market segment.
its
(Corey 1978, 1)
For with
toward
method for
the developer's
selection and positioning.
its
to
the
important
of a target
deployed
in
were
most
the selection
strategy
defined
problem statement, and upon
opportunity and
is based
characteristics that
and market
situation
way it
of its
by remedying
opportunities.
(O'Shaugnnessy 1984, 39)
As discussed
the marketing
channels
developer utilizes
Three, the
mix--the product, the price,
through
communication
in Chapter
which
policy
for
marketing of the product.
the
product
the
As
is
product--
the distribution
and
the
control
the
sold,
to
part of the marketing plan the
Page 87
marketer
needs
determine
to
examine
what resources
each
one
of
and emphases
what part of the marketing mix.
these
four
should be
and
placed on
(Roberts 1984, 14)
The marketer should also examine the strategy chosen and
the marketing
mix to
be used to
insure that
program developed fits the needs
element of
the
the mix should
customer
also
should
in the
be
strengths and
reviewed
of the target market.
be reviewed for its
target
the marketing
market
for its
segment.
fit
weaknesses of the company
with
Each
influence on
The
the
program
relative
and its competition
(Shapiro 1984, 2-3)
in the market.
Action Program
The action program is the
last of the five steps toward
The key of an action program
a comprehensive marketing plan.
is
to
insure
continuity
marketing the product.
be
will state
intensity
also
which media should
of that
specify
the
communications and
events.
Since
be used to advertise
audiences
the schedule
personal
strategy.
the marketing
advertising over
target
approach
selling
Page 88
to
program is the tactics to
The action
implementation of
used for
developer's
in the
time.
The
to
receive
of planned
is so
It
and the
plan should
marketing
public relation
important
in
the
commercial
real estate
industry, it
approach and time to be spent
project be
the
specified.
use of
This
special events,
is important
that the
on the personal selling of the
would include
specification of
personal presentations,
materials to be used by the project's agents.
or the
(Roberts 1984,
15)
To insure a successful marketing program it is important
for the action program to
by
the marketer
benefit
to
the
include control devices to be used
to insure
the marketing
developer
than
marketing calender
it
and a budget of
been two tools used successfully
plan yields
cost
to
more
produce.
A
marketing resources have
by firms to help manage the
marketing effort.
The marketing calendar should identify the
promotable stages
and milestones of the
(e.g., the closing of the
development process
project financing, the design, the
groundbreaking, the topping out)
and other special events or
holidays within the community that will take place during the
development of the project.
for
promotional events
budget
needs
available
for
to
and press
clearly
the
communication efforts
These events should be targeted
releases.
allocate
marketing
the
Page 89
marketing
development
effort
(e.g., advertisement,
direct mail, promotional gifts).
The
to
the
funds
various
special events,
(Roberts 1984, 15)
WORKS CITED IN CHAPTER FOUR
"Marketing Planning for Industrial
Ames, Charles B.
September-
Products", Harvard Business Review.
October 1968.
Corey, Raymond.
"Marketing Strategy - An Overview."
Boston: Harvard Business School Case Services, 1978.
Dolan, Robert J.
"Marketing Planning."
Boston: Harvard
Business School Case Services, 1984.
Foxall, Gordon R. Strategic Marketing Management.
London:
Biddles Ltd, 1981.
Kotler, Philip.
Principles of Marketing.
3rd ed.,
New Jersey: Prentice-Hall, 1986.
O'Shaughnessy, John.
Approach.
Competitive Marketing: A Strategic
Boston: George Allen & Unwin, 1984.
Roberts, Duane F. Marketing and Leasing of Office Space.
Rev.
ed.
Chicago: The Institute of Real Estate
Management of the National Association of Realtors,
1986.
Page 90
CHAPTER FIVE
CONCLUSION: THE MARKETING MANDATE
Marketing
is crucial
to maintain
or increase
leasing
velocity in today's competitive environment and the marketing
of
an
office
building
must be
planned
Developers in the commercial real
from
the
start.
estate industry will go to
great effort to systematically and comprehensively plan every
step
of
the
marketing.
financial
building
The
process--
developer
except
will
analysis, management
the
utilize
project's
sophisticated
intensive project
meetings,
and construction time tables, but most often when the task is
marketing the
developer's approach
is reactive
rather than
proactive.
Currently many developers will work backward through the
marketing
process, starting
tools of the marketing mix
strategy.
Not prepared
with one
of the
and working back into a marketing
to commit
the time
understand marketing,
a developer might hire
or
firm.
public
relations
comprehensive
marketing
advertising agencies
own
marketing mix.
in the
Without
created
plan
do what
communication tools
the
by
they do best:
over the
an oversight
Page 91
and effort
to
an advertising
guidance
the
of
a
developer,
emphasize their
other ingredients
Usually this results
project's image,
communication
of the
in a lack of continuity
of the
project's own
special attributes, and possibly
niche market opportunity or
MUST BE
THE MARKETING PROCESS
than needed.
a greater cost
MANAGED.
In order to manage
must
energy
commit
real
commercial
with
real
estate
beneficial influence
and
consumer
more
become
has
is
needs
What
the
the
same
of the
marketing departments
Developers must
product industries.
techniques
and
theories
the
industrial products,
are
being written about
influence.
now
industry
from the
industrial and consumer
comprehend
Street's
Wall
there
Today
it.
analysis
financial
estate
sophisticated
understand
to
and articles that are
numerous seminars
how
the marketing process, the developer
and
used
adapt
market
to
them to
the
marketing of real estate development products.
Although
a typical
purchase decision and as
sale to
close the deal,
should be seen as an
must start
developer
specific
market
needs
to
a well developed
is a
large
marketing program
investment toward these leasing efforts
velocity of the leasing.
at the
divide
"want categories"
by "thinking
building lease
such requires a personal one-on-one
to increase the
and help
process
office
beginning of
the
and
backward" to
Page 92
market
then pay
But the
the project.
The
groups
with
into
attention to
the
mind of
the
picture the
prospective tenant as the tenant decides what type of project
best serve the needs and desires
is going to
enhanced
be
can
process
This
the
with
of their firm.
utilization
of
research, such as focus groups, to understand the prospective
tenant's preferences.
The developer must also realize what is contained within
building lease.
the office
building
is
market
will
be valued
The
segments.
of a
not just the sale
of the
The
office
certain
and
by
differently
project
developer's
market niche with an image,
positioned within the
consumer products will create an image.
understand Levitt's
size.
tangible
bundle of
larger
a
which
qualities
space
a
to occupy
right
It is
intangible
different
should
be
just as a
The developer should
"total product" and include
the process
of differentiation as a conscious part of the marketing plan.
In today's competitive
market the developer will
need to be
creative to produce a greater differentiation through the use
of
new "augmented
intangible,
that
product" attributes,
will
elevate
the
either tangible
project
beyond
or
the
"expected."
Since
the office
building can
not be
actually tested
before the tenant "purchases" it, the sale will depend on the
assertions and
implications the developer makes
Page 93
about these
purchase.
attributes in advance of the
more competitive
to
relations,
tested--the
the marketing
by applying
including
industry,
the
of
use
of
certain
a
techniques from
advertising
qualities
communicate the
promise
The developer can be
that
public
and
can not
be
the
lifestyle--to
prospective tenants.
of
marketing
the
developer
studies
the
products, it
is evident
that no
other industry
As
other
would dare
launch a new product or service without a marketing plan.
Why should the commercial
the real
real estate industry?
estate product has its
same general
--
--
Although
unique characteristics, the
marketing theories and techniques
apply to the
marketing of a new office building, and with time and study a
set of
specific theories and
practices will evolve
commercial real estate industry.
Page 94
for the
APPENDIX ONE:
The
advertisments
Francisco.
for
key to the
advertisments have
marketing
the
Plaza
Marathon
print
three
contains
project
in
San
The advertisments directly address the six issues
identified as
Kimble, the
appendix
following
marketablity of the
been reproduced at the
marketer of Marathon
effort.
(Rod
Page 95
The
permission of Rod
Plaza at the time
Kimble
California)
project.
Associates,
of this
Tiburon
So What's the Point?
San Francisco's
Newest High Rise
Is A Low Rise
San Francisco's
Beating a Path
To Our Door
Somebimes
Bigger is Better
ii
'.
MARATHON PLAZA
MARATHON PLAZA
MARATHON PLAZA
.. how San Francisco's newest
office building is an exciting
new concept
... how the city is moving in
our direction
... howour efficient floors
reduce your space costs by up to
23 percent
BELWWI
all
5153
*ME'nT% B
-=
MARATHON PLAZA
MARATHON PLAZA
... how our plaza is becoming a
new focal point for the city
... how we're the center of
an amazing transportation
network
.how we're surrounded by over
400 shops. restaurants and
support services
Over the last few months we've beenpointing out the many advantages and benefits of
MARATHON PLAZA.
Things like location. amenities. support
services and especially how our floor efficiencies can substantially reduce your spacecosts.
But all the points we've tried to make are
really beside the point.
The point is you've got to come seefor
yourself what we've beentalking about.
Becausethat's really the only way to seehow
our points give you the advantage.
And that's just the point.
ForLeasingInformation Call:
Peter Sullivan
(415) 495-8270
MARATHONPLAZA
Second Street between Folsom and Harrison
Page 96
San Francisco's
Newest High Rise
Is ALow Rise
a"
I
s3galm
*
es a emso s of lo
as~s
ee meof Isof of
.
Samas ae se
s
l g*
.........
.............
IntroducingMarathon Plaza and its Single Floor Superiority
in
soonne
to
Once a grmatwhile
has the
von, mielhglence
andreour'cen takea simple
concpi andcreatesorething remarkale
MARATHON
PLAZA suchan
achieve~me
I
is
Utilzig a creatve designconceptcalled
horzonalhighroe. MARATHON
PLAZA
10
consists of two fowersof 9 and
%tones.
at fioon 3
6 Theseunually
unobnstruced
floorsoffer large
themner.
Joumedthrough
tenants
officeconvence andferbihty ofsmgle
floors
Son Faf'clses Haet
Workig Building Wtrks In
Wap: You Won't Belieoe
specially
MARATHON
PLAZAwas
designedtoaccommodate
thechanging
needs
of
themoden electronc
office
BART.MUNI.SamTrans.
EastBayTrnat.
Golden
GaleTranit. Golden
GafeFerry.
Calinm
and theTrans~ayTermnaareall withn a Short
walk.makng ey togetto work
Andforthou whodrve orcar-pool.
MARATHON
PLAZAI. nightnexttotheBa
Bridge. all mayorfeewayrampsandconams
ownenclosed
inur-level
garage
Whatcouldbeeasier'
it
its
rangingin ze from3OD0to 9g.000+ q ft
Thermsuht
" a sigificam costslvomg
losmg
valuabletome
AndMARATHON
PLAZAsnoor are
easlydl.vtble'Io smallerspacesfor smaller
userswamng thesamecostsan
mgsandefficien.
so
ly
showt
s
MA BA TIION LA
Aim The Plemare
Of Year COMM"y
becauseof the
15-25% morefoor spaceeffi
ciencvthanfound inconventional
olderbuildings
Nomorerunnngfromioe tofloor
wainngforelevators
and
Surrounding
this unnyopen counyardae
caMtullyected Mall shop. restaurats and
Otherservicesimportm emploees
Designedtobe lnvting
andrelating.a vari
of tegular
evenns.
andexhibitsarepan
of thfe
activitesplanned
afer opnieng
V*wantMARATHON
PLAZAtobeone10
San Franciscogreat
publicspaces
77,,1,,
is
Whetheryourcompany wellestablished
withan mae mam n or
begiming10
make mark.therightbusss environment
can
makeall
difference
i theworld
Andthat'swhatyou'llfindatMARATHON
PLAZAwith ig
floorsuperonty and
technological
efficiency
assunngthepleasum
of
o small
whetherlarge
yourcompany.
MARATHON
PLAZAsunque location
oflers city prestige
andconvenience
ina new.
excilngdownown
area
Butdon1ttake u, word,fort,
Clon e fo10r0
ll
r
In
marketit,
toget
i good
dea1m goodofficebuildmig
But 1oudemandmorethan theordimary
o.Id get Ag.1 deal
And salue.you
q 1ll
holh4th
to
sjust
its
the
ce. Officesbecome myeay
o plannowandeasyso
space
needs
eXpandmeetfuture
to
its
TrulySanFmncisco's
seennothingquite
lhkethisbefore
you
San Franiso's Beating
APath ToOur Door
WAth
fewbuildable itesleft inthe
traditionalFmnancial
District.MARATHON
PLAZAst rightin themiddleof thenaturalpath
of busiess growth. Second
Street
Corndor
the
today
competitive easy
noor
A uniquepokethrough
sytem for
efficientelectnc.
communcanonanddata
distnbutin means
desks. elephonsandcomputer
equipmetcanbe easilymoved
betweenoffices
andfloorswithoutexpensivecoredrillingor compicatedhook-ups
It alsomeans
noAccesspanels
syssem
Marke
Mson.
Aile
conditoning
Andetrical
are
designedfor icreased power
and cohoing
for
yeta energy
efficien ensurelow
operatingcosts
Buildingmanagenem
systems
include
and We alet,
,ophtcaluedsecutl. Access
A,all urne,
well-hemg
deIgn oiassuel emplovee
workstatins
H-
PLAZA
I
AnExeltingPlae ToW
AnE
ii
if
graanbuBe
is
nelween
in
whereSan Franocscobusinessagrowing and
going
Atldg
MARATHON
PLAZA
MARATHON
PLALAwasdesignedtohe
gracerulanddramatc.elmnatingthecoldper
sonlhtyof mom
modernurbanarchnecture
to
For Leasing Information Call
oL
'Peter Sullivan
1 415) 495-8270
Hason
ThI hiolncallkJimtgu-hed neighbior
and
hood Alivewithnewrestaurant%Nhops
ser-ces ofall kmnds
and,, thede-gnatedhun of
newoffice.housi g andcnmmerIal d.eelopment
ascomiiaiedInthenewDowntownPlan
a fuI blk ontheeast ideof
Occupvng
FolsomandHarrioun.
SecoiSndStreet
PLAZAisnight the middleof
MARATHON
in
Sa
racscopsNewst
fTrnsoratlon center is
An Office Complex
Iicneasing
trafficcongestion
makesaccess
and conemnence
moremporam thanever
MARATHON
PLAZA sits
.1 t hub ofone
of themos.imegratedtransportaionsystems
m.Amenica.
i
Thefcal poinm
ofthebuildingis
mt
nifiem
n34 acrepaza with tscasadng foan.
beautifulreflecingpro. erracedseatgand
of trees
andflowers
lot
MARATHON PLAZA
Developedand managedby MarathonU.S. Realtes. Inc.
Page 97
San Francisco's Beating
A Path To Our Door
Some people still think the San Francisco
business district ends at Market Street.
Not any more.
With few buildable sites left in the traditional Financial District, the natural path of
business growth isdown the dynamic Second
Street Corridor. This historically distinguished
area, where the Financial District meets downtown, is alive with new developments, shops.
restaurants and services of all kinds.
And right in the middle of all this activity is
MARATHON PLAZA. with its single floor
superiority accommodating any corporate
space need and alocation offering easy access
and convenience.
MARATHON PLAZA was specifically
designed for the changing needs of the modern
electronic office byincorporating aunique system for efficient electric. communication and
data distribution.
And employees and visitors will appreciate
the on-site retail amenities and the beautiful 3/4
acre plaza. fountain, reflecting pool and regular
program of special events designed to enhance
one of the city's great public spaces.
Check us out and see why San Francisco's
beating apath to our door. You'll find we're
right in the middle of where San Francisco
business isgrowing ... and going.
Exclusise Leasing
Agents:
SCHNEIDER
Petersunitan. Curt Ghan
397-0900
(415)
RetailInformation:
EdAard G. Zampa& Company
1415
1956-3355
MARATHONPLAZA
Second Street between Folsom and Harrison
Page
98