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September 11th, 2009
Fractional Sales Urgency Tools and Incentives
September 9th, 2009
Market conditions that were present during fractional real estate’s first major boom in 2004 and 2005 are long gone. Not to say that those conditions won’t come back, in fact many believe they will with fractional ownership sales leading the way.
But what are you, the developer, land owner or sales manager doing in the mean time? Lots of consultants and advertising companies continue to gloat over past sales successes in the “Order Taking Era” of 2004 and 2005 and kudos to them for those accomplishments. But how are they helping you today? Your focus today should be on answering these questions:
1. Have you adjusted your price matrix?
Typically it’s not a good idea to drop your price and I’m not recommending everybody go out and do that tomorrow, but we can all agree that today’s economic environment is atypical so discussions about atypical price adjustments shouldn’t be ignored either.
2. Does your sales team have the fire power to sell “The Lifestyle”?
Put another way; what are your hiring criteria for the sales team?
Many licensed real estate agents can sell features and benefits, but are they equipped and trained to sell an experience? Can they learn about their prospect and position the product based on their needs? Can they move the prospect along efficiently through the sales process? Fractional selling is solution selling and order taking is a thing of the past.
3. What are you doing to shorten the sales cycle?
If sales are more difficult today then it seems logical that facilitating an easier process for those who do have interest would make sense. What steps are you taking to simplify your message? What technology is available to facilitate quicker delivery of information? Are you still hanging on to the old school method of creating interest and following up with several different marketing pieces?
4. What sales reports do you use?
The information assembled from your sales staff is priceless. Why are buyers not buying? “The economy” is an easy answer and is often times true but the right product at the right price can win a percentage of those deals. Here is a good one that came from a qualified prospect: ”We don’t want to rub our success in our friend’s faces” was the gist of their objection. People are choosing to wait just because it might look bad if they make a $250,000 purchase right now - in their eyes, it’s not a very ‘responsible’ use of their money… even if it actually is. Get my drift? You can’t help someone over the goal line if you don’t know what their real objections are. It’s too easy these days for a prospect to throw out this classic line: “we’re just going to wait a while and see what the market does”. Not knowing for sure what the true objections are will sink your ship.
5. Have you thought about creating more products?
I’m not referring to adding a timeshare component or re-designing your floor plans. But maybe there is some merit in today’s market with different levels of membership to help broaden your target market. Maybe a corporate option isn’t a bad idea? A more flexible option designed for corporate use that individuals can choose to upgrade to.
6. Are you embracing new marketing techniques?
Social media is the big deal today and should be included into your marketing mix. Notice how I say “should be included”; this does not mean pour all of your money into Facebook, Twitter and your blog, but they definitely need to be a slice of your pie. These outlets are quite inexpensive as well and can help you get exposure for very little money if done right. In other words, go easy on the $20 per piece marketing brochures for a while and get more information out there faster and cheaper.
7. What suite of incentives are you offering?
Buyers are looking for a little something extra because they know they can get it. What do you have planned for them? Of course there is the popular ‘Charter Membership’ opportunity, but what else? Have you looked at various referral incentives that can be used for the owners you have already closed? What does your owner communication program consist of?
8. What urgency tools are you going to use?
The sales process in this market can move at glacier speed. There are methods to move your interested customers along. For example, if you are in pre-construction, there are clever ways (outside of price increases) to provide more incentive to put down a deposit sooner.
The bottom line: you have options and there are several clever ideas that you can implement today to boost your sales pace. We at Pierce Group spend most of our time answering the questions above and gathering valuable new ideas.
Learn more about our services here or contact us for a free phone consultation.
Eric Pierce
President - Pierce Group, LLC
10 Common Mistakes in Fractional Real Estate Development
September 3rd, 2009
Arguably the most valuable service provided by any reputable real estate consultant is the ability to prevent costly mistakes for their clients. Not only does this apply to the fractional consulting industry, it’s magnified. Our industry is still relatively young compared to its predecessor, the timeshare, and the majority of real estate developers have yet to embark on the development, sales and marketing of any type of fractional ownership real estate.
If I had a nickel for the number of times I’ve heard this: “We’re going to sell this project out through the local real estate community”, I could retire and buy fractional interests around the world! This brings me to the list of most common mistakes made by new fractional real estate directors.
Mistake #10: “We’re going to go with Super Duper Advertising Company because they have sold more than $10 Billion in luxury real estate.”
Not so fast. It might sound logical at first, but selling out a project in 2004 was about as difficult as selling a cheeseburger at McDonalds. Look for companies that have had some traction this year - yes they do exist. The ability to defy the odds and sell real estate today indicates that the advertising company has the ability to adapt to different markets and reach out to buyers no matter how difficult. This quality is very valuable so pursue these companies even if they have never heard of fractional ownership. The fractional expertise is what you have Pierce Group for!
Mistake #9: “It didn’t sell wholly so it will sell fractionally.”
Not Really. Is there a chance that your stalled condo project could sell fractionally? Of course. Is it a lock? Absolutely not. Often times a traditional real estate development won’t sell because of traditional issues, or traditional errors. If the project is a mile and a half from the beach and all you have is a tennis court then it probably won’t sell fractionally. Before you convert it, seek out an expert opinion.
Mistake #8: “We’ve set aside the traditional 5% for sales and marketing.”
Wrong. A fractional real estate sale is a different animal. No longer are we selling marble countertops and hand-crafted cabinetry. This is a lifestyle message that requires more explanation around the effortless experience and practicality of ownership. When was the last time you saw the explanation of a reservation system on the web site of a typical whole ownership gated community? Your costs will be significantly higher for more advanced brochures and web content. Additionally, more outreach is required. The MLS (in most cases) won’t even bring 5% of your sales. The real estate community won’t be your answer either - reference Mistake #2 - so a full on-site sales team is needed and there are plenty of extra costs associated with that. Don’t worry developers; the difference will be made up in higher sales revenues. We’ll leave that for a different article.
Mistake #7: “We’ve decided to leave out the exchange program; it sounds too much like a timeshare.”
Incorrect. The key difference between timeshare exchange and fractional exchange is that timeshare buyers more often make their purchase decision based on the exchange component. The reverse is true for fractional buyers - they purchase because they love the location - the exchange is simply a bonus. Your sales team understands this and never leads a conversation with an explanation of the exchange benefit. The exchange affiliation is a tool that can add credibility to your project and help get your prospects over the goal line.
Mistake #6: ”One sales team will be responsible for selling all of our residential products.”
Don’t do it. One team should sell your fractional product; another should sell your whole ownership product and so on. Each team should be masters of their own product and be able to handle product specific objections. A little competition is healthy. Of course, gun slinging and infighting among sales teams doesn’t do any good so set the ground rules from the start, put together a good internal referral program and it shouldn’t be an issue.
Mistake #5: ”We are hiring local real estate agents to run the sales office.”
Not so fast. While some local real estate agents might be well qualified, many are not - I’ve seen both. The fractional sales position requires skills like… listening. This is not an easy skill to learn and many sales people will simply never be able to grasp this concept. Vomiting features and benefits all over prospective fractional buyers is as effective as a two for one special at a super-yacht dealer. Reach out of the box when hiring your sales team and don’t concern yourself so much with whether or not the candidate has a real estate license.
Mistake #4: ”We have rock solid legal documents that protect us no matter what!”
Go easy here. Typically, legal documents are written by attorneys hired by you, the developer. So it is your attorney’s job to protect you, their client. This is completely understandable but at the same time it is to your advantage to make sure the documents are sales friendly - i.e. free of sales land mines. In the case of fractional sales, the documents are lengthy and include things like Public Offering Statements and references to timeshare. Our industry still falls under timeshare regulation; actually a good thing for the buyer but can look scary nonetheless. Buyers will have their own attorney’s, accountants and/or financial advisors look through them. So get those sales land mines out of there by having your trusty fractional consultant review them.
Mistake #3: ”We already know our ratio is 8:1 and what our price will be, we don’t need a feasibility study.”
Never skip the feasibility. Why did you choose 8:1 and not 6:1 or 10:1? What criteria did you use in setting your price? There are reasons why we come up with the appropriate owner to residence ratio as well as the reservation system. These reasons come out of research performed during valuable feasibility studies. Remember, a project cannot be sold by even the most skilled sales people if the product is structured incorrectly or priced incorrectly. Spend a few bucks up front to ensure that you are starting off on the right foot; it will save you oodles in the long run. We like to say it this way: “Foresight Costs Less Than HindsightSM“
Mistake #2: “We’re going to sell this project out through the local real estate community.”
No you’re not. Don’t confuse this with Mistake #5; here we are referring to spending very little on traditional marketing avenues and re-directing those resources towards educating the local real estate community to sell for us. Sounds decent in theory but never works. To go this route assumes that the real estate community is willing to spend their valuable time and energy learning a new product with a sale price equivalent to a “fraction” of a traditional whole ownership sale. Commissions are lower so an agent’s interest and excitement is usually lower as well. This is not to say that there are not local agents that will understand the product and embrace the opportunity to offer a practical alternative to their trusted client list. It is simply not a strategy that can be used to sell an entire project.
Mistake #1: “We’ve read this article, bought a couple fractional books and have now gathered all of the information we need. We no longer need a professional consultant.”
Not so fast. First of all, we have just scraped the surface in this article. You will be faced with hundreds of decisions that can prove costly if not handled correctly. The majority of what you will face throughout the project development, sales and marketing lifecycles cannot be found on the internet. Second, selling this product requires extensive training, followed by more training and then additional reinforcement training. Explaining the fractional concept to buyers is an art and must be done at the right pace as to not confuse them and send them away without completely understanding what you have to offer. See To Vomit or Not to Vomit. Third, every project is different and you should not be expected to understand the intricacies of how each reservation system is designed and why. Stick with what you do best, find attractive properties and put together the right team that can work interdependently to create something special.
In summary, eliminate mistakes and save money by reducing costly expenses associated with errors that could have been prevented at the start. Fractional ownership is not only a practical decision for your buyers but for you as well. Learn it, love it, embrace it; do it right the first time and watch your profits grow!
More information here: Pierce Group Feasibility Study and Pierce Group Project Development Services