How Well Do You Know Your Consumer?

Scenario 1: Before launching a project, a developer recruits a property consultancy company for a market feasibility report on one of the micro markets of Hyderabad. The report given by the company had thorough detailing of the market, the job catchment area, the competitor analysis and the overall market feasibility of the proposed project. Three months after the project launch, the relations between the developer and the consultant went so sour that they stopped being on talking terms. Apparently, the developer's new project received a poor response, contrary to what was suggested by the feasibility report.

Scenario 2: A Mumbai-based developer recruited a research agency for some data on a specific micro market before the launch of a project. Not convinced with the report, the developer smartly commissioned the research of another micro market through a third party while using his existing data about this market. To the amusement of the developer, his own data were found to be incorrect by the said research agency. The developer had no choice but to launch the project on an assumed price point and an assumed segment of the housing demand.

Scenario 3: A Noida-based small developer called his existing homebuyers for a discussion over the experience that they had with their new apartments. In the course of an informal chat, this developer not only convinced these buyers to invest in his next project but also gained a great deal of information about the local property market, the state of economy in general and their financial bandwidth in particular. When the final tally came, the developer found that about 30 per cent of the buyers in his new project were either repeat buyers or being referred to by the existing buyers.

To say that most of the research and study on the real estate market has been off track would be stating the obvious. The property market in this part of the world lacks scientific and methodological study to assess the mood of the homebuyers, their preference, causes and concerns and the overall psychological orientation with regard to making the costliest purchase of their life.

The question is whether developers are realising this lack of lack of data is affecting their bottom lines. Are they really serious to invest into scientific consumer confidence study?

JC Sharma, managing director and vice-chairman of Sobha Ltd, believes that the Indian housing market is still nascent when it comes to adopting a scientific methodology to monitor consumer confidence index. According to him, regional classification of information (psychographics) is indispensable for a thorough understanding of consumer sentiments across the country. Consumer's perception of a brand also plays an equally important role in influencing the consumer confidence index.

“The holistic consumer confidence index based on the existing politico-socio-economic milieu will not only help planners and policy makers to keep a tab on the direction and growth of the sector but also give an idea on the growth of other ancillary industries such as steel, cement, paint, banking and mortgage. This will eventually help identify the key macro-economic indicators influencing the economy,” says Sharma.

Ashish R Puravankara, managing director, Puravankara Limited, does not seem to agree with lack of investment theory when he says that historically, this may have been a perception, mainly because of the presence of unorganised players in the housing sector. But, things are changing rapidly where bigger players are focusing on boosting the confidence of the end-users.

“As a large listed industry player, we do use scientific methodologies to monitor the consumer confidence index. Primarily, we analyse the consumer confidence index two levels – the brand level and the industry level. At an industry level, the implementation of the real estate law will eventually boost consumer confidence levels, mainly due to the transparency that the Act would bring, which will make measuring intangibles such as customer satisfaction feasible and viable,” says Puravankara.

Requesting anonymity the research head of a large market agency, however, admits that generating consumer-centric real-time data is not possible. According to him, the challenges are manifold, ranging from budget constraints to limited scope of study that has to comply with what the developer wants as the final outcome.

“If you are expecting the same guy who did sampling for marketing of toothpaste and shampoo to give you the demographic analysis with psychograph and expected purchase pattern of the catchment area, you are probably trying to measure temperature with a speedometer. But then, nothing much can be done with a limited budget where the cost factor is the primary concern of the client while picking a research agency.

Further, any unpleasant finding can get your balance payment forfeited,” explains the research professional.

In a nutshell, the sector gropes in the dark when it comes to understanding buyers and their behaviour. 

Where monitoring goes wrong

Opinion of lenders & brokers: Opinions of brokers and financial institutions do matter. However, the assumption that they have real insights about buyers may be ill founded. What the banking industry or brokers think about the prevailing consumer sentiments may not always be right.

Ancillary or associated sector opinions: There are about 250 real estate ancillary industries (paints, tiles, sanitaryware and plywood, etc.) which are dependent on the housing sector. Do they have the real insights about the consumer confidence?

Peer pressure: The peer pressure or the ego of the developers to compete in the same micro market, assuming that the other guy has already done the homework, is a recipe for disaster. 

What can be done?

At the brand level: At a brand level, developers can monitor periodic CSAT (customer satisfaction survey) scores which could be directly linked to the KRAs (key responsibility areas) of senior professionals, who deal with customer relationship management.

At the industry level: At the industry level, monitoring the ongoing economic scenario and its challenges is critical.  This analysis can create sales and marketing and organisational strategy to address the new challenges

An on-ground demographic study of family income, price of housing, cost and availability of credit, consumer preferences, investor preferences, price of substitutes and price of complements is needed

The writer is CEO, Track2Realty. Views expressed are personal.