Indirect Buyer Incentives
Following from my previous post…Direct incentives that a buyer might receive could include cash value or discounts, price reductions and rebates. There are other non-cash incentives in the form of items such as a higher level of fittings, furniture packages, delayed settlement terms, or other items associated with the purchase.
However it is also possible to consider other less direct but still valuable incentives, these could include customer referral payments, loan caps or body corporate off-set fees in strata projects.
For a major development of 100 or more apartments setting up an on-going website for the strata plan might be one idea that adds value, because it helps reduce future costs to the body corporate.
In community title land estates the developer could give a similar incentive that improves common facilities that reduces costs and adds value in the long-term to the estate. What we are looking at are modest incentives that are still used in a positive way dictated by local conditions or as a way to give a project a competitive advantage.
The promotion and use of customer referral incentives are common in many industries and depending upon the prevailing laws and regulations are used in some project marketing structures.
The format used will vary greatly and may be a simple and easy to manage. Idea such as giving a gift or credit voucher to those involved, is just one idea. Much more complex offers would need to be highly focused and well managed.
There are examples of ongoing referral incentive programs structured into major developments that can also operate across an entire portfolio of developments in varied locations. They become part of the brand offer and as already mentioned early can also be tied to a format that gives VIP access to a new release.
An example of the first type of referral would be to give say a $500 store voucher to both the person who introduces a new buyer and the same value voucher to the actual buyer. The payment to both parties has been a popular use of incentives.
Project builder incentives
It is also possible to offer much larger incentives like those that are now commonly on offer from project builders associated with a large land estate. Here we have seen incentives to up-grade with a heavily discounted package almost become the norm.
While this might eventually lead to buyers expecting these incentives it does reinforce the theme that incentives need to match those same buyer expectations.
Incentives used in any project application or sales path structure need to be justified by the success they achieve and knee-jerk reactions avoided. However, at times a quick response might be needed if market conditions take an unexpected turn. If well managed and made accountable, incentives can impact as many as 20-25% of sales for particular projects.
If incentives are well defined and not seen as a narrowly focused ‘gimmicks’ they can be used in a positive way, that is after all what various government concessions and grants aim to do.
However if and when used they can’t be expected to influence the market for ever, like the builder up-grade packages, they can run out of steam and so become the standard and no longer work as a useful incentive. And moving on it may transpire that in some markets it will be necessary to manage price, and this aspect of incentives will be the final hurdle in this topic that I will look at next.