I wanted to discuss some of the key marketing budget options for smaller projects over the next couple of weeks. All budgets are formed within the project’s gross realisation (GR) and required net realisation (NR) – two key values in any development feasibility.

When considering smaller projects it is imperative to manage budgets against clearly pre-determined goals and prevailing market conditions because your GR is typically much smaller and such your percentage of spend is tighter.

As an essential starting point, marketing budgets, lead targets and a sales timeline need to be taken into full consideration as part of the initial site strategy. The project timeline is imperative, because as we all know market conditions do change and if the delivery of a project is delayed the sales path will always be impacted. Any delays may well be compounded by the fact that we will, in most circumstances, be dealing with a smaller and some times more demanding target market for the development.

Even though for a small project the funds attributed to marketing might be moderate, the marketing role should still be very much seen as a critical element in achieving the project objectives. Just because a project is small, it would be a mistake to relegate marketing to the margins, because failure to connect with right audience could quickly eat into your net realisation (your profit!) and any need for u-turns can be expensive.

No matter the size of a project, experience always shows that a well-devised marketing plan will highlight the extent of demand for the end product and dictate the time that would be needed to sell-out. The marketing budget needs to be a part of the early and ongoing strategy from the start.

Budget Settings

When looking at smaller projects the allocation of marketing expenditure will always be a tough question to answer. Generally, marketing budgets are usually set at around a guide figure of 1.25-2.5% of GR for smaller projects which would include the big ticket items like the construction of sales suites and a marketing campaign for the life of the project (“the worst case scenario” – but any quality project marketing agency or team will work to sell-out under marketing budget to increase your NR).

It also does not take a crystal ball to appreciate that demand and the rate of sales achieved are big factors that further amplify the marketing of a small project. At this stage I think it would be useful to look at how key expenditure might be split.

A predicament in any development assessment would be how to set a suitable budget. The availability of hard and fast figures is limited. However, the figures I am using here have come from past experience and are quoted to give some appreciation of what budget and relative weighting might be invested in nominated these basic areas:

And while not all areas will always be used, and other options are available, the relative composition of the marketing budget will always help focus the investment required against particular sales targets.

We will always need to answer the question: what investment of time and money is required to support the anticipated rate of sales and what price levels need to be reached?

In the next post I will look at how each area of the marketing budget can be used, and how important it is for small projects to target expenditure. For example if a successful off-market campaign is achieved the character of a project is essentially altered.