Importantly, due to the liquidity in the market during the expansion, developers invested enormous sums of capital in marketing their projects. This huge expense was largely due to the fact that there were so many competing projects. This marketing cost was often budgeted at 6% to 8% of sales. There was a singular focus to sell as many units at the launch as possible.
Currently, with a slower sales speed, marketing budgets are a much lower percentage of sales. In contrast to a massive effort early in the project, developers must plan on a sustained marketing effort. However, critically the product selection and the strategic price point drives the marketing process currently. Consumers are much more discerning, clever, and do more research before purchasing.
As the sales process is longer, an internal sales team is often more effective for this sustained effort. Marketing costs for properly selected projects will be approximately 2% to 4% of sales, which results in an improved margin.
Crucially, developers must start with a realistic price. A high price and then discounting can lead to bad results as consumers, similar to investors, want to ensure that their buy-in price is appropriate and at or below market.
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