"Residential block management has, for years been considered the poor relation of the surveying industry"
Darren Pither is a director of Gray's Inn Estates

 

Market changes for block managers Residential block management has, for years been considered the poor relation of the surveying industry. This years ARMA (Association of Residential Managing Agents) conference was considered by some to be a rather dry affair. This is no reflection on the organisation itself, which has achieved startling growth in both membership and professionalism in its thirteen years of existence. It is more an expression of the contemporary issues that have stifled the industry over the last few years. The commonhold & leasehold reform act, section 20, new asbestos regulations, the dreaded FSA and more have resulted in monumental levels of new procedures for managing agents to get to grips with. In his closing speech, ARMA Chairman David Clark indicated that next years conference may focus more on the entrepreneurial edge of the industry. Discussion on commercial dynamism would be welcomed by all involved in the industry given the anticipated emerging market place. Developers are building more apartment schemes than ever. The right to manage (RTM) legislation will both break the cosy long term security some agents have enjoyed and provide new opportunities in the market. Managing agents who have previously relied on house builder clients or ground rent landlords for business will have to fight to retain their existing instructions, and fight harder to gain new business. Managing agents have often achieved growth through developer contacts or being the prominent agent in a particular geographical area. RTM is still in its infancy so the market dynamics have not yet changed dramatically. However they will. This embryonic market change is now only ever going to shift in one direction. Managing agents need to be ready for it. The keenest ones will devise and implement marketing strategies and apply marketing techniques in the same way as other industries do. They do however face an extremely difficult challenge which will test the most skilled marketer. Look at other industries for a moment. An FMCG manufacturer such as Proctor & Gamble will have enormous marketing resources focused on an easily identifiable individual consumer. BAe will deploy the most sophisticated marketing systems to grow market share in the corporate customer arena. BMW will spend millions maintaining their mega successful brand to both consumer and corporate markets. Identifying the decision maker when marketing is crucial. In consumer marketing the target it is obvious. Corporate is more difficult because different business customers have different hierarchy and collective decision making processes. However a business marketer will generally have an idea. For instance accounting software giant, Sage know to target finance directors within organisations. Additionally their prospects are highly visible. Managing agents have two distinct markets. These are the developer market and the resident management company (RMC) / RTM market. The former can be identified, segmented and approached using traditional marketing ploys that work in any other corporate market. The latter is an almost unique challenge. It is not a corporate or individual consumer. RMC / RTM’s are anonymous existing for the sole purpose of managing a residential development. Other than interrogating Companies House records, there is no likely reason anyone will come across these companies. The decision makers (i.e. the Directors) are registered at Companies House, however to obtain this information on a commercial scale would probably not be cost effective. It is fair to say that many RMC directors are inactive and disinterested. The active minority are the target and there is no way of knowing which are which purely from a list of names. So a direct approach is probably rather ineffective. Market segmentation is a good way to kick start any marketing strategy. If an agent has a clearly identifiable market then the marketing communication tactics are easier to devise. The RMC / RTM market can be segmented many ways including geographically, demographically, economically, by size of block, quality of block, etc. Once segmented, the market appears clearer. An agent may then still decide to skim the market approaching all segments and going after any instruction they can get. Alternatively they may decide to penetrate particular segments. Once the target market is identified, the agent is well advised to carry out a basic SWOT analysis on their organisation to ensure they have the skills to satisfy their target market. If there are any weaknesses, strengthen those areas. Buyer behaviour is a vital element. Marketing guru Phillip Kotler advocates a complex buying behaviour model identifying four general patterns in all industries. For example, a consumer who buys a tin of beans will have low involvement in the buying process as there is little difference between brands and no serious consequence if they choose wrongly. Therefore they fall into the “habitual buying” category. RMC / RTM directors are the complete opposite kind of consumer. There will be a very high level of involvement in the buying process as it is an infrequent purchase. They will interview several agents, ask detailed questions, seek references etc. A managing agent needs to differentiate themselves from the competition. This is difficult but very important. If the buyer cannot perceive any beneficial difference between two agents that buyer will fall into the category Kotler labels “dissonance reducing buyers”. This often means their decision will be based on price which is an unsatisfactory basis to compete on. Marketing theory is interesting but most managing agents won’t have the budget to accommodate intensive levels of marketing. In any event, it may be wasted if agents don’t build awareness of their brand. There are plenty of practical steps agents can take raise their profile. Most people can name several local estate agents. Why not use the similar promotional tactics as an estate agent. Introduce site boards (or flags if the lease prohibits boards) and create a shop front to your premises if your target market is local. Personal recommendation is the most powerful marketing tool there is. Introduce a reward scheme for your leaseholders for any instructions they introduce and make sure such a scheme is constantly promoted over and over again. All it needs is one chance remark to a friend about a situation the agent handled well. The next time that friend hears of a problem at a block, that recommendation will be at the forefront of their mind. If that recommendation is relayed to the decision makers at the block, the agent already has an advantage over the competition. Unfortunately bad situations are conveyed even more powerfully through such channels but agents already face this problem anyway. Link ups with letting agents are now more mutually beneficial than may have been in the past. The buy-to-let boom means many letting agents have buy-to-let clients who may have numerous flats in different blocks. The opportunity here is obvious. If the managing agents target market is geographically segmented, direct mail drops to blocks of flats and cheap eye catching advertisements in local stores will increase awareness. The local press property section will have been read by new property owners who will be more aware of options for alternative managing agents once they are in their new flat. So consider advertising or editorials. As previously mentioned differentiation is key. The best way to differentiate and engender that powerful personal recommendation is through service. Estates Gazette editor, Peter Bill made a fascinating observation at the ARMA conference three years ago. It was that block management is quite removed from surveying and that surveyors are probably not the best people to dealing with leaseholders. Block management is unquestionably a service industry. Service charges are an incredibly emotive issue. A property manager is likely to have to deal with the similar type of irate customer that a Virgin rail employee or Thomson holiday rep will encounter. A property manager will also need the same operations management skills required in hotels, supermarkets and personal banking. The aforementioned analogies are all high pressured customer facing roles that require problem solving skills - the core profile of a modern property manager. Most managing agents won’t have the training budgets to develop such skills so will do well to cherry pick bright individuals from such suitable backgrounds, so capitalising on the high level of customer service training that the individual has received in the past employers. Clearly the surveyor is still important in property management. All managing agents require some surveying expertise in building or landlord & tenant law. However this resource can be in the office, and not necessarily in the field. If the marketing is successful and generates the opportunities to pitch for business, the agent needs to be able to sell their attributes to the customer. There is no lack of entrepreneurial flair in the block management industry. Most business owners will find that classical marketing theory is only a diagnostic examination of the intuitive selling instincts that have got them where they are today. The next five years will be interesting in seeing which ones sharpen those instincts enough to rise above the pack. • Darren Pither is a Director of Gray’s Inn Estates and holds a post-graduate diploma by the Chartered Institute of Marketing.