pgsem2010 marketingmgt semiii part2 v6

8/2/2019 PGSEM2010 MarketingMgt SemIII Part2 v6

1/12

MARKETING MANAGEMENTIII SEMESTER

Sobha Developers

Part II

Submitted toProf. Ramya Neelamegham

on 15th

January 2011

Pavan Cheruvu 1012017

David Raju Kolakaluri 1012018

Sudeep Kumar SK 1012064

Vedula Ravi Phanindra 1012071

Venkatesan Sundaram 1012072


2/12

Marketing Management Sobha Developers

1 | P a g e

CONTENTS

CONTENTS ................................................................................................................................................ 1

1. KEY CHALLENGE ............................................................................................................................ 2

2. SEGMENATION ............................................................................................................................ 2

3. TARGETING................................................................................................................................... 3

4. POSITIONING ................................................................................................................................ 4

5. INTERVIEW WITH DLF ............................................................................................................ 5

6. PRODUCT ........................................................................................................................................ 5

7. PRICING........................................................................................................................................... 6

8. PROMOTION.................................................................................................................................. 7

9. PRODUCT MIX .............................................................................................................................. 9

10. CONCLUSION .......................................................................................................................... 11

11. REFERENCES .............................................................................................................................. 11


3/12


2 | P a g e

1. KEY CHALLENGE

As part of Part I of the project we did a situational analysis for Sobha covering the 3Cs (Company,Customer, Competition) and came up with a list of major challenges that Sobha faces. In this report, wekept our focus is in doing a STP (Segmentation, Targeting and Positioning) analysis for Sobha and comeup with a list of recommendations that Sobha can consider to effectively handle those challenges.

Though the real estate sector in general experiences several common challenges like spiraling inputcosts, shortage of labor, global liquidity crunch etc. Sobha's marketing-specific challenges are thefollowing in our view

1. Get recognized as a major pan India player in the real estate segment2. Competing with established all-India players like DLF, Unitech etc

In this paper we discuss on how Sobha can leverage its unique differentiating factors like full backwardintegration, reputation on quality etc and effective marketing mix to address the above challenges.

2. SEGMENATION

The real-estate industry can be segmented broadly under the following heads

1. Individuala. Affluentb. Upper middle-classc. Middle-classd. Low income group

2. Corporatea. Office spaceb. Retailc. Industriald. Hotel

e. Resorts3. Location of individuals and companya. Tier 1, 2 & 3 citiesb. SEZ (Special Economic Zones)

Further segmentation (sub-segmenting) can be done by combinations of above like housing forindividuals at tier-1 Cities, office space at Special Economic Zones etc

Currently Sobhas target segment is in tier 1 and tier 2 south-Indian cities like Bangalore, Cochin,Chennai, Coimbatore etc and it specializes in building residential and commercial projects (office spaces /retail)


4/12


3 | P a g e

A quick segmentation of people by salary in India across a wide variety of businesses is presented below

The segments in descending order of their salary range are Financial, Information technology,

Engineering, Consumer and Auto. Generally, as a rule-of-thumb, the affordability for housing iscalculated as five times the annual salary and hence we can arrive at the below chart for targetingpeople working under various segments

Housing AffordabilityIndustry Type Senior Level Middle Level Junior LevelFinancial $425 K $140 K $ 47.5 KInformationtechnology

$375 K $120 K $ 35 K

Engineering $ 270 K $ 75 K $ 23 KConsumer $ 210 K $ 72.5 K $ 23 KAuto $ 175 K $ 65 K $ 23 K

The above computation shows that there is a market in India for houses starting as high as Rs. 2 Croresfrom people cutting across various professions. This is in addition to the real estate market needs fromself employed people

3. TARGETING

Though there are a wider number of segments in place for any construction company to focus on, ourrecommendation for Sobha is to expand its presence across India in premium housing segment byestablishing itself well in all major tier 1 cities and fast growing tier 2 cities across India rather thangetting branded as a south-India player.

Need for pan-India presence

Urbanization is a pan-India phenomenon these years with Indias GDP growing steadily at the rate of 89% year on year across all Industries. If Sobha intends to grab a significant market share in this, it has toensure that it expands its presence across India at the earliest. The chart below gives an idea on therising urbanization across India


5/12


4 | P a g e

The percentage of urbanization is on rise across India and Sobhas exclusivity only in South India doesnt

seem to be a good choice due to below reasons

Sobha is not able to grab the share of Pan India phenomenon of urbanization Other players are getting into South market making Sobhas position tougher to lead in this market It is going to be more difficult for Sobha to establish itself in other regions as other players are slowly

consolidating their positions

4. POSITIONING

Though Sobha is well positioned in its segments of Premium residential housing & office space buildings

in south-Indian cities, we are of the opinion that it may not be difficult for Sobha to get into the newly

identified segments of pan-India presence in premium housing due to the below points of parity and

points of difference

The key Points of Difference for Sobha to get into any new segment s are below

1. Sobhas well established reputation as Quality builder by leveraging its core competency of being

the only fully backward integrated construction company in India.

2. Presence across a wide range of premium housing markets like 3/4-bedroom Semi-Luxury,

Luxury, Super Luxury apartments, Luxury Row Houses, Super Luxury Villas in the price range of

Rs. 50 lakhs to Rs. 4 crores.

On Points of Parity, Sobha matches on most of the aspects ag ainst other premium builders in terms of

variety and quality.


6/12


5 | P a g e

5. INTERVIEW WITH DLF

Find below the key points (Competitor stand point) on interview with Chief Marketing Officer (Bangalore)

of Sobhas new competitor in Bangalore real estate market

We understand DLF specializes in building large scale projects of more than 1000 units unlikecompetitors like Sobha (100 to 500 flats). What are the pros and cons of doing projects on such a

large scale?

1. Primary advantage is less per-square-foot cost in large projects when compared to smaller ones

2. Primary disadvantage is the ability to manage large complex projects

Some of your competitors like Sobha specialize in doing backward integration. What do you think

are the pros and cons of doing Backward Integration?

1. Ability to maintain / control quality is a key advantage

2. Cost control might be difficult, may lose focus on your core competitive advantage and there are

many established players capable of handling most of the jobs like interior design, brick

manufacturing etc

What are the Differentiating factors of DLF when compared to other competitors like Sobha?

1. Pan-India brand presence

2. Building townships which changes the entire landscape and brings value to consumers

3. Provision to customize individual apartment as per the flat-buyers needs

4. Public Private Partnership

5. Post-construction, maintenance of apartments to maintain brand image of DLF

What are the key Sales Challenges DLF faces?

For any project to succeed and move forward, booking at least 30 40% of the planned inventory is

crucial for viability of the project; so selling that initial 30 40% is a major challenge for any new project.The challenge is typically addressed by pre-launch offers at Cost-Focus, Cost-Plus and Cost-Minus

pricing strategies depending on the prevailing demand pattern.

Are you worried about competition from other established players?

1. Competition in neighboring location is a win-win situation as it helps to increase the valuation of

the location

2. If a competitor comes in a different location as product is distinct (Location), it is not a major

issue.

3. Small time builders are never a worry for us

6. PRODUCT

For a residential apartment product, Customer Value Hierarchy can be understood as follows


7/12


6 | P a g e

Expected product featuresinclude RCC framed structure, Common basement, Covered car park in the

basement, Balconies/Utilities, Security kiosk, Common areas, Proximity to schools, hospitals, shopping

centers etc. and basic amenities such as a play area for children

Being a premium builder, Sobhas products meetall features of the expected product

There are many augmented product featuresin housing. Sobha provides most of the standard

augmented features. The augmented features are categorized under broader areas of Services & High

end amenities.

Services includes Convenience store, Visitor car parks, CCTV Security, Rainwater harvesting

system, Sewage treatment plant etc and

High-end amenities includes fully equipped club-house, Jogging track, Swimming pool, Cardio

and weight training gymnasium, Meditation room, rappelling wall, sports facilities etc

Sobha lags on Potential product featureswhich are being provided by some of the competitors like

DLF, TATA Housing etc. Some of the potential product features are High-end security technology,

Innovative Green design concepts such as Organic Waste Converter, solar-powered lighting etc..

Consumer specific customization, Wi-Fi connectivity, Home Automation

Sobha is leading in all the expected product features as well as augmented features. Hence, it is

well positioned in all aspects to compete across India with any pan-India/established local

players. Focus on Potential features can help Sobha to lead the game

Sobhas unique differentiation in the form of complete backward integration by providing all kinds of

facilities like architectural expertise, interior design studio, wood work and legal support would help in long

term

7. PRICING

Broadly, real estate pricing is driven by the following macroeconomic factors Interest rates and Inflation,GDP growth rate, Per capita income (employment rate) etc

The ability to price at a premium depends upon the location, class of properties and the sellers brand.Sobha, known for its best quality and good landscaping has positioned itself as a market leader inquality and commands premium pricing compared to its competitors in south-India. It bases its price onthe Customers perceived value. Perceived value is based upon several factors such as the propertylocation, complete solution with backward integration model, quality of construction, aesthetic design,green concepts and robust engineering.

Find below a quick comparison of quotes that we obtained from Sobha, its closest competitor DLF and asecond tier builder Windsor Manner. The properties are located in similar localities and hence

comparable

DLF New Town Sobha Forest ViewWindsor Four Seasons(Tier 2 Builder)

Saleable Area (Squarefeet)

16901686 1696

Rate per Square feet 3000 3850 3240


8/12


7 | P a g e

(Rs./sft)

Basic Price (Rs.) 5070000 6491100 5495040

Total PLC charges (Rs.) 169000 0 0

Car Park Charges (Rs.) 225000 300000 200000Club Membershipcharges (Rs.)

60000200000 50000

Total Price (Rs.) 5524000 6991100 5745040

Our Observations and recommendations

Sobha is able to command a price premium when compared to a tier-2 builder l ike Windsor

Properties and the main reason for it is attributed to Sobhas brand power in s outh-India and

product features (covered under product mix) offered by Sobha when compared to tier-2 builders.

Sobha may have to cut down its premium pricing to compete effectively against established

players when it enters into other tier-1 and tier-2 cities where Sobha doesnt have a presence

now

DLF being a premium builder like Sobha and a new entrant to Bangalore has priced around 20%

lesser that Sobha. We feel the main reason to this is attributed to the scale of economics. DLFproperty is a mini township in Bangalore with more than 3000 flats with around 18 floors in each

apartment tower. Hence it is able to pass on the benefits on shared land cost to the consumers

by reducing the per-square-foot rate. This would be a serious issue to Sobha to expand to other

cities in India where DLF is present unless Sobha increases its scale of operation from the

current 200 300 flats per project to compete effectively with DLF

Sobhas charges towards some of the augmented product features like car parking, club

membership etc is very high when compared to both DLF and tier-2 builders. This may not attract

price / value focused buyers. Sobha may have to relook into the pricing strategy of augmented

features

Premium residential apartments can work well in an economy that is fast growing but there could

be serious issues in case there is an economic down turn. Though it is not an area to worry about

in the present economic conditions, Sobha can think about getting into the area of Affordable

Housing which is fast picking up in India.

8. PROMOTION

The primary medium of promotion for Sobha Developers is the print media and outdoor advertisingcampaigns. Sobha uses direct marketing via a customer support centre to provide clarifications andinformation on current and ongoing projects to those customers who call directly for information. Genericinformation is made available on the web-site for price comparison. Specific details of the productofferings are provided in face-to-face meetings with the sales team who are co-located in the projectoffice.

Model flats are made available in each project site to provide the prospective customers with a look andfeel of the quality differentiators in the construction of Sobha properties.

All Sobha print-media advertisements give a prominent place to the Sobha Logo which helps to createand sustain the brand identity.

The Sobha Logo is described as below on the company website.


9/12


8 | P a g e

The ratio of the golden rectangle in mathematics is one of the most desired proportions in theconstruction arena. The background of the Sobha logo is designed to come very close to the goldenrectangle ratio. The elegant rectangle represents balance reflection of the solid foundation anddurability that our creations offer. The yellow background signifies energy and optimism, traits wellengrained in every Sobhaite. The black dots represent the state-of-the-art technology we employ in all ouroperations. The red dot at the top is symbolic of being auspicious and represents the pinnacle ofsuccess a sign of our continuing quest for perfection.

The promotion strategy of Sobha Developers is designed to meet the twin objectives ofa. Informing prospective buyers of the expected product features like location, quality and price.b. Stress the differentiation from competition by highlighting the augmented product features like

ambience, comfort and luxury.

Given below are examples of recent print advertisements which Sobha has used to promote the SuperLuxury and Super Luxury Plus category of offerings.

Emergent Promotion/Advertising Strategy of Sobha

[W]e intend to have a record year. How? In a downturn, everyone cuts advertising. So if you just

maintain advertising, you stand out. And we aregoing to increase our advertising.Jack Kahl, president and CEO, Manco Inc.

A comparative analysis of the advertising, sales and other promotional expenses of Sobha and some ofits competitors over the years suggests that Sobha adopted the Counter-cyclical advertising strategy.The recessionary years of 2008 and 2009 saw Sobha spend more on promoting its brand than DLF.Some conclusions that we drew from the table below

a. The promotion expense, as a percentage of sales or revenue, is (weakly) inversely related torevenue i.e., smaller players like Puravankara have to spend more on promotion.

b. In absolute terms, the smaller players may end up spending more on promotion expenses thanthe next segment. For instance, Puravankara spent more on promotion in years 2007 to 2009than Sobha even though its revenue was between one-third and one-half of the revenue of

Sobha. It spent almost the same amount in 2010 as Sobha for about half the revenue.c. The largest of the players dont leverage the counter-cyclical advertising opportunity.

*All amounts in Rs. Million

Company

Yr.

2010 Perc.

Yr.

2009 Perc.

Yr.

2008 Perc.

Yr.

2007 Perc.


10/12


9 | P a g e

Sobha

Revenue 11,139 100 9,747 100 14,291 100 11,864 100

Promotion

expenses 123 1.10 158 1.62 143 1.00 50 0.40

DLF

Revenue 32,204 100 38,390 100 60,585 100 14,295 100

Promotion

expenses 364 1.13 394 1.03 309 0.51 279 1.95

Puravankara

Revenue 4,784 100 4,449 100 5,658 100 4,169 100

Promotion

expenses 111 2.31 161 3.62 183 3.23 156 3.75

Though in net Sobha seems to do well on Promotion aspects, some of the belowrecommendations can definitely help Sobha to create a Pan India Brand impact in line with otherplayers like DLF

Sobha can make additional investment in event sponsorship. DLF became a household name forreal estate sector in India after its sponsorship of IPL cricket matches which are viewed acrossIndia by millions of cricket fans

Even if not in well established South India market, Sobha can consider special Pre-launch offersat Cost-Focus, Cost-Plus and Cost-Minus pricing strategies in new markets

It can consider going for corporate schemes / referral schemes in new segments Sobhas web presence is very minimal as there is nothing significant other than its own website.

Sobha should leverage Social marketing by expanding its presence in web throughadvertisements, presence in facebook kind of channels, providing rich informational content topeople looking for residential housing related information. These pull marketing strategies thatSobha can consider to attract quality leads

Sobha can focus on Cause Marketing by helping poor & needy which in turn would help toimprove its brand image

9.PRODUCT MIX

Sobha caters to different sub-segments of the premium segment of residential customers. We visited thenew ventures of Sobha in the Sarjapura area of Bangalore to understand more about the differentiation inpromotion to the sub-segments. Given below is an overview for comparison

Factor Luxury Super-Lux Super-Lux +

SBA ~ 1500 sft. 1700 - 1900 sft. 1950 - 2400 sft.

Flooring Vitrified tile Premium vitrified tile Premium tiling +

wooden flooring

DG Backup 1 KW 3 KW 6 KW

Bathroom Premium fittings Granite counter tops Luxury fittings and

larger size

Servant

Room

Not available 75 sft with attached BR 100 sft. with attached

BR and Kitchennette


11/12


10 | P a g e

Price Rs. 68 lakhs Rs. 94 lakhs Rs. 1 Crore+

Example Sobha Cinnamon

Phase II

Shobha Classic Data Not Available

Club House

Features

Standard:

swimming pool,

gym, kids playarea, pantry,

library, table

tennis, pool table

Standard +

jogging track, rapelling wall, gym

with weight and cardio training,separate steam facilities for men

and women, billiards,

meditation room, gaming room

with facilities for carom,

football, community space

indoor & outdoor, meeting

room, half basket-ball court.

Data Not Available

Ambience A walking path

around the block

Woods and shrubs around the

complex with pleasant views

Data Not Available

Sobha Cinnamon (Luxury) and Sobha Classic (Super-Lux) are about 1 km apart. However, we noticed amarked difference in the promotion approach by Sobha. To elaborate, the (per square-foot) land cost andthe base value of the construction is the same for both the projects (Cinnamon and Classic). What standsout is

a. Sobha is able to charge a 38% premium (after adjusting for differences in super built-up area)over Luxury for the Super-Lux sub-segment as the amount towards material quality andambience.

b. Of the 38%, 21% is attributed to the higher quality of material/fittings although the few extraluxuries like granite counter tops may not justify it.

c. The remaining 17% is the premium charged for the ambience and the exclusivity. To be precise,a resident of Sobha Classic pays Rs. 3852.2 per month more than a resident of Sobha Cinnamon

over a 20-years period for the ambience.

This is in line with the advertisements (produced on page. 9) of Sobha showing people with refined tastes(owners Victorian-era clothes with dogs of high pedigree). We do not have enough information on theSuper-Lux+ sub-segment to draw any conclusions.

The promotion strategy of Sobha has been successful in maintaining top-of-mind recall with consumers.Sobha Classic opened for booking six months ago (September 2010) and 143 out of the 256 flats arebooked. The rate per square-foot realized is approximately Rs. 4015/sq-ft and the total cost to theconsumer is over Rs. 1 Crore (delivery of the project is expected in 2014). There are no units available forsale in Sobha Cinnamon.

In spite of their successes in selling luxury apartments, Sobha Developers have to factor in manychallenges in the real-estate sector of high interest rates, delays and higher costs from rising input andlabour costs. They do not produce on the scale of DLF but are not as small as Puravankara either. Withtheir backward-integrated model, they can price aggressively to capture more market share in thepremium/luxury segment.

Some of our recommendations to Sobha on product mix are below Focus on building townships in line with DLF / Puravankara to leverage the factor of economics of

scale and in turn reducing the cost of apartment units sold


12/12


11 | P a g e

Can attempt at getting into Affordable Housing segment to insulate itself from economicfluctuations

Sobha doesnt seem to fare well when compared to Mantri in choosing locations. Going forwardcan focus more on better land acquisition strategies to come up with projects in better location

Many of the competitors like DLF and Mantri focus on integrated township where facilities likeSchools, Hospitals, Shopping stores etc are made available within the apartment complex

bringing in value to the property. Sobha can attempt the same

10 . CONCLUSION

In net after the detailed analysis we feel though Sobhas challenge to get established as a leading PanIndia player in real estate market looks tough, we are off opinion that Sobhas inherent competitiveadvantages along with suggested recommendations in the paper if executed properly can help Sobha tomeet the challenge easily

11. REFERENCES

1. http://www.sobhadevelopers.com/about/index.html

2. Secondary research from other web resources

3. http://www.indiainfoline.com/Research/LeaderSpeak/Mr.-J.C.-Sharma-Managing-Director-Sobha-

Developers-Ltd/19551378

4. http://www.merinews.com/article/indian-real-estate-opportunities-and-challenges/125283.shtml

5. http://www.hindu.com/2011/01/10/stories/2011011050320300.htm

6. http://www.property-investing.org/property-demand-segmentation.html

7. http://www.india-seminar.com/2008/586/586_mohd_sanjeer_alam.htm

8. http://www.buzzle.com/articles/growth-of-the-hotel-industry-in-india.html

9. http://www.articlealley.com/article_1054840_33.html

10. http://www.pacificbridge.com/publication.asp?id=30
http://www.sobhadevelopers.com/about/index.htmlhttp://www.sobhadevelopers.com/about/index.htmlhttp://www.property-investing.org/property-demand-segmentation.htmlhttp://www.property-investing.org/property-demand-segmentation.htmlhttp://www.india-seminar.com/2008/586/586_mohd_sanjeer_alam.htmhttp://www.india-seminar.com/2008/586/586_mohd_sanjeer_alam.htmhttp://www.buzzle.com/articles/growth-of-the-hotel-industry-in-india.htmlhttp://www.buzzle.com/articles/growth-of-the-hotel-industry-in-india.htmlhttp://www.articlealley.com/article_1054840_33.htmlhttp://www.articlealley.com/article_1054840_33.htmlhttp://www.articlealley.com/article_1054840_33.htmlhttp://www.buzzle.com/articles/growth-of-the-hotel-industry-in-india.htmlhttp://www.india-seminar.com/2008/586/586_mohd_sanjeer_alam.htmhttp://www.property-investing.org/property-demand-segmentation.htmlhttp://www.sobhadevelopers.com/about/index.html

pgsem2010 marketingmgt semiii part2 v6

Documents