Executive Summary
A detailed marketing plan and launch strategy for affordable luxury apartments have been presented in this paper. The apartments will be developed by DAMAC Properties in the UAE, Qatar, Jordan, and Saudi Arabia in the next five years. The new product development concept will be to use the tunnel-form technology to construct low-cost luxury apartments. The technology will reduce construction cost and facilitate the use of modern finishing materials to decorate the houses. The apartments will be positioned as affordable, high-quality residential properties to attract the middle class and the affluent in various markets.
Introduction
This paper presents a detailed marketing plan and launch strategy for a product that will be developed by DAMAC Properties. DAMAC is a leading real estate company in the Middle East. The company was founded in 2002 in Dubai. It has since joined new markets in the Middle East such as Iraq, Jordan, and Saudi Arabia. DAMAC focuses on developing leisure, residential, and commercial properties. Its mission is to “be the leading luxury developer in the Middle East” (DAMAC).
Product Innovation Charter
Background
Modern homeowners are interested in high-quality residential properties. Specifically, they need houses with spacious rooms and unique interior decorations (Preiholt and Hagg 114-119). An ideal residential property is expected to offer flexibility and convenience in terms of access to infrastructures such as roads, shopping malls, and airports while maintaining the serenity of the countryside. This means that there is an opportunity in developing affordable luxury apartments in emerging markets.
Focus
The company will use modern construction technologies to develop apartments. The technologies will help in reducing construction costs and facilitate the use of unique designs and decorations in the buildings. The luxury apartments will be produced for the middle class in the UAE and other countries in the Middle East.
Goals and Objectives
The luxury apartments must be affordable and attractive to the middle class. The objective of the company in the short term is to create brand awareness for its new line of luxury apartments. In the medium term, the objective is to increase sales by 10%. Moreover, the company expects to realize a 15% return on investment (ROI) by selling the new apartments.
Guidelines
The company will use off-site manufactured building materials rather than the traditional bricks and mortar to construct affordable luxury apartments. Measures will be taken to improve the durability of the apartments. The tastes and preferences of prospective customers will be taken into account during the design and construction stages.
Market and Trend Analysis
The real estate market in the Middle East is growing rapidly. In the UAE, the market for residential buildings grew by 16% in 2013 (Kader 14). This means that there is a high demand for residential property. In the medium term, demand will be supported by improved economic growth, availability of cheap credit, and increase in population growth.
The market is dominated by foreign companies from mature markets such as the US and Europe (Kader 14). Most companies are undertaking mega projects that consist of commercial buildings, luxury hotels, and residential properties to enable homeowners to maintain the convenience of the urban environment in the suburbs of major cities.
Most governments in the Middle East have introduced new regulations to prevent a market crash. Furthermore, investors are preventing oversupply in the market by developing new properties according to the existing effective demand. Investors are increasingly using initial public offers (IPOs) and real estate investment trusts (REITs) rather than bank loans as their preferred sources of funding (Kader 14). These trends will improve the stability of the market in the long-term, thereby promoting rapid growth in sales.
Market Opportunity
First, increased investments in transport infrastructure and public facilities such as hospitals will improve the prices of residential properties in most cities. Second, the expected improvement in economic growth will increase the demand for high-quality houses (Preiholt and Hagg 114-119). Most governments in the Middle East are currently implementing expansionary fiscal policies to diversify their economies. The resulting increase in consumption in the private sector will improve sales for houses in the medium term. Third, the 2022 FIFA World Cup is expected to be held in Qatar. This event will attract thousands of tourists and visitors from all over the world. As a result, the demand for luxury apartments is expected to increase significantly in Qatar and the neighbouring countries.
Idea Generation
Idea Generation Techniques
First, new ideas were obtained from prospective customers. The aim of this technique was to determine customers’ expectations concerning an ideal luxury apartment. An excerpt of a dialogue with a prospective customer is the appendix. Second, new ideas were generated through discussions with suppliers of building materials and reputable constructors. This helped in accessing information concerning the technologies that have to be adopted to reduce construction costs. Third, the company’s design team generated new ideas through research. This led to the development of new house designs that will meet the expectations of customers.
The Ideas
The first idea is to construct luxury apartments using precast flat panels. In this case, the floor and wall panels will be manufactured off-site in a factory (Watts 46). The panels will be transported to the construction site where they will be assembled to form a complete structure. The panels will include “windows, doors, and finishes to reduce the time that will be required to complete the construction process” (Watts 47).
The second idea is to use 3D volumetric construction technology to build the apartments. This technology involves three-dimensional manufacturing modules in a factory (Watts, 78). The modules will be assembled on-site according to the specifications of the homeowner.
The third idea will involve building the apartments using the tunnel-form construction technology. In this case, ready-mix concrete and formwork will be used to construct monolithic walls and slabs (Watts 86). This will improve durability, reduce costs, and facilitate the construction of high-rise buildings, as shown in figure 1.
Finally, the luxury apartments can be constructed using prefabricated flat slabs. The slabs include prefabricated gas, water, and sewer service pipes. The main advantage of using flat slabs is that they do not place restrictions on partitioning rooms (Watts 92).
Product Concept Development
The proposed concept statements for the new luxury apartments include the following. First, DAMAC will use precast flat panels with factory-fitted insulation and unique decorative cladding to construct luxury apartments that are resistant to extreme weather conditions and have high-quality interior designs, as shown in figure 2.
Second, the company will use the 3D volumetric technology to develop high-quality apartments that offer spacious rooms and excellent interior decorations, as well as resistance to fire, extreme temperature, and sound. The quality of the buildings will be improved by designing and manufacturing their components in a controlled factory environment. This will ensure accuracy and consistency during the construction stage.
Third, the tunnel-form technology will be used to construct low-cost luxury apartments. The use of factory-prepared ready mix concrete will ensure durability. It will also facilitate the use of modern finishing materials such as machine stones, gypsum, timber, and moulding plastic to improve the attractiveness of the apartments.
Fourth, DAMAC will use prefabricated flat slabs to develop high-quality apartments that offer flexibility to the homeowner in terms of ability to change the interior layouts in response to changing tastes and preferences. The use of flat slabs will reduce the cost of the apartments and enable the owner to repartition the rooms after construction to suit his or her lifestyle (Watts 112).
Finally, the company will use the traditional concrete construction method to develop luxury apartments on the seafront to provide a panoramic view of the Persian Gulf Coast. In this case, the use of steel-reinforced concrete will facilitate construction at the seafront, which is often susceptible to destructive seismic waves.
Concept Testing
Concept testing will be done using quantitative methods. Questionnaires with structured questions will be used to collect data concerning customers’ reactions to the new product concept (Grewal and Levy 104). The questions will help the company to determine whether potential customers have purchased interests in the luxury apartments. They will also enable the company to determine the prices that customers are willing to pay for the apartments and the product features that are most important to them. The information obtained from potential customers will be used to improve the new product innovation concept to ensure success.
Full Screen
Building the apartments on the seafront using reinforced concrete will improve their attractiveness to customers. However, they will be very expensive due to the high cost of using steel-reinforced concrete and purchasing land at the seafront. The 3D volumetric technology will improve the durability and quality of the apartments in terms of interior and exterior designs. However, executing the concept is quite challenging due to the difficulty in shipping large three-dimensional modules. Although prefabricated flat slabs will provide flexibility to the homeowner, the durability of the buildings is likely to be compromised (Watts 53). The precast flat panels provide durability and unique decorations. However, they cannot be used to save on space by constructing high-rise buildings.
Therefore, the tunnel-form technology is the product concept that will be adopted to construct luxury apartments. The concept will ensure cost reduction without compromising key quality indicators such as durability, interior decorations, and the size of rooms.
Sales Forecasting
Table 1: Five-year sales forecast.
Table 1 shows that sales are expected to increase at an annual rate of 10% in the first three years. From 2018, sales are expected to increase at an annual rate of 15%. These expectations are based on the assumption that the demand for luxury apartments will remain high in the medium term and long term as the economy grows. In addition, the expected increase in the number of tourists and ex-pats in the Middle East is expected to increase sales in the long-term. According to the sales forecasts, the company will realize a gross profit margin of at least 25% annually.
Breakeven Analysis
Assuming a fixed cost of AED 300 million in the first year, the price per unit of AED 4 million, and a variable cost per unit of AED 2.5 million, the breakeven can be calculated as:
This means that the company will have to develop and sale 200 units in order to breakeven in the first year.
Product Protocol
Target Market
The target market includes the middle class and the affluent in the UAE, Saudi Arabia, Qatar, and Jordan. In these markets, the company will target individuals who are interested in affordable luxury apartments. It will also target institutions that are interested in purchasing high-quality residential properties for their employees. The middle class and the affluent are likely to purchase the apartments due to their high income.
Product Attributes and Positioning
The apartments will have three to five bedrooms. Each bedroom will have a Jacuzzi, bathroom, toilet, wardrobes, and a dressing area. Each apartment will have a living room with a separate dining area and a fireplace. The interior decorations and kitchen fittings will be custom-made to suit each customer’s needs. The apartments will be positioned as high-quality residential properties that offer unique features at affordable prices.
Marketing and Financial Requirements
Advertising through print and electronic media will be required to create awareness about the apartments. The company’s sales team will have to participate in real estate exhibitions in various markets to create brand awareness (Grewal and Levy 142). The company will require AED 4,666.3 million to develop 1,556 units in the first five years. 75% of the financial capital will be obtained from retained earnings, whereas the remaining 30% will be raised through REIT.
Production Requirements
The company will be responsible for sourcing and purchasing land in strategic locations. It will also prepare the designs for the apartments. Sales will begin after the design stage to incorporate customers’ interior decoration requirements. Construction will be outsourced to reputable constructors in each market. This will help in reducing construction costs and improving the quality of the apartments.
Product Launch Planning
The first 300 units of the luxury apartments will be ready by August 2015. The company’s sales offices will be the main distribution channel that will be used to sell the apartments. The company’s website will also facilitate sales activities such as viewing the apartments.
The company will adopt a market penetration pricing strategy. This will involve selling the apartments at a low price in order to gain market share. Gannt chart 1 summarizes the activities that will be conducted in the six months to the launch date. Model houses will be constructed to enable customers to have an idea of how the apartments will look like upon completion. This strategy will facilitate sales before the completion of the construction process. The sales team will be trained so that they can sell the apartments easily. Customers will benefit from a 12-month defects liability period. The defects that will be identified within the first 12 months after purchase will be repaired free of charge.
References
Ansoff, Igor. Strategic Management, New York: McGraw-Hill, 2007. Print.
DAMAC. About DAMAC Properties. 2014. Web.
Grewel, Dhruv and Michael Levy. Marketing, New York: McGraw-Hill, 2011. Print.
Kader Syed. “Dubai Property Market is Bullish.” Property Weekly 2014: 14. Gulfnews. Web.
Preiholt, Hakan and Claes Hagg. “Growth Opportunities in Luxury Goods and Real Estate.” Journal of Fashion Marketing and Management 10.1 (2013): 114-119. Print.
Watts, Andrew. Modern Construction, New York: McGraw-Hill, 2013. Print.