Developers prepare for marketing

Having recently celebrated a first quarter that gave them better-than-expected presales, most of the larger firms are well into planning for substantial new residential projects to be launched in the next few months. But the national economy remains in a state of downturn and many of Thailand's export markets are caught up in deep recession, so they are preparing for a spirited - and expensive - marketing battle.

LPN Development's managing director Opas Sripayak said his company had already increased its 2009 marketing budget from about 0.7 per cent of its presale target to 1 per cent. The company is aiming for Bt8 billion in presales, meaning it is prepared to spend Bt80 million to achieve its share of sales. Its marketing budget last year was Bt50 million.

It will be unable to adjust its sales prices to compensate for the additional marketing expenditure, so its gross margin will fall between 3 and 5 per cent, Opas said.

Asian Property Development's senior vice president Visanu Suchartlumpong said his company was planning to launch a fresh marketing campaign every month to maintain or boost its sales to meet the company's target. Its marketing expenditure will consequently be higher in 2009 than it was last year, and this will affect the company's gross margin. It may be maintained at last year's level of 34 per cent, but more likely it will fall to between 31 and 32 per cent, he said.

Asian Property Development is trying to manage its administration and construction costs so that despite higher marketing costs, the net profit margin will be maintained or even improved, Visanu said.

"We have to launch a marketing campaign every month to challenge our customers to speed up their decisions to buy from our projects. This is a time of economic downturn and there is high competition in the market from the larger property firms," he said.

Preuksa Real Estate's director and chief operating officer Prasert Taedullayasatit said his company was forced to campaign more actively for sales this year, to stimulate home-buyers to make the decision to buy. This will boost the company's marketing budget above that of 2008.

"Our marketing campaigns will be different from project by project, depending on demand in the location," he said.

The company is striving to reduce its administration and construction costs by speeding up the construction process, so as to maintain its net profit at last year's level or higher. But gross margins remain under pressure, he said.

Currently, the company's construction process takes only 110 days to deliver residences to customers and this cuts Preuksa's construction costs below those of other developers, he said.