LPN propelled by product innovation

During the disastrous 1997 Asian economic crisis, LPN Development - one of Thailand's leading lower and middle-income condominium developers - did just that to find new market niches so it could survive and thrive.

"LPN never followed the pack and built whatever and wherever its competitors were building," he said.

Over the last decade, these innovative strategies made LPN into one of the country's leading stock exchange-listed real-estate development firms. Last year, its annual revenues exceeded Bt7.3 billion and net profits were Bt1.2 billion.

Opas said LPN had decided to charge full-steam into the middle-income inner-city condominium market that was just beginning to develop. "We knew that many young couples and families were looking for affordable housing in the city," he said.

These young and mobile middle-income homebuyers were working in Bangkok and needed affordable housing near their places of employment.

"They could afford to pay about Bt3,000 to Bt4,000 per month on a mortgage," he explained.

To compete successfully in the inner-city condominium market, Opas said LPN had to implement many new innovations.

Initially, it re-launched and sold 40-square metre condominiums on Rama 3 Road in Bangkok for about Bt1 million. "It was an innovative new product for the Bangkok market," he said.

The company then developed similar products for other parts of central Bangkok. "We began thinking how we could deliver inner-city Bt40sqm condominiums at Bt1 million or less," he said.

Initially LPN had to face two major challenges: designing a product that met this market's unique needs and rebuild rapidly declining customer confidence.

"They wanted a nice full -functional Bt1-million city-condominium home," he said. "And our market research showed that customers would be confident if we could guarantee construction in one year."

Opas, whose background is architecture, said LPN addressed the product innovation issue by completely rethinking city-centre condo designs.

"We decided on an open-plan that would include a kitchen, bedroom and bathroom," he said.

Perhaps most importantly, the new open-design allowed LPN to reduce the size of its units to 30sqm so it could be sold profitably at Bt30,000 per square metre.

"The people loved our design and our innovative product sold out quickly," he said.

By successfully selling a well-designed 30sqm inner-city condominium at less than Bt1 million, LPN went on to develop a niche market that is still highly successful throughout Bangkok, especially in the current tough economic environment.

LPN then addressed the second challenge - using innovative practices to reduce its construction period from two years to just one. The company has built and sold more than 30,000 condominium units in more than 50 different projects throughout Bangkok.

LPN's new product and process innovations that were initially implemented to address specific customer needs for well-priced inner-city condominiums during the 1997 financial crisis have allowed it to retain a competitive advantage especially during the current global financial slowdown.

Its well-designed 30sqm condominiums are still being lapped-up. "These smaller units allowed us to maintain our profit margins even as the cost of land continued rising," he said.

According to Opas, LPN is continually tweaking its inner-city condominium model with additional product and process innovations that meet changing customer demands. "Currently in the Ram-Indra and Ram-Indra/Prachachuen areas we have been successful selling 25sqm condominiums at between Bt800,000 and Bt900,000," he said.

The company has also successfully developed and sold 24sqm studios in Bang Kapi near Ramkhamhaeng University. "These units initially sold for Bt300,000," he said.

Note: Published yesterday was a report on Preuksa Real Estate's innovations.