Track2Realty Survey: Is a buyer ready to pay premium for the brand reputation of the developer? Majority of the brand conscious buyers’ say ‘NO’ unless the big brand has offering to match the high price and differentiate the product. In the high-end category, 40 per cent of the buyers are ready to pay a premium.
In the mid segment not more than one fourth, 26 per cent of the buyers are ready to pay a premium for the brand. 70 per cent of the buyers who are brand conscious and can name the reputed developers in the given city and other parts of the country say a ‘brand’ has to be ‘synonymous’ with better offering, failing which paying a premium is a pain.
How much should be the premium over the brand. Here again it depends on the product segment and it ranges from 20-40 per cent in the high end to 10-15 per cent in the mid segment housing.
However, Pranay Vakil, Chairman of Praron Consultancy maintains that brand reputation does give a premium if the branding has been scientifically done over a period of time, and not just selling the project.
“A classic example would be the name of K Raheja where three companies are operating with the same name and one that has invested wisely in branding is today commanding a premium of about 40 per cent,” says Vakil.
As a surprise finding, the survey noted that the first time home buyers are more brand conscious than the second-time or seasoned buyers who have tasted the water. They are also more matured in picking the project on its merit than going for the ‘big name’.
While nearly seven out of ten, 68 per cent of the first time home buyers go for a ‘brand’, this figure is not even touching the half-way mark, 46 per cent, when it comes to second time home buyers.
This indicates that the perception of just having a roof over the head drives the buyers to unbranded or less reputed builders is not based on merit.
Brand positioning for a developer is more important in retail where the success or the failure depends on the kind of brands that open their outlets. But here also survey respondents have a fractured mandate.
40 per cent say there can be no premium also even after footfall, if the footfall is not translating into the sales. While 42 per cent assert footfall definitely adds to premium, rest 18 per cent believe it is a result of a number of factors.
Food and grocery is sill the demand drivers of the retail as majority of Indians go to malls for outings, as many as 68 per cent, followed by grocery purchase by 56 per cent.
Exclusive brands do drive the footfalls but hardly translate into sells. For other branded stuff like clothing or other expensive items Indians, as many as nearly eight out of ten, 78 per cent, prefer high street. Despite of all its branding to attract brands into the malls, Indian retail real estate has thus far failed to translate footfalls into sales.
This dynamics changes in residential real estate but gone are the days of paying premium for the top developers’ projects vis-à-vis same offering by the lesser known developer in the same location.
For many of the home buyers it is difficult to differentiate the product offering as more than seven out of ten, 72 per cent say all the advertisements appear to be offering the same amenities and services in their advertisements, with project elevation being the only difference between various advertisements. For majority of them, 80 per cent, location is the brand, and not the developer, to show off in their peer group.
“Brand is important because I am not ready to invest with a company which has not delivered the promised houses in the past. I won’t compromise on a lakh or two to end up repenting my life’s biggest purchase being a nightmare. But if you ask me whether I will pay a couple of lakhs more to the developer just because he has a slight edge as a brand name, then the answer would be no. It does not matter how much they advertise. I am happy with a lesser known brand so long construction and other promises have not been compromised with,” says Raman Prasad in Bangalore who is on a house hunt.
But yes, brand matters in a sense that most real estate developers and their brand strategists have failed to acknowledge the psychograph of the target buyers. While branding is positioned only selectively with investors or the IPO in mind, the project branding (rather plain advertising) is done to attract the buyers.
…to be continued
