FloorPop  - Internet Marketing that Works, April 7, 2004

Vol. 4, Issue 1

Copyright (C) 2004 Blair Kuhnen.  All rights reserved. May be reproduced in any medium for noncommercial purposes as long as attribution is given.

Leveraging Virtual Reality in Marketing Coming Soon Communities

This month, we deliver part 2 of our 6 part series on how marketing coming soon communities is changing. In this issue we discuss how builders are leveraging virtual reality ("VR") to support new community pre-sales.

There is nothing new about VR in the marketing of new homes and communities. However, what was once a novelty that sparked interest, is increasingly mainstream for some builders. While it is still an expensive proposition, the quality and effectiveness has improved greatly as visualization and, more importantly, its application has improved. First, let us put these efforts into context by explaining a little of the history and goals of the adopters.

The History

An early application of the technology was in marketing condominiums and other hi-rise projects. Penetration to production builders was slight. Interestingly, several of the early vendors in the space were Canadians. We asked Jim Warren, CEO of Imagenius (http://www.imagenius.com) why this appeared to be the case. He explained that many Canadian production builder projects were financed by 3rd parties which required pre-sales prior to funding. Now, this trend is moving South with increased 3rd party funding in some markets.

Suddenly, marketing new homes is less of a product-driven exercise, and is becoming more marketing driven. The attitude becomes, "If you can sell it, I will fund it." rather than "If I builder it, they will come." Models are built, but they come later in the sales and construction cycle. Visualization becomes an important pre-sales tool.

Why They Do It

Builders leverage VR for a number of reasons. We believe, it's part of a larger shift toward pre-selling communities. This may be driven by financial partners requiring pre-sales or may be ROI-driven in the case of builders with deeper pockets who want to pace their sales and price increases while reducing their model costs.

The core need is to place the buyer in the end product before it is built and establish a clear vision of the end state. However, VR generally becomes part of the pre-sales marketing mix for one of two reasons: (1) models will not be available for viewing for some time, or (2) in an amenity rich community, the amenities will not be available for some time.

Direct Affect Marketing (http://www.directaffect.com), an interactive marketing agency supporting the real estate industry has worked with a number of leading builders to rollout pre-marketing programs that leverage virtual reality. We asked Chris Delucchi, President of Direct Affect, what typically drives their clients into this space? "Builders are able to present the product in a real-life way without having to build the product first. We really want to visualize the end community." Lino Hilario, Vice President / Partner, Imagenius (http://www.imagenius.com) put it this way, "It gives builders the ability to say to their prospects 'Here's what it's going to look like.'"

In some cases builders have pre-sale requirements before getting funding from financial backers. According to Delucchi, In the D.C. condo market "Many smaller builders/developers are totally driven by their pre-sale lending requirements."

The Costs and Benefits

The costs for implementing VR as part of a pre-sales and ongoing sales program can vary widely. The hard costs for a community animation and animating a few models may run $30-$40 thousand or considerably more depending upon complexity. However, the real cost is the effort and planning time required to make it effective. Expect the animations to take about 8 weeks to produce once your product and community details are finalized.

Builders leveraging the technology see a substantial ROI as it helps prospects become buyers long before models and amenities are completed.

The benefits are often some combination of the following:

In short, it helps facilitate the sales process. According to Mike Lozicki, President, MediaLab (http://www.medialabonline.com) "VR allows them [the salespeople] the opportunity to really engage prospects." By observing how prospects interact with the VR, an observant salesperson can better help the prospect with their buying decision.

When It May Make Sense

While we do advocate developing a pre-sales program for every new home community, VR may not be a good choice for many of them. When it is, it gives builders a significant competitive edge. You have to make the call community-by-community.

Visualization can be a great tool to help buyers place themselves in the community. If the planned amenities are great, but are not going to be built out for some time, VR may be an important component of your sales process.

Alternatively, builders may be interested in the technology simply to reduce their model costs. According to Frank Guido President of Aareas Interactive (http://www.aareas.com), "It's easiest to justify when there will not be models for a while or the builder is planning not to have models."

Critical Success Factors

So, you think this might be a good fit with one or more of your communities? We asked several vendors to give their thoughts on the subject of what it takes to make a VR project successful. Surprising or not, they were all in general agreement on these critical success factors:

The Vendors

There are a number of very high quality vendors available (this is not an all inclusive list, just several that I have either worked with or have received bids from):

Alpha Vision - http://www.alphavision.com

Aareas Interactive - http://www.aareas.com

Focus360 - http://www.focus360.com

Imagenius - http://www.imagenius.com

MediaLab - http://www.medialabonline.com

R.M. Design Studios - http://www.rmdesignstudio.com

Learning More

You can learn more by attending seminars or contacting any of these vendors. However, probably the best method was suggested by Guido. Just visit a community using these tools to experience how it works in practice and take time to talk to salespeople about how it fits into their sales process.

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FloorPop is published on the first Wednesday of each month. We welcome your comments, thoughts, and questions. Please send write or call anytime. blair@luxsolutions.com.

Blair Kuhnen is President of Lux Solutions, an independent consultancy serving the homebuilding industry by building sales and marketing solutions. He can be reached in Fort Worth, Texas at 866-923-4026 (toll free 866-923-4026) or via e-mail at blair@luxsolutions.com