Other side of word of mouth property purchase

Bottom Line: Word of mouth is the most effective marketing channel today, but over-use and abuse to push sales could lead to suspicion in the mind of prospective homebuyers, writes Ravi Sinha

Word of Mouth, Whispering, Word of mouth publicity, Referral buyers, Buyers' recommendations, Social circle approval, Best publicity of property, India real estate news, Indian realty news, Real estate news India, Indian property market news, Investment in property, Track2RealtyGone are the days when the overnight appreciation of property prices was enough for the fly by night operators to lure the buyers with glossy advertisements. The ROI of the advertising spend by the developers was calculated with the number of phone calls in return. The economic downturn leading to an end of era of quick appreciation, however, changed the market dynamics completely.

The developers who relied on the advertising were suddenly clueless and wondering how to strategise the marketing spend. Amidst this trial and error, the developers in the last 5-7 years were completely exposed to the reality that it is no more a market of cold calling and direct footfalls.

While the majority of the developers shifted their focus on the digital media, more due to compulsions of cost cutting than any marketing strategy, the healthy balance sheets of some of the grounded developers indicated that the buyer today relies heavily on word of mouth.

As per the pan-India consumer survey by Track2Realty, in today’s market nearly one third of the buyers are direct referral buyers. Nearly equal number of buyers are those who have done their homework & online search/research before looking for credentials verification by the existing buyers of the project or the developers’ other projects.

What it clearly suggest is the fact that around two third of the homebuyers today are driven by word of mouth goodwill of the developer. It might give an impression that the developers should entirely shift focus on the existing customer base, but that is easier said than done.

More importantly, the developers have no choice but to enhance the customer experiences than trying to use them as influencers with a beg, borrow or steal mindset. A wrong strategy to lure the existing homebuyers as extended sales channel could also expose the developer as greedy marketeer who is out on prowl to bribe the buyers.

Catch of word of mouth publicity

Word of mouth publicity is a great marketing tool but is not blind sales channel

Word of mouth can be sustained only with overall brand trust and not influencing the buyers

Incentivising or bribing the buyers for referrals could be counter productive

Investing into homebuyers is different from luring them to sell the project for cash returns

 Take for instance, the experience of Diwakar Sharma who bought an apartment in one of the projects in Delhi-NCR on the recommendation of his office colleague. Prima facie, there has been nothing to suspect in a project where most of his colleagues had bought the home based on mutual reference. 

However, he was soon exposed to a not-so-pleasant reality of developers’ mechanism to create a chain of recommendation. The homebuyers in the said project were paid an incentive for inviting more friends and family to buy the flat in the same apartment.

“I did not know that I was being referred for a commission by my colleague whom I trusted. He acted like a de factobroker. Instead of creating a social neighbourhood it turned our relationship sour for ever,” says Diwakar.

According to brokers and property managers, the practice is more common in newer buildings, which may have several units available at once. But some buildings develop a reputation for their fraternal atmosphere as well, like the ones known for majority people from same community living there with their cultural festivities adding flavour. “It is like everybody knows everybody there,” says the broker.

However, like any other relationship, this artificial neighbourhood needs to be nurtured carefully. Failing this, if one gets tempted by the developers’ offer to invite others for a price, like the case of Diwakar Sharma, it leads to bad blood with neighbours in future.

And it is here that the developers also need to understand the difference between creating a word of mouth goodwill in a holistic manner and just using the buyers as referral agents. Unfortunately, in a business that still has not learnt to address the long term brand roadmap in its quest to address the short term goal of sales, the thin line that differentiates between word of mouth and bribing the buyers is often blurred.

All that the developers know is that a friend’s endorsement goes a long way. The prospective homebuyers are going to believe their friends before they believe the broker or the developer. If their friend tells them it is a great project to live in and social ambience is happening, they are going to believe it. The catch here is genuine review and not manipulated ones which would be eventually exposed in due course of time.

The Indian real estate has just started learning the importance of word of mouth publicity. The developers are trying their best to create an artificial neighbourhood for communities, professionals and other cohesive groups. The idea is to sell the inventory through referral marketing which is one of the most effective sales tool today. The long term vision of creating a brand that acts like word of mouth referral and magnet is yet not visible.

However, besides the buyers’ demographic profile and financial standing in a given apartment, based on referral buying, maintaining privacy and autonomy when one lives on the same elevator as one’s social circle can also prove to be challenging. If three friends call the same address home, can just two of them go out for a movie and dinner? If one does not want to announce to the world that one is having a hot date with so and so, how can one get around not being seen together by their in-building buddy?

Word-of-mouth publicity and its by-product referral marketing may sound to be an ideal marketing methodology of the Indian real estate, yet it could also be a double-edged sword. In the cities while it is a wishful thinking to have a like-minded neighbourhood, it also brings to the focus the privacy concerns of the homebuyers. For the developers, though it has the potential to be a great sales channel and brand driver, the same can tarnish the brand reputation if the strategy is not well executed.

Instead of incentivising or bribing the buyers for recommending the project to friends and family, the ideal way for the developers should be to look for market research. With the right kind of research they can find out as to what can be done to turn housing projects as magnet for identical social profiles to invest.

Entry of right TG in the initial phase of a project does attract matching gentry. Today, social profiles segment act on word-of-mouth – be it at a social gathering, event, function etc where people always move together. These social profiles always connect at small social gatherings which have a marketing flavour to it.

Like any other marketing concept which the Indian real estate has killed with its over-use and abuse, word of mouth could also be counter-productive if not used with long term vision to enhance brand equity and just focus on short term goals of sales.

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