FUNDAMENTAL ASPECTS OF MARKET RESEARCHFUNDAMENTAL ASPECTS OF MARKET RESEARCH

Main objectives of chapter:Main objectives of chapter: * To discuss types and levels of market research.* To discuss types and levels of market research. * To discuss the issues and scope of market * To discuss the issues and scope of market research.research. * To discuss research consulting in general.* To discuss research consulting in general. * To discuss the research process.* To discuss the research process.

Expected learning results:Expected learning results: * know the types and levels of market research;* know the types and levels of market research; * can identify issues and scope of market research;* can identify issues and scope of market research; * understand * understand property market research consulting;property market research consulting; * understand and apply the scientific method in a * understand and apply the scientific method in a market research.market research.

Types of researchTypes of research

Level of researchLevel of research

Level of research – Inferential analysisLevel of research – Inferential analysis

Sometimes called trend analysis.Sometimes called trend analysis.

Uses secondary time series data and Uses secondary time series data and emphasises on the estimates of future changes emphasises on the estimates of future changes in values by investigating past market trends.in values by investigating past market trends.

Identifies trends and patterns and infers Identifies trends and patterns and infers expected market behaviour.expected market behaviour.

Real estate analysts use statistics two draw Real estate analysts use statistics two draw inferences about a general class of phenomena, inferences about a general class of phenomena, studying recent data to predict future events.studying recent data to predict future events.

Attempts a projection of historical trends Attempts a projection of historical trends focussing on macro data.focussing on macro data.

Take-home exerciseTake-home exercise

Study the rental trend of properties in your Study the rental trend of properties in your state since 1990. Use any forecasting state since 1990. Use any forecasting methods to estimate the likely rental level in methods to estimate the likely rental level in 2004.2004.

Apply your finding above to office in your Apply your finding above to office in your locality. Comment on your findings.locality. Comment on your findings.

Submission: next lectureSubmission: next lecture

Level of research – Fundamental analysisLevel of research – Fundamental analysis

Goes beyond trend analysis.Goes beyond trend analysis.Forecasting based on segmentation of broad demographic Forecasting based on segmentation of broad demographic and economic data to reflect the subject’s specific market.and economic data to reflect the subject’s specific market.Principle: real estate value is tied to the services the real Principle: real estate value is tied to the services the real estate provides.estate provides.Uses micro data for a specific parcel of land and sub Uses micro data for a specific parcel of land and sub marketmarketOriented toward future developments.Oriented toward future developments.E.g. to estimate the future capture rate of retail property:E.g. to estimate the future capture rate of retail property:

* identify the market/area of competition* identify the market/area of competition * identify competing properties* identify competing properties * compare subject with competing properties* compare subject with competing properties * estimate capture rate of competing properties* estimate capture rate of competing properties * estimate capture rate of subject property. * estimate capture rate of subject property.

Issues and scope of market researchIssues and scope of market research

S = f(expectation of demand; planned S = f(expectation of demand; planned supply; competitive environment, and; supply; competitive environment, and; availability and cost of land, labour and availability and cost of land, labour and capital)capital)

D = f(population; income; employment; D = f(population; income; employment; relative prices; taxes; interest rate; down relative prices; taxes; interest rate; down payment requirements; and future payment requirements; and future expectations)expectations)

Direct Factors

Indirect FactorsIndirect Factors

STEP factors:STEP factors: * Topography and soil conditions, * Topography and soil conditions, * engineering,* engineering, * production process,* production process, * zoning, utilities,* zoning, utilities, * transportation linkages,* transportation linkages, * environmental impact,* environmental impact, * public facilities & amenities,* public facilities & amenities, * consumer behaviour,* consumer behaviour, * economic conditions,* economic conditions, * and government law and regulations.* and government law and regulations.

Scope of market researchScope of market research

Data Synthesis and RecommendationsData Synthesis and Recommendations

Research Consulting ProcessResearch Consulting Process

Instructions to carry out a specific studyInstructions to carry out a specific study

Consulting proposalConsulting proposal

Contract signingContract signing

Systematic procedure for studySystematic procedure for study

Communication and co-ordination of workCommunication and co-ordination of work

Four stages of research consulting:Four stages of research consulting:

* Developer’s goal and objectives;* Developer’s goal and objectives;

* Analysis of the general market conditions;* Analysis of the general market conditions;

* Market and/or feasibility study;* Market and/or feasibility study;

* Project decision.* Project decision.

ExampleExample

Steps in Research Steps in Research

STEPS IN THE SCIENTIFIC METHODSTEPS IN THE SCIENTIFIC METHOD

Three basic steps in property market research:Three basic steps in property market research:

  

Ascertaining market conditions:Ascertaining market conditions:

   * Information: SS & DD, prices and rentals, * Information: SS & DD, prices and rentals, sales & sales &

and leasing transactions, investment, and leasing transactions, investment, competition, competition,

product innovation)product innovation)

* Analyze markets and produce forecasts* Analyze markets and produce forecasts

   Converting ‘gut feelings’ into ‘intelligent Converting ‘gut feelings’ into ‘intelligent information’ through a scientific approach information’ through a scientific approach

Drawing conclusions & communicating the Drawing conclusions & communicating the resultsresults

Defining the research problem and objectivesDefining the research problem and objectives

  • • A problem/decision needs information.A problem/decision needs information.• • Must know how to obtain the information.Must know how to obtain the information.• • Avoid wrong information, incorrect interpretations, Avoid wrong information, incorrect interpretations,

or information that costs too much.or information that costs too much.• • Advise how to define the problem and suggest Advise how to define the problem and suggest

ways to make better decisions.ways to make better decisions.• • Identify the necessity of research (See Figure Identify the necessity of research (See Figure

2.4).2.4).

• • Do not too vague or too broad.Do not too vague or too broad. E.g. “Gather the data on the residential market", E.g. “Gather the data on the residential market", hundreds hundreds

of things can be researched!of things can be researched! What is specific decision facing the company?What is specific decision facing the company? Best site for residential or commercial?Best site for residential or commercial? How much demand from each alternative use?How much demand from each alternative use? Should price be the sole factor?Should price be the sole factor? If not, what are other factors?If not, what are other factors?  • • From the problem comes objectives.From the problem comes objectives.• • Govern the entire research process.Govern the entire research process.• • Can be exploratory, descriptive, and causal.Can be exploratory, descriptive, and causal.• • Put in writing to be certain about purpose and expected Put in writing to be certain about purpose and expected results.results.

Defining Research Problem and Objectives (contd.)

Deciding on Research ApproachDeciding on Research Approach

Primary versus secondary researchPrimary versus secondary researchPrimary and secondary (already discussed).Primary and secondary (already discussed).Primary: original research, carried out for a new Primary: original research, carried out for a new and specific purpose.and specific purpose.Secondary: existing research, useful to those who Secondary: existing research, useful to those who buy or read the published reports.buy or read the published reports.Ad hoc versus continuous researchAd hoc versus continuous researchAd hoc: once-only basis and is complete in itself. Ad hoc: once-only basis and is complete in itself. E.g. To evaluate the management quality of a E.g. To evaluate the management quality of a shopping complex to find out what the tenants and shopping complex to find out what the tenants and shoppers say about facilities, security, rental level, shoppers say about facilities, security, rental level, business profitability, management-tenant business profitability, management-tenant relationship, etc.relationship, etc.

Deciding on research approach (contd.)Deciding on research approach (contd.)

• • Continuous: conducted regularly, each succeeding Continuous: conducted regularly, each succeeding report shows the movement of trends over time, report shows the movement of trends over time, about a particular variable. E.g. surveys on rental about a particular variable. E.g. surveys on rental level, selling price, cost of material, sales turnover, level, selling price, cost of material, sales turnover, and competitors' strategies can be conducted from and competitors' strategies can be conducted from time to time.time to time.

  • • Quantitative versus qualitativeQuantitative versus qualitative   Quantitative: total, percentage, mean, std. deviation, Quantitative: total, percentage, mean, std. deviation,

etc.etc. Qualitative: seeks information on reasons, Qualitative: seeks information on reasons,

perceived images or motives rather than numerical perceived images or motives rather than numerical measurement of variables.measurement of variables.

Deciding on the Types of ResearchDeciding on the Types of Research

• • Some of types of market research:Some of types of market research:

A. Desk researchA. Desk research

B. Field researchB. Field research

C. Observational researchC. Observational research

D. Survey researchD. Survey research

Developing a Research PlanDeveloping a Research Plan

A. Determining specific informationA. Determining specific information  

Decided based on research objectives.Decided based on research objectives.E.g. to investigate how the prospective buyers will react to a E.g. to investigate how the prospective buyers will react to a new housing product at a reduced price: new housing product at a reduced price:

• • The demographic, economic, and lifestyle characteristics of The demographic, economic, and lifestyle characteristics of current owners of similar housing products.current owners of similar housing products.

• • The benchmark information of overpriced housing products.The benchmark information of overpriced housing products.• • Affordability profile as reflected by the affordable average Affordability profile as reflected by the affordable average

propensity to spend and the required average propensity to propensity to spend and the required average propensity to spend.spend.

• • The price bands and how they affect consumers' purchase The price bands and how they affect consumers' purchase decisions.decisions.

• • Forecasts of sales of the product under study with the Forecasts of sales of the product under study with the reduction in price.reduction in price.

Developing a Research Plan (contd.)Developing a Research Plan (contd.)

B. Survey of informationB. Survey of information

  

Secondary or primary. Secondary or primary.

Starts by gathering secondary data, internally or Starts by gathering secondary data, internally or externally.externally.

Help define the problem and research objectives.Help define the problem and research objectives.

Cheaper and quicker.Cheaper and quicker.

Problems: unavailability, irrelevance, inaccuracy, Problems: unavailability, irrelevance, inaccuracy, non-currency, partiality of data.non-currency, partiality of data.

Thus, go for primary data!Thus, go for primary data!

Developing a Research Plan (contd.)Developing a Research Plan (contd.)

Developing a Research Plan (contd.)Developing a Research Plan (contd.)

2. Research instruments2. Research instruments  Questionnaire.Questionnaire.

Questionnaire is difficult to design.Questionnaire is difficult to design.Elicit relevant information to answer research questions.Elicit relevant information to answer research questions.Needs to be developed, tested, and debugged for actual Needs to be developed, tested, and debugged for actual survey. survey. A good research comes from a good questionnaire design.A good research comes from a good questionnaire design.Needs proper sampling techniques.Needs proper sampling techniques.

  Checklist.Checklist.

Contains elements/items of interest for which the subject Contains elements/items of interest for which the subject perceives, pays attention or acts upon.perceives, pays attention or acts upon.Popular in observational research.Popular in observational research.

E.g. visitors inspecting a model house: What a visitor E.g. visitors inspecting a model house: What a visitor inspects? Why? How he/she evaluates things? What he/she inspects? Why? How he/she evaluates things? What he/she finally does?finally does?

Developing a Research Plan (contd.)Developing a Research Plan (contd.)

3.3. Implementing data collectionImplementing data collection

Most expensive and subject to error.Most expensive and subject to error.Should monitor the fieldwork closely to:Should monitor the fieldwork closely to:

* make sure that plan is correctly implemented.* make sure that plan is correctly implemented. * guard against various survey problems * guard against various survey problems (contacting respondents, respondent’s non (contacting respondents, respondent’s non cooperation, biased or dishonest answers, cooperation, biased or dishonest answers, interviewer’s mistakes, etc.).interviewer’s mistakes, etc.).

Data must be processed and analysed.Data must be processed and analysed. * checked for accuracy and completeness.* checked for accuracy and completeness. * coded for computer analysis.* coded for computer analysis. * apply computer programs to prepare statistics and * apply computer programs to prepare statistics and advanced statistical and decision analyses.advanced statistical and decision analyses.

Developing a Research Plan (contd.)Developing a Research Plan (contd.)D. Presentation of resultsD. Presentation of results

  Interpret the findingsInterpret the findingsDraw conclusions about the implicationsDraw conclusions about the implicationsReport them to managementReport them to managementUseful tips:Useful tips:

• • Do not overwhelm managers with numbers and fancy Do not overwhelm managers with numbers and fancy statistical techniquesstatistical techniques • • Present major findings that are relevant to the major decisions Present major findings that are relevant to the major decisions research problemresearch problem • • Interpretation should relate to problem situationInterpretation should relate to problem situation • • Avoid biasAvoid bias

Check whether:Check whether: the research project was properly carried out, all the necessary the research project was properly carried out, all the necessary analyses were done, there area additional questions that could analyses were done, there area additional questions that could be answered using the data collected.be answered using the data collected.

Put up recommendations objectively.Put up recommendations objectively.

▪ Real estate market research: a systematic design, collection, analysis, and reporting of data and findings relevant to a specific market situation facing a real estate company.▪ Market research can be specific or general.▪ Two levels of market analysis: inferential (trends and future forecasts) and fundamental (specific site analysis).▪ Research consulting process: developer’s goal and objectives; analysis of the general market conditions; market and feasibility study; and project decision.

SUMMARY OF THE CHAPTER

SUMMARY OF THE CHAPTER (contd.)SUMMARY OF THE CHAPTER (contd.)

SSeven general steps in conducting any research: even general steps in conducting any research: defining the research problem and objectives; defining the research problem and objectives; deciding on research approach; deciding on the deciding on research approach; deciding on the types of research; developing research plan; types of research; developing research plan; implementing research plan; presentation of implementing research plan; presentation of results; and disseminating information.results; and disseminating information.

Research results must be presented to company’s Research results must be presented to company’s management and results be interpreted correctly.management and results be interpreted correctly.

Findings may be distributed internally for company Findings may be distributed internally for company use or published for wider access.use or published for wider access.

REFERENCESREFERENCES

Abdul Hamid bin Hj. Mar Iman (2002). Abdul Hamid bin Hj. Mar Iman (2002). An Introduction to Property An Introduction to Property MarketingMarketing, Skudai: Academic Publication Unit;, Skudai: Academic Publication Unit;

Barett, G.V. and Blair, J.P. (1982Barett, G.V. and Blair, J.P. (1982). How to Conduct and Analyse ). How to Conduct and Analyse Real Estate Market and Feasibility StudiesReal Estate Market and Feasibility Studies. Van Nostrand Reinhold . Van Nostrand Reinhold Company.Company.

Fanning, S.F., Grissom, T.V., and Pearson, T.D. (1994). Fanning, S.F., Grissom, T.V., and Pearson, T.D. (1994). Market Market Analysis for Valuation AppraisalsAnalysis for Valuation Appraisals. Chicago, Illinois: Appraisal . Chicago, Illinois: Appraisal Institute.Institute.

Greer, G.E. and Farell, M.D. (1988). Greer, G.E. and Farell, M.D. (1988). Investment Analysis for Real Investment Analysis for Real Estate DecisionsEstate Decisions, 2, 2ndnd. ed. . ed.

Thank you!Thank you!