Stop Guessing. Start Planning. What Should Your Budget Be?

Determining appropriate branding and marketing budgets for your new development.

Contributed by Erina Malarkey, Virtual Marketing Officer

There is an ancient ritual dance that takes place between vendors and clients and marketing teams and asset/development managers all around the world in the initial stages of project planning and requirements gathering.

“Are there any budget parameters or constraints we should be aware of?” the vendor or in-house marketing lead inquires.

“Well, I don’t really have a budget,” the client or asset manager replies. “Please just tell me what you think my budget should be to do it right.”

“Very well. For the scope you’ve requested the budget should be $50k.”

“Oh, really? Well, I don’t have that. What can you do for $25k?” says the client. And so, the dance is done.

What if there was a better way? A strategic planning methodology that allowed you to allocate an appropriate branding and marketing investment for your ground-up development at the very beginning? That ensures you’re well-positioned to meet your lease-up or sales goals while generating an acceptable ROI?

There is.

What if the conversation went something more like this?

Developer: “Since our development costs are $XX, we know we need to invest $XX in branding and marketing to ensure we meet our business goals and have an acceptable ROI that will keep our investors and JV partners happy. Let’s be sure to allocate that investment out over two years, with initial investments made at least 18 months before delivery.”

Others: “Agreed. I’ll find the right resources for the work and we’ll kick off shortly.”

After over 10 years of developing branding and marketing strategies and campaign plans for numerous ground-up developments, we have found there are some simple but useful calculations that can inform budgeting and take some of the guesswork and risk out of the process.

What’s the magic formula?

For ground up developments, we recommend you take your total development spend and multiply it by the magic number: .004. This magic number is the average percent of total development spend we see leading developers invest in their branding and marketing efforts. This calculation will produce your suggested investment often over two to three years, pending your development schedule.

Here’s an example:

If your development is $200M, the magic formula (200,000,000 x .004) suggests your marketing spend should be $800,000 from project inception through stabilization.

We occasionally see a slight variability pending asset size, micromarket conditions, and existing and upcoming supply, but the swing is minimal. This calculation will allow you to make a smart initial allocation.

Once I have my magic number, how do I allocate spending across phases and programs?

Within this budget, we recommend breaking it into the following phases:

  • Construction and Development
  • Pre-Leasing
  • Leasing and Stabilization

Then within each phase we recommend allocating across the following program areas, using a campaign-based approach.

  • Reputation Building (e.g., brand strategy, naming, logo, press release)
  • Demand Creation (e.g., A-frames, geofencing)
  • Sales Enablement (e.g., tour gifts, brochures)
  • Market Intelligence (e.g., Google Analytics, Yardi reporting)

A thoughtfully developed campaign baseline report, campaign modeling scenarios, and a detailed campaign plan can help identify exactly when and where to focus, so you can be sure you’re spending the right money in the right places with the right metrics to evaluate success.

We want to know.

Does above sound familiar? Foreign but relevant? Comment below to share your thoughts as to how this aligns to your budget experiences and any other best tips and tricks you have to stop dancing and start allocating budgets in a smart, data-driven way.

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