Slice of Heaven and Associates
Tiny Homes Market Plan
Slice of Heaven Marketing Plan
Product Description
Value Proposition
Critical Issues
Market
Macro Environment
Market Size and Growth
Market Trends
Target Market Segments
Competitive Analysis
Direct Competition
Indirect Competition
Marketing
Marketing Objectives
Financial Objectives
Positioning Strategy
Product Strategy
Pricing Strategy
Distribution Strategy
Integrated Marketing Communications Strategy
Advertising
Sales Promotion
Direct Marketing
Public Relations
Branding Strategy
Market Research
Revenue
Break-Even Analysis
Sales Forecast
Expense Forecast
Marketing
Marketing Implementation
Controls
Marketing Organization
Contingency Planning
Appendix 1 Positioning Map
Appendix 2 Marketing Organization
Executive Summary
Goals
Founded in 2016, Slice of Heaven is a community of small economic homes set in an urban setting that are both environmentally friendly and aligned with your values for low cost. We build small homes using recycled materials such as reclaimed lumber and generate power through the use of solar energy. Our homes are situated in a gated community which allows for a shared community experience through gardens and play areas, as well as, community centers that help to create meaningful relationships with those around us. Slice of Heaven exist to create experiences where passion and purpose come together.
1.2 Purpose
Slice of Heaven and Associates seeks to make first-time home buyers, of small homes and gardens comfortable, happy, and worry-free both during the home buying process and even after their closings. By doing this, Slice of Heaven hopes to build a reputation as the company for first-time home buyers of small homes, effectively branding its name in the small homes and energy efficient market in an urban setting.
2.0 Overview
These tiny homes will allow the average American to enjoy a slice of heaven.
2.1 Mission
People ... Neighborhoods ... Community
2.2 Product Description
Slice of Heaven & Associates is planning to develop a "tiny homes" gated-community in an urban setting. This will allow members of the community to be mostly "off-the-grid" without having to move to a rural area, yet still have access to the amenities of an urban lifestyle -- balancing the best of urban and rural living in one community.
The community will feature tiny homes that are environmentally friendly, costing much less to build and leaving a smaller carbon footprint on our planet. Home-owners will also benefit from lower bills for maintenance and repairs, energy, food and water. They will get to enjoy shared community spaces that include a community garden and outdoor play-areas, and will still have access to luxury amenities found in the typical urban housing development, such as a community center for entertaining, with a gym, climbing wall, and pool area. The community center will have ample space for residents to entertain their guests. Having tiny homes will allow for more outdoor community areas.
The homes will be made of recycled or reclaimed lumber. Homes will have solar panels for roofing that will provide natural lighting and meet the energy needs of the home, and rainwater catchment and filtration will be done for household water usage. Wind energy will be used to supplement solar energy generation. Buyers will have the option to choose from a range of homes sizes starting from 200 sq. ft. to 500 sq. ft. with a price range of $150 to $300 per sq. ft. depending on design features and size.
Having these homes in a gated-community will provide safety and encourage residents to explore outdoors as much as possible (especially within the community). This will give residents the opportunity to interact and build connections with others in a healthy environment, rather than sitting indoors interacting with devices.
And since a larger number of people should be able to be housed in the tiny home community than on the typical urban housing development, this allows for more efficient use of land. The community will be certified by the WELL Building Standard (http://delos.com/about/well-building-standard/). A certification based on human health and wellness.
This sort of community will attract buyers who are looking to downsize, yet still want their own "home" rather than an apartment, those who want to spend more time outdoors than indoors without going completely off-the-grid, and those who want to be "mortgage-free" and able to have disposable income for other uses. It will also attract buyers who want to gain a sense of "community" by being with like-minded residents.
Currently the tiny-home market is in its infancy stage. A niche market of millennials is moving into tiny homes to be able to have more disposable income for travel and entertainment. Another niche market of community-based welfare agencies is using tiny homes as a cost-effective option for housing homeless and low-income groups.
However, the broader market of the average American home-owner that could downsize for social, environmental, or economic reasons has not been aggressively targeted. This market is the bulk of the U.S. population, and by targeting this group, impactful socio-environmental and financial changes should also lead to more savings for healthcare, travel, retirement -- and this should reduce reliance on public assistance.
2.3 Value Proposition
The value proposition will be "Tiny Homes, Big Savings" Own a home today that cost less and environmentally-friendly.
2.4 SWOT
Strengths
The Price -- Tiny homes cost a fraction of larger homes. Cost will range from $15,000 to $60,000 depending on the design features and size.
Cost Savings -- Tiny homeowners will have huge savings in their utility bills, maintenance and repairs through the use of renewable energy and water.
Eco-friendly: - The tiny house will be environmentally-friendly since it will be built of recycled or reclaimed lumber, and will use solar as the main source of energy. This will create leave a smaller carbon-footprint on the environment.
Spend less time cleaning and maintaining the house
Excellent customer service that will lead to a lifetime relationship with our customers
Our product is made of unique materials that will appeal to customers who are conscious about the preservation of the environment
Weaknesses
Tiny homes have little market presence or reputation
Initial investment will also be a challenge since this is a new trend in the housing industry
Opportunities
This will be an ideal home for millennial's since most of them will graduate with high college loans. Therefore, it will be ideal to own a tiny home rather than a traditional house, which will increase their debt.
The home will also be ideal for retirees and baby boomers who desire affordable homes with minimal maintenance.
Our tiny homes can be purchased or rented as a vacation home at a lower cost
Threats
Although the tiny home is unique in nature in terms of the materials, there is a concern of strong competition in the industry for market share.
2.5 Critical Issues
There are a couple of critical issues that were identified in the SWOT analysis. The first is that this is a relatively new, untested concept. Tiny homes are a niche, and while they have piqued some interest, the market for them is, well, tiny. The idea of a tiny home community is even less tested. The biggest critical issue therefore revolves around how Slice of Heaven will be marketed. It could be packaged as an economical solution, which would appeal to two of our major target markets. But ultimately, if the Slice of Heaven concept is to have legs in the marketplace, it needs to appeal to people on more than just the basis of cost. There is also the possibility of presenting the community as more of a community of like-minded people. This will make for a stronger community, because there will be a higher level of commitment among the people that choose to live there, but again, this is a niche market. There are few benchmarks -- the earth ships in Taos, NM and the community of Findhorn in Scotland -- but these are very small places with narrow appeal, and neither concept has won any traction in the market. So finding the right marketing message and branding to present Slice of Heaven will be essential to cultivating a strong community of people to build around.
The second key issue is licensing or zoning requirements. For all practical purposes, this is a multi-home community, but cities typically do not zone that way. In most places, the zoning for such a concept does not exist. There are certainly cities where the local government would grasp the concept right away and be able to get the right zoning in place -- something in between a multi-unit building and a single family lot -- but this is going to be a challenge in many jurisdictions. The best course of action is to launch somewhere that is going to be amenable -- Portland is a good place to start, but there are others.
The third critical issue for Slice of Heaven is to raise capital. On one hand, the DIY nature of such a community means that capital requirements are not that great. On the other hand, it still requires money and people to get things done, even with this sort of concept. Most important if the objective is to build Slice of Heaven within a set time frame. In some cases, DIY homebuilding is not even allowed. There is reason to believe that the financing challenge can be overcome, but because the concept is new and untested, there will definitely be some issues with finding the right financing for the project.
3.0 Market
3.1 Macro Environment
Macro-economic factors will be examined using the PESTEL framework. This will allow us to identify and understand the external macro-environment impacting Slice of Heaven.
1. Political:
As a housing community, Slice of Heaven is regulated by HUD at the federal level, and by various state and local agencies, such as a state's real estate commission and the local division in which the community will be located.
Land/Building regulations and zoning regulations are key factors overseen by these agencies.
Political/regulatory factors in the housing market are relatively stable. Any adjustments to the political environment will require lobbying to the governing agencies if needed.
Slice of Heaven will need to be located in an area where residents receive recognition of being in a legal dwelling and receive the same rights as typical home-owners.
2. Economic factors:
Interest rates in the U.S.A. remain low at under 1%, and in turn mortgage rates remain low, with bankrate.com showing a 30-year mortgage rate of 3.65%. Interest rates are not expected to increase significantly in the near future. This should assist potential residents of Slice of Heaven with getting financing for their tiny home if needed.
However, given the median income in the U.S.A. of $53K and that average expenditure per consumer unit is approximately $53k, households are struggling to find disposable income. Investing in a tiny home would require a smaller mortgage than the typical home, and there would be savings on interest charges, real estate taxes, insurance, maintenance/repairs, energy usage, etc. that would free up income for tiny home-owners.
For example, if an average tiny home costs its buyers $300,000 less than the typical family home, at an interest rate of 6%, over 30 years they can save $180,000 on interest charges. And savings on taxes, insurance and maintenance/repairs/improvements of the house could come to a total saving of $700,000 and more.
3. Social-cultural conditions:
Slice of Heaven focuses on a lifestyle trend of living simpler, having fewer possessions, spending more time outdoors. Slice of Heaven will provide buyers with financial freedom, as having smaller mortgages or no mortgage will allow them to have more disposable income to pursue their passion or to take time off and travel, spend more time with their family, have less items to buy for the home, and be able to save money for their retirement or children's college funds. These changes should lead to healthier lifestyles and happier residents.
4. Technology:
Innovation and technological development of tiny homes has grown significantly. From being homes on wheels, tiny homes have become fixed structures and a niche market has developed for architectural and engineering needs of these homes.
5. Environmental impacts:
The average size of homes has increased by 61% in the last 40 years, leading to increased environmental impacts. About 25-40% of solid waste comes from construction, and an average American home is 2,598 square foot and uses about 7 logging trucks to provide lumber.
Tiny houses can be very beneficial for the environment because they are eco-friendly and will be built using eco-friendly components. Slice of Heaven's tiny houses are to be built with reclaimed lumber and will use only about 1/2 logging truck of lumber. Today's homes use approximately 45 light bulbs consuming 639 KWh of electricity; our tiny house will use approximately 6 light bulbs consuming 85 KWh per year.
6. Legal:
Legal dwelling: Tiny homes that are on wheels face the challenge of not being recognized as "legal dwellings," and we will ensure that our homes are all fixed structures, and not on wheels.
Fair housing Laws: Housing must be open to all age-groups/races/genders. Recently, a councilmember in Washington DC attempted to introduce a bill to boost tiny homes development for Millennials; however, by restricting them to Millennials, the bill violated fair housing laws.
3.2 Market Size and Growth
The tiny house movement is a relatively new product in the housing industry, but gaining a momentum at a faster rate especially among Millennials. The tiny house industry has a promising market growth, especially among Millennials and baby boomers. Therefore, the marketing will be directed towards this group of people. Millennials are moving into this size of housing because of their limited funds to purchase a traditional house. Purchasing tiny houses also enable Millennials to quickly pay off college loans and save some extra money for other uses. According to Fry (2016), the population of Millennials has increased from 74.9 million in 2015 to 75.4 million in 2016, and will continue to grow as young immigrants continue to join the economy. On the other hand, baby boomers are also finding ways to maximize their pension by switching to tiny houses that cost a fraction of what traditional houses cost.
Since the Millennials population represent one-third of the total U.S. population the market growth potential looks very tremendous (Whitehouse, 2014). This group of the population is investing into education in order to get reputable jobs and have enough disposable income. Therefore, investing in tiny houses will align with their money-saving strategy while they still live a comfortable, independent life. According to Tinyhousetalk (2015), the future of tiny houses is bright because of the simpler lifestyle and other benefits such as environmentally-friendly and cost savings. It is estimated that more than 1 million tiny houses will be purchased within the next year (Tinyhousetalk, 2015), and this shows a positive sign of market growth for our product.
3.3 Market Trends
The current trend in the United States market for smaller energy efficient homes is facing a transition. Previously, the U.S. market desired large and lavish homes in a suburban setting on a big plot of land, but now the current trend is smaller and more energy efficient homes closer to towns and businesses occupying less space. Slice of Heaven provides the consumer with smaller and more energy efficient homes utilizing green technology and located on a small plot of land in a safe and secure urban environment. The effect of this real estate trend is a lot of realtors and large suburban communities have disappeared; less competition for large homes and an increased awareness of green, energy efficient, technology and a desire to live with minimal assets or dwellings has changed the way people live. American consumers are becoming more comfortable with the use of alternative methods of energy and the shift from bigger is better to a more minimal lifestyle in an urban setting. This trend will just open more opportunities for Slice of Heaven to provide its products to all ages and income levels. The benefits of providing a smaller energy efficient home and garden are the reduction in cost and added convenience for consumers to be in numerous locations in an urban environment. However, there is lack of personal space in a Slice of Heaven home and community, so if consumers wanted to see a representative for this new product they would need to visit one of our local communities or visit our website for more information.
3.4 Target Market Segment
The tiny house market for homes "typically between 100 and 500 square" has a wide demographic outreach in terms of its age range: "Millennials, who have limited funds and might not be able to afford a traditional mortgage because they have to pay off college loans; and Baby Boomers, who are retiring and seeking ways to stretch their pension by finding affordable homes" (Hyde, n.d). The concerns of both groups are strikingly similar. Idealistic Millennials embrace the environmental benefits provided by such homes and Baby Boomers are seeking to save money on utilities. However, demographically, the impressive size of the millennial generation makes this an even more attractive potential target market: "By sheer numbers, the 75 million members of the millennial generation overtook baby boomers last year" (Lee, 2016). Slice of Heaven's emphasis on the luxury market of tiny homes would allow both demographics to enjoy homes in gated communities where they can associate with like-minded individuals yet still pay a fraction of the cost of a standard-size home in such a neighborhood. "Those in tiny houses are often well-educated (with many being artists and writers, and the majority of those surveyed saying they had at least some college education), with cultured tastes, which are seeking to live simpler lives" and free up more disposable income to pursue other things as well as save for or enjoy retirement (Hyde, n.d).
The socio-economic demographics of the tiny house market are relatively wide, given the varied costs of such homes but there still is a fairly deep base even in the higher-end section of the marketplace, given that even the most expensive tiny home is still cheaper than a modest full-sized home. Particularly for couples who do not want children immediately or whose children have grown up, tiny houses allow buyers to have the privacy of their own structure without many of the financial burdens of ownership. The placement within a community which allows community sharing of amenities such as fitness facilities further allows a balance between the financial benefits of small home ownership and many of the perks of still owning one's own structure.
3.5 Customer Analysis
Millennials are questioning their parents' traditional assumptions that home ownership is always an unquestioned benefit, financially and personally. "Developers have been catering more and more to affluent baby boomers, building larger and more expensive dwellings, which makes buying a first home even more difficult for young adults ... less than 20% of new construction in recent years has been for entry-level properties" (Lee, 2016). Millennials are better-educated than the previous generation of young people yet have less disposable income and fewer choices in terms of builders catering to their needs. Mortgages are also less affordable for young people burdened by debt. The communal living also facilitated by the creation of a gated community allows something parallel to dorm life, which may be attractive to twenty some things for whom college is still a recent memory. The memory of the recent Great Recession caused by the housing market has caused even many affluent Millennials to question the value of putting so much equity into a home, versus focusing on other life pursuits.
Young adults are also postponing having children longer, which further intensifies their interest in the small housing market. Currently, "of 18- to 34-year-olds who are married and with kids has fallen steadily to 20% from almost 50% in 1970" (Lee, 2016). They are also more likely to have remained living in their parents' homes for longer than previous generations, reducing their perceived as well as real need for personal space: 31.5% of young adults in 2015 lived with their parents (Lee 2016).
3.6 Need Analysis
Purpose:
Slice of Heaven aims to build a community of tiny affordable houses in the North Carolina city of Raleigh (City of Oaks) due to its close proximity to Universities, government offices and entertainment arenas. This community will provide it's residences a debt free living style without having to compromise on living standards and change people's perception that they have to move to a rural area to achieve this. As a new wave of downsizing has captured America's attention, Slice of Heaven wants to offer people willing to change their life style and educate them that bigger homes kill many trees, use more land and resources, uses more energy/electricity/water and ends up costing more over a 30-year period. By having tiny homes, people are left with extra cash to actually enjoy their lives, spend it with their loved ones without having to stress about daily lives.
Target population:
Our target markets are college students or recent graduates who dream of owning their first home with the pressure of building their careers and paying off student loans, retirees who want to move to a warmer area and currently residents who would like to downsize.
Need identification:
Raleigh is the fastest growing city in the country the need of building more homes in a land that covers 142.8 square miles has been growing, therefore, without cutting more trees a tiny community can provide more homes in the area. Many people visit Raleigh for its mild temperatures and beeches, hikers visit the AP Mountains which causes pollution and traffic problems. Our company wants to provide more homes, easy access to tails without damaging its culture and maintain greenery for which Raleigh is famous for.
Needs assessment:
Because of Raleigh's humid climate with four distinct seasons, it is suited for older population who want to escape harsh winters in Northern and Midwestern states by either having a second or primary home. Current students or recent graduates from many universities around Raleigh, who are working in the area and want to enjoy the close proximity to Appalachian Mountains, will allow residences with a more active life style, meaning lesser visits to a doctor's office. Tornadoes and hurricane have sometimes affected Raleigh, having a tiny home means quick evacuation, less property damage and they can get on with their lives after a natural disaster.
Communicate:
As of right now there are no such communities in Raleigh or anywhere in America, therefore, now is a good time to enter the market because the need for more homes and community is increasing. The population of baby boomers in America (65 and older) is 323,730,082, 95 million Millennials, about 2 million people want to downsize their homes, Slice of Heaven will focus on targeting and attracting these groups. Our company wants to emphasize on quality of life that a tiny home will provide its owners, saving them money and they can feel empowered that they are helping in reducing pollution on this planet.
3.7 Competitive Analysis
Montainer is one of the more popular entrants in the tiny home market. It offers a relatively low price point for container homes. According to its website, a base module in the form of a recycled and refurbished shipping container is only $65,000, well below the price of even the most inexpensive homes, and installation runs $10,000-$20,000. The homes can be located anywhere the customer has land and can secure a permit. "We determine exact installation costs for your site including connection to utilities whether you are [sic] access to power, city sewer and water or well and septic system. Solar panels are also an option that we provide." ("FAQ," 2016). The shipping containers are relatively Spartan, however and a more realistic target market may be individuals who want vacation homes or temporary office spaces although according to Montainer, "Montainer wants to sell its homes to mainstream buyers who otherwise could not afford to buy a house" (Davis 2015).
Tiny Home Builders produces tiny homes on wheels, enabling the owners to drive them anywhere. Unlike Montainer, the owners of these tiny homes do not even need to purchase a piece of property. This would make it less attractive to young families with children or stable jobs that need to be rooted in a particular town but would be suitable for empty nesters or people seeking a second home for outdoor adventures. The company heavily markets itself to hands-on, DIY types and even sells a book for people who want to build the homes themselves. Tumbleweed Houses similarly offer 'homes on wheels' that include amenities such as bathrooms that might be enjoyed by people who seek out mobile living but with greater comfort than can be provided by an RV. Humble Homes sells tiny house plans for the do-it-yourselfer who wishes to build homes themselves.
3.7.1 Direct Competition
The most direct competition with Slice of Heaven & Associates would be that of Montainer, given that Montainer's structures are permanent and pre-fabricated, unlike the mobile offerings of other organizations. However, in comparison with Slice of Heaven, Montainer's structures are far more bare bones in nature. There is also no built-in community for Montainer residents even though the homes are stationary. For more affluent consumers who are simply seeking relief from the responsibilities of home ownership, Slice of Heaven offers the amenities of a fitness center and other elements comparable to high-end apartment or condominium life with greater privacy and at a fraction of the price. There is a lack of simultaneous social reinforcement if someone simply purchases a small piece of property to install a shipping crate.
The wheeled homes of Tiny Home Builders and Tumbleweed Houses offer the added asset of mobility but for some potential consumers this may not be necessary or even less desirable, as they may still want to live within a community. Also, these accommodations, while attractive, are not as luxurious as the rooted structures provided by Slice of Heaven. The ability to build one's home from a provided plan like Humble Homes is unlikely to be feasible for people with busy careers who are looking to save money as might be typical of millennial first time home buyers or baby boomers looking to simplify their lives. The gated community structure of Slice of Heaven is very different from the ability to live in the outdoors and largely off the grid in contrast to the other companies. The social life and amenities afforded by the gated community may also be attractive to young, single people who are looking for a more vibrant social life and older, lonely couples who are looking for new friends and interests.
3.7.2 Indirect Competition
Of course, many people who want less responsibility in regards to their home ownership and maintenance might simply look for inexpensive homes like condominiums. They "aren't always cheaper than existing, larger houses, particularly if they use high-end materials or custom design features" (Mears 2015). For seniors, alternatives also include over-50 communities which can offer less expensive structures but with a more traditional home layout. For older individuals who still want to retain possession of a lifetime worth of memories, the additional storage space offered by a more conventional home in an over-50 community may be more desirable. As one resident of a tiny home noted, "Living in a small house is challenging because you don't have as much space to hide your clutter" (Mears 2015).
Another possibility is using a mobile residence such as an RV. However, this presents the same obstacle for residences of wheeled mobile homes, namely the challenge of finding a home which is adequate. "Building codes in most municipalities set a minimum size for dwellings" and many "ban full-time RV living outside of an RV park" (Mears 2015). For younger residents, homebuyers who are concerned about purchasing green homes with a minimal environmental footprint and lower utility costs have expanded options behind tiny homes. For example, construction companies "are creating design plans for first-time buyers that incorporate high-quality design and smart use of materials" at a relatively low price point like BSB Design in California which "features high-density, detached homes in the 1,000- to 1,400-square-foot range at a cost of $150,000 to $175,000" ("Top trends in home design," 2016). While not as cheap as a tiny home, it offers the possibility of a home that is smaller in size and less expensive to maintain with the same advantages regarding saving on utilities.
Purchasing a small home or condominium still frees up the income of the buyers to spend more money on hobbies, including selecting their own fitness facility or social venue with the leftover income, and they may not perceive a need to live in a gated community with shared amenities as a result.
4.1 Marketing Objectives
Increase by 15% annually.
Decrease customer purchase costs by 8% annually.
Increase brand equity evidenced by voluntary requests.
4.2 Financial Objectives
In keeping with the spirit and philosophy of Slice of Heaven, the objective is to turn a modest profit on the community within three years. It is important not to emphasize the profit motive, but for the company, it needs to earn enough money to pay its workers a living wage, and it needs to have a small profit left over for the associates of Slice of Heaven. This profit is not intended to be large, but reasonable, so a 15% margin is targeted in terms of profit.
The more important financial objective at this point is actually not profit, but to growth the business. That means growing the number of sites, the number of sales, and the number of square feet that have been developed. Such approaches are a natural response to the need to grow, rather than turn a profit. The profit objective is merely long run, and it is expected that any profits will be plowed back into the business for the first several years. It is more important to establish the market, and then work to increase the size of the market.
The number of locations and the number of cities in which there will be communities is a key metrics. A good example is when Uber started -- success was measured in the number of cities in which it was legally allowed to operate. Money was something that would come later. The same goes for Slice of Heaven, as the initial objective is to establish a market for such a community, to ensure that there is a long-range demand set of Slice of Heaven, because without that none of the other financial objectives will come to pass.
Obtain profitability within three years.
Decrease labor cost by 5% annually.
Generate sufficient profits to maintain interest and profitability in this venture.
4.3 Positioning Strategy
Tagline/slogan "a simple life is a happy life." "
For home owners who want to live a happy and fulfilling life, slice of Heaven is a company that strives to be a market leader in providing tiny home community that will deliver a life-style of financial empowerment to over 184,757 people in Raleigh area that has been growing at a rate of 9% since 2010. Our community provides active lives.
Target Customer:
Company research has shown that Millennials in Raleigh's university dominated environment want to purchase their first home, however, are unable to do so due to other responsibilities, such as student loans and are still living with their parents. Adults aged 55 to 74 have at some point in their life expressed the desire to downsize without giving up everyday amenities a traditional home provides, that's where our product steps in, we provide low priced luxurious community/houses.
Market Definition:
Slice of Heaven is not just a housing community but we strive to provide its residents with quality of life. Company intends to work with local healthcare organizations such as North Carolina Public Health Association and will set-up a booth in their annual conferences to promote our community. Our team will advise people attending the conferences on the benefits of a stress-free life and overall well-being. Our company's TV commercials will show people of all age groups, race, ethnicity, and economic backgrounds enjoying living in the community, the aim is to make buyers award that that they don't have to spend tons of money to achieve higher living standards or a huge home to be happy.
Brand Promise:
Slice of Heaven combines the idea of convenience a traditional housing community provides with low prices of tiny homes on wheels and added a wide-range of floor plans with sense of togetherness. We strive to differentiate from other housing communities because we actually care about our residents a tiny house benefits its owner with freedom from debt, ability to travel and a reduced environmental footprint. We stand for healthy and happy Americans that want to own fewer materials but want to spend time building relationships.
Reason to Believe:
It's a product that has never been introduced before as a housing option in American, the current tiny home concept is 350 square feet or smaller park model like an RV or a park community with tiny homes on wheels. However, our company will provide a traditional community feels where the homes are not moveable and it provides safety to the residents because no one can walk up to their door steps. There have been instants where a tiny home on wheels was driven away/stolen when owners weren't at home, our community will provide peace of mind that this will not happen to them.
Positioning Map: (See Appendix 1)
4.4 Product Strategy
Product strategy serves as the roadmap for a product that helps to determine where and how the product will end up. This can also be described as the life cycle of the product. Slice of Heaven will be building tiny houses using quality and environmentally-friendly materials that will not only be safe for the environment, but also last for a very long time. These materials will be made from recycled or reclaimed timber, which will reduce the cost of production and will make the house more affordable for our customers. The house will also have solar panels that will generate energy. This will create a product differentiation from other tiny and traditional houses on the market.
The idea of a tiny house is to save cost while continuing to enjoy quality time with loved ones in a friendly community. Our customers include recent graduates, young working adult families, and baby boomers who want to own their own houses without being tied down with a mortgage. Our products will be sold directly to consumers in order to create that personal customer service relationship with them. We will not only be selling products to our customers, but also establishing an effective relationship that will make them know how much we care about them and the environment in which we operate.
Also, our product will be priced per unit, and considered to be affordable compared to a traditional house. In a nutshell, Slice of Heaven will be adopting the price-based product strategy to penetrate the housing market and successfully sell tiny homes to our valued customers.
4.5 Pricing Strategy
Given the overall marketing strategy of Slice of Heaven to increase awareness, establish a base, and develop a unique brand of small homes and communities in an urban setting; the strategic goal will be to maximize our brand of small homes through various techniques such as penetration pricing, which will allow for maximum market share, and value pricing which will win the loyalty of our customers through offering low prices for a high quality product. These strategies will allow for our unique brand of small homes to gain strength and recognition in the market, while allowing for rapid and continual growth through higher sales and lower cost per unit with long-term profits. Slice of Heaven will therefore use Cost-Plus pricing, calculation of the average cost (AC) plus a 15% markup (AC = Total Cost/Output) when determining the final cost of a unit.
4.6 Distribution Strategy
Our distribution channel strategy will include both direct sales and realtors. Since this is a new project, we will need a detailed distribution strategy that will create value for our products through direct interactions with customers and minimize distribution cost. Our first distribution channel will be a direct sales approach. The direct sale distribution strategy will give us complete control over the product and enhance a personal customer service relationship with the buyers. There is no need for intermediaries that may add costs to the price of the home; therefore, we will encourage direct sales by offering discounts to customers who directly purchase their tiny home from us.
We will also use realtors as part of our distribution channel to extend our product in the major target markets. Since many home buyers usually use realtors as their first point of contact, when it comes to looking for houses, it will be ideal to include them in our distribution strategy. This will enable Slice of Heaven to expand their market in other areas.
4.7 Integrated Marketing Communications Strategy
Many people have the urge to reside within gated residential communities. For this reason, gated residential communities together with garden apartments across the nation are coming up at fast rates. They allow members of that community to feel the balance between the rural area and the urban area since they still have access to amenities of an urban lifestyle. This brings a balance between the urban and rural lifestyles within the same community. Most of the people reside in communities where their access is mainly controlled by use of key cards, entry codes, gates, and keycards. The communities offer benefits and some shortcomings depending on whether one is a resident or in property management. Big apartment features include gate systems as the amenity to bring forth new residents (Lister et al., 2003). They are very much desirable to prospective residents and many property managers since they mainly charge some amount of premium for rent. The gate is included mostly on the low crime property not mainly for the purpose of deterring or preventing crime but for providing the perception of exclusivity and enhancing security. The truth is most of the people like the good feeling of where they reside, and as far as a gated community is concerned, it feels like a private club in which access privileges are needed. They also offer opportunities for persons to interact and connect in a serene environment which is better than being indoors.
Over time, it has become necessary for developers to come up with gated communities since most of the consumers are willing to downsize and at the same time want the feeling of being in their homes rather than being in an apartment. At the same time, they want to feel free from mortgages and direct their income into other meaningful uses and also gain the feeling of being in a community by being like-minded citizens. At the current time, the Slice of Heaven and Associates is in the process of developing 'tiny' homes' in an urban setting. They aim at making members of the nation enjoy the advantages associated with gated communities to the maximum. The tiny-home market is at its very initial stages. This subset of the market has had Millennials shifting into tiny homes to tiny homes so as to have the most disposable income needed for entertainment and travel. Other market communities use welfare agencies that are using homes as the cost effective option to house the homeless and the low income.
The following study seeks to show that the wide market of an average homeowner in America can downscale for the environmental, economic or social reasons have not been extensively targeted yet. The market forms the bulk of the country's population and so through targeting this group, changes in the social environment and financial aspects will cause a corresponding change in the savings for travel, retirement, and healthcare. This will help reduce dependence on the public. From the market research, we decided to conduct the research in Raleigh, North Caroline. The research involved determining the demographics of the place to come up with the potential and their incomes. Millennials and the older generation are the majority, therefore, making our product meet the needs. The strong business community and the diversity in culture will be a good business opportunity to aid us design houses that meet the market preferences and allow us to collect feedback to help us improve on our designs. The increased disposable income is a sure indication that our target market has the sufficient income to help us patronize our products. Slice of Heaven and Associates Integrated Marketing Communication Strategy will entail a variety of options the organization will combine to endorse the product and create brand knowledge for tiny homes we offer.
4.7.1 Advertising
Slice of Heaven is specifically targeted to a higher-end demographic of prospective tiny homeowners. One market segment is that of young people wishing to save money, but who still wish to have the amenities and privacy of home ownership as well as older couples who are downsizing. Using Facebook to target this demographic seems wise, given it is the social media source most used by middle-aged professionals. "82% of online adults ages 18 to 29 use Facebook, along with 79% of those ages 30 to 49, 64% of those ages 50 to 64 and 48% of those 65 and older" (Duggan 2015). Advertising should stress the benefits of cost, reducing the impact on the environment, and also the luxury of the accommodations, given that lower-end tiny house consumers are not likely interested in seeking out a gated community. Television commercials, ideally in prime time when the target demographic is watching, could be used to communicate both the lifestyle as well as the low cost of tiny homes and build awareness.
Housing bloggers and real estate bloggers can also be used to promote coverage of the organization and give more intimate details of what it is like to live in a tiny home. Asking current residents of tiny homes to write about their positive experiences or the builder of the community to share his vision in a sponsored article can help people think outside of the traditional box of how they envision home ownership.
4.7.2 Sales Promotion
Although tiny homes are cheaper than standard-size homes, working with local banks to facilitate mortgages would be one way to use promotional strategies to incentivize the purchase. The gated community could also offer discounts on any HOA fees during the first year of ownership, or any other costs associated with the community amenities such as the shared gym, play areas, and parking.
4.7.3 Direct Marketing
Salespersons in the form of realtors can be very effective in selling residences. Working through a real estate company would enable real estate salespeople to more effectively interface with potential homebuyers and sell them houses. This would attract consumers who might be looking for new houses in general but never considered tiny houses as a possibility. Realtors can communicate the central message of Slice of Heaven, which is "a simple life is a happy life" yet still stress the amenities offered by being part of a community. Salespeople can be powerful advocates in helping people envision a new way of life, for example a "lifestyle' campaign" stressing "Debt-free urban living" or that tiny homeowners can "Spend your income traveling, having fun and going out to dinner, not on a huge mortgage" (Hite 2015). Along with use of Salesmen we plan on using direct mail and direct email as well to provide customized promotional material to each individual on our target list regularly. The successful implementation of this strategy will entice the recipients to open and read each form of correspondence for further information.
4.7.4 Public Relations
The environmentally friendly nature of the housing complex might be an angle that a local or national news organization would be interested in covering from a sustainability perspective. The tiny house movement itself is a growing story within the news and touches upon many issues of public interest such as baby boomers struggling to save enough for retirement and young families burdened by student debt and not having enough money to support their professional lifestyle. Although news stories cannot be controlled in the same manner as advertising, it is less costly and sometimes carries greater credibility; because it is disseminated by an apparently objective source.
4.8 Branding Strategy
Slice of Heaven has a simple Brand Mantra and that is to provide environment-friendly housing full of community amenities. Our company wants to communicate that we provide tiny homes that are affordable and eco-friendly. We would like communities to get inspired to lead healthy, stress-free and simple lives, and focus on relationships rather than holding on to worldly possessions, and this is also our point-of-difference from our competition. Building materials will use reclaimed timber while household water will come from rain-water catchment. However, our housing community will be very similar (point-of-parity) to existing high-end gated communities around America, that include a community pool, gym, community center and play-ground.
Color and brand logo is very important to make a lasting impression and earn customer loyalty, and that is why Slice of Heaven has picked the following colors:
Yellow - is the color of warmth, joy and happiness, to show joyous and happy living in our community.
Green - represents health, growth, freshness, and renewal where buyers can save money over the life of owning our tiny home as they grow independent of governmental programs and have healthy and happy lives.
Purple - is for wealth, nobility and wisdom, signifying a luxury community yet a wise, cost-effective investment. The company's logo will have a globe with several happy families surrounding it, using the colors listed above.
Figure 1
4.9 Market Research
Based on our market research we decided to target the market in Raleigh located in North Caroline for various market opportunity reasons. We researched on the demographics of the area to determine the population of our potential customers and their disposable income. The Millennials and Baby Boomers form the majority population in the area; therefore, our product will be able to meet their needs. The city has a strong business community with a diverse cultural population which will be a good business opportunity for us to design different houses that will meet the preference of the market. It will also enable the company to collect valuable unbiased feedback that can help improve on product designs. Our market research further showed that the disposable personal income in Raleigh increased from $34,927 in 2014 to $36,049 in 2015 (New Jersey Department of Labor and Workforce Development (2016), which is a clear indication that our target city has enough income to patronize our products.
5.0 Revenue
5.1 Break-Even Analysis
Slice of Heaven estimates to have a fixed cost of $298,000 per year to cover costs such as salaries, utilities, and rent. The company also estimates variable costs for each unit to be $65,000 for materials and labor. We estimate to sell the houses for $80,000 per unit in order to be able to cover our costs. The break-even analysis will enable the company to calculate the amount of units that need to be sold in order to cover our initial expenses and when to expect to start making profit. This is a useful tool that can also help us to determine the best price for our products, so as to not over or under price. The three important factors needed to determine the break-even point is shown below.
Slice of Heaven Break-Even Analysis
For the Period 01/01/16 to 12/31/16
Fixed Cost $298,000
Payroll
Rent
Utilities
Accounting/Legal charges
Advertising
Total Fixed Cost 298,000
Variable Cost per unit $65,000
Materials
Direct Labor
Overhead cost
Total Variable Cost per Unit 65,000
Selling Price per Unit $80,000
From the above table, we can calculate the Break-Even in units and sales as:
BE units = Fixed Cost / (Selling Price -- Variable Cost)
= $298,000 / (80,000-65,000) = 20 units
BE sales = 20 x $80,000 = $1,600,000
This means that Slice of Heaven will need to sell at least 20 units of tiny houses in the first year at $80,000 or $1,600,000 in order to break-even. With effective advertising, the company will be able to reach more customers and in return increase sales performance.
5.2 Sales Forecast
Slice of Heavens sales forecasting will be based on the prediction of future sales of Tiny Homes. We will take into account performance, interest rates, market trends, and consumer interest when developing a forecast. A well thought out sales forecast will aid in the development of a budget, the allocation of assets, and scrutinize the market segment for growth. Our sales forecast is a prediction of how well a Slice of Heaven will perform over a one to three-year period. This forecast is based on trends, developments, and economy for the region. This will be how we monitor the market for available sales in a given market or region. These projections of likely customer demand for Tiny Homes, over a three-year period, will be determined using standard principles in marketing and forecasting. Market potential relates to the total capacity of the market to accept and purchase this type of home. But, Slice of Heaven seeks to gain sales potential as a sole source of tiny homes in the region and penetrate the market. Forecasting relies on hard data and the analysis of that data in the making of sound business decisions. Proper forecasting will require Slice of Heaven to not only anticipate units sold, but also the cost associated with their manufacture.
Slice of Heaven must prepare a forecast prior to developing a strategic plan. This forecast of potential sales will allow us to adjust based on our current production and marketing assumptions and such things as production capacity. This will give our management team the opportunity to examine various proposals and decisions on production, promotions, and market trends moving forward. Also, through proper forecasting we can best determine future markets for production, a corporate strategy, develop sales quotas, decide on distribution channels, and determine a price. Forecasting will also allow us to develop an advertising budget, determine benefits of promotional programs, establish principles, select suppliers, define financing, and determines inventory for our venture into the Tiny Home market. For this endeavor to work, managers at all levels will need to consider those factors listed above as they develop a sales forecast. Slice of Heavens sales forecast, to meet market objectives, is 30 units sold at an estimated 80,000 dollars per unit the first year and a 50% percent increase in year two, according to the trends in small home sales for this region, and a modest 22% percent increase in year three to meet our market objectives.
5.3 Expense Forecast
2016
2017
2018
Start-up cost
Office furniture and Equipment
$1,280.00
$1,280.00
$, 280.00
Website- Development / Maintenance
$35,000.00
$5,000.00
$35,000.00
Signage
$6,000.00
$3,000.00
$3,000.00
Grand Opening-Promotions
$10,000.00
Land
$917,000.00
Licenses and Permits
$73,200.00
$18,300.00
$18,300.00
Fixed cost
Taxes Rate
0.534
0.534
0.534
Utility bills
$12,000.00
$12,000.00
$12,000.00
Phone bills
$1,440.00
$1,440.00
$1,440.00
Insurance
$5,000.00
$5,000.00
$5,000.00
Legal and Professional fees
$100,000.00
$100,000.00
$100,000.00
Office supplies
$1,000.00
$1,000.00
$1,000.00
Trucks, Autos and Machinery
$3,000.00
$3,000.00
$3,000.00
Model Homes -- furniture
$12,000.00
$12,000.00
$12,000.00
Payroll
$150,000.00
$150,000.00
$50,000.00
Advertising and Marketing costs
$10,000.00
$10,000.00
$10,000.00
Research and Development
$4,000.00
$4,000.00
$4,000.00
Total Fixed Cost
$298,440.00
$298,440.00
$298,440.00
Variable costs per unit
Raw materials
$60,000.00
$75,000.00
$200,000.00
Packaging
$3,000.00
$5,000.00
$20,000.00
Transportation
$2,000.00
$4,000.00
$15,000.00
Total Variable Cost per unit
$65,000.00
$84,000.00
$235,000.00
Note:
7.29 ac lot for Tiny home community
Year 1 expected unit sales
30
Year 2 expected unit sales
45
Year 3 expected unit sales
55
Selling Price per unit Year 1
$80,000
6.1 Marketing Implementation
The marketing implementation phase for this project has been scheduled to last about a year and can be run in conjunction with other simultaneous activities. One of the advantages of having a new and progressive business model is that the project will likely warrant publicity from the local community. For example, it is reasonable to suspect that many people representing local media outlets will find the business model news worthy and wish to cover the project at different stages of its development. Therefore, it is recommended that the first phase of the marketing implementation plan is to build a network of local news representatives as well as a system to keep them in the loop of news developments related to the project status. The free publicity can be an invaluable way to promote the project without requiring any dedicated funds, with the exception of the time it takes to organize these efforts.
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