ZAR 1,000,000 marketing budget due diligence

For Luxury Villa Rental & Sale Mandates

By Nick Ray Ball 16th September 2016

In this article we shall look how the at the ZAR1,000,000 ($70,000) marketing budget is afforded for qualifying villas.

Index

1. What is a Qualifying Villa?
2. The Magic Mandates Spreadsheet?
3. Circular Events?
4. Additional Cost Price Branding Options (Paid for by villa owner)?
5. For Sale Mandates?
6. Itemize list of all costs incurred in the ZAR1,000,000 marketing budget.?

 

1. What is a Qualifying Villa?

First we need to define which villas ‘qualify,’ please open the spreadsheet ‘Magic Villa Rates’
on which we present a quick case study of villas available for sale and attached to each is a rating from 2 to 6, which corresponds to the tabs at the bottom of the spreadsheet.

For each villa we present some key factors, location, property type, distance to beach, pool size, view, Wow factor and bedrooms. All play their part.

This was a very quick case study; however, we can see its quite possible for a ZAR 18,000,000 ($1,250,000) villa to be as desirable as a ZAR 40,000,000 ($2,800,000) in the same town of Camps Bay. As such, each villa is considered on a case by case basis, not specifically it’s for sale value, that said value is the most accurate single factor.

In general as a holiday location not a place to live, all being even, Camps Bay is more popular than Clifton and Clifton is more popular than Bantry Bay and Fresnaye. However, a villa with a garden & big pool and great view and lots of wow in Fresnaye for ZAR 50,000,000 ($3,500,000) will significantly out earn a villa with a small garden and pool and less wow in Camps Bay for ZAR 40,000,000. ($2,800,000)

In the case of each villa, we will create a forecast and then present our marketing commitment, and note that our forecasts are in general ‘low forecasts,’ for which we are happy to put our money where our mouth is and trigger penalties is we do not make target.

In general, we consider 3 different price brackets, based on the mid-season rate, if it is above ZAR 18,000 ($1,250) a day then a villa qualifies for the ZAR 1,000,000 commitment. (Note that the mid-season rate in Cape Town is March or November which is typically about a third of the peak season rate seen in Late December and Early Jan)

If a property has a mid-season rate below ZAR 18,000 then on a sliding scale the commitment decreases, so for instance the ZAR 18,000,000 ($1,240,000) villa identified as Villa 1 in the ‘Magic Villa Rates’ spreadsheet would see a marketing commit from our commission of ZAR 600,000 ($42,000) (3.3% of the value of the home, or 5.5% if one were to use web, content and PR agencies to do the same task)

Note that our commission is typically 20%, but rises to 25% when selected affiliate agencies and booking channels are used.

For a villa with a higher mid-season rate over ZAR 30,000 ($2,100) a night, the budget increases to include cost of a few thousand individual property brochure that we send to clients who wish to book and include in the property packs given to potential buyers.

In addition, a collection of additional marketing factors such as featuring in our magazine, or in various Conde Nast editorials are offered at 50% of cost. You can see such items below in the 3rd series of the table, albeit this is the standard ZAR18,000 ($1,250) per mid-season rate presentation. To see the higher value offer, download the ‘Magic Mandates. ‘spreadsheet

 

2. The Magic Mandates Spreadsheet

Marketing Commitment
Villa Value from	40,000,000	to	70,000,000
	Years	Our	Agency/Direct
		Costs	Costs
Website & Content Marketing	3	346,170	626,129
Web Advertising	3	290,929	394,053
PR	3	223,875	338,623
Subscriptions & Directories	3	140,228	198,862
Guaranteed Total		1,001,202	1,557,668
Paid for by three different Villa Secret divisions
Company that acquired the Mandate		439,802	0
Communal Marketing Budget		250,238	0
S-World Villa Secrets (Head Office)		311,161	0
		1,001,202
Additional Cost Price Branding Options (Paid for by villa owner)
Villa Secrets Magazine	4 Pages	279,996	559,992
Broacher 4 Page	3	63,021	85,860
Conde Nast 1-page editorial	1	100,000	200,000
Websites Home Page Inclusion	3	150,000	300,000
Network Extras Total		593,017	1,145,852

Above we see a breakdown of the ZAR 1,000,000 marketing budget, the first thing to notice is that the ZAR 1,000,000 is the cost price. (See spreadsheet ‘Magic Mandates.’) With the exception of video, all marketing and development is handled in house, the head office for Villa Secrets is for all intents a purposes a development and marketing company, they do not rent or sell villas, they focus on increasing the size gravity (size) of the network and the quality of the content within. On the right we see the cost equivalent from a SA marketing or web development agency is about 50% more as the agency marks up costs for profit and paying tax.

For Villa Secrets Ltd UK’s global strategy, it does not really make much difference which websites are created and which grow, just so long as the quality is good. This is one way we can afford to do what we do. About 60% of the costs are covered by Villa Secrets head office and a joint marketing budget.

Once we deduct the head office expense and the communal marketing budget and spread the cost over 3 years we get to a figure that is only ZAR 115,000 per year for the actual Cape Town villa agency that signs the mandate.

 

3. Circular Events

There is a lot of mathematics the underpins the S-World Villa Secrets strategy, the founding principle is very simple and is a consideration of ‘the butterfly effect’ where we look to create feedback loops and look for the concepts that have the greatest cause and effect. We call such effects ‘Circular Events.’

For instance, by spending ZAR 1,000,000 in marketing we will of course generate a lot of booking requests, however one can’t book the same villa twice. Or can one?

When we assess how much income we make from a villa mandate we consider

1. The revenue we will make in commission from the villa rentals
2. The revenue we will make in commission from sale of the villa, if we also receive a sales mandate
3. And importantly the revenue we will make from the enquiries we receive when the villa is booked or deemed unsuitable (maybe it’s not suitable for young children). In this case we use the enquiry to make bookings in other villas.

In the case of the latter, over a three-year period we would expect to make about the same residual income from bookings made in other villas that we would in the primary villa (when it is booked or was not suitable).

As such, by spending ZAR 1,000,000 in marketing we generate over twice the income, see the spreadsheet ‘Magic Mandates’ and go to the second tab ‘booking Income.’

Below we see the summary, in which as the marketing we perform increases over the 3 years we see the commission we kame for the villa increases (as does the villa owners income) and in addition we see the residual income starts at about 50% in the first year and by year 3 we expect to make more from residual income that we do in commission from the booking. More than justifying our expense.

Villa Commission	Residual Income	Total Income
316,913	158,456	475,369	2017
364,449	364,449	728,899	2018
437,339	546,674	984,013	2020
1,118,701	1,069,580	2,188,281

 

4. Additional Cost Price Branding Options (Paid for by villa owner)

In addition to the complimentary (free marketing and development services are some cost price branding and print media options.

1. Placement in our forthcoming ‘Villa Secrets’ magazine,
2. Create mini brochures of each property (and send them and the magazine to clients when they enquire)
3. Feature the villa in editorial content in various Conde Nast magazines.
We already have one deal in place with one Conde Nast UK publication to create 4 page editorial posts, that would look like genuine editorial. This we have negotiated at half price and a near front position because Conde Nast like our portfolio and Africa. The article we are currently creating will feature 4 properties and cost about ZAR 100,000 per page.
4. Offer ZAR 150,000 in homepage placements on various websites.
(The value in this is only realised when we increase out Advertising Budget on VillaSecrets.com to about ZAR 5,000,000 a year)

For Villas in the ZAR 70,000,000 and above category, we increase the size of the mini broacher to 8 pages and include it within the complimentary marketing. We increase the magazine placement to 8 pages and reduce the pro rata increased cost by 50%. We pay 50% towards the Conde Nast Article and significantly increase the amount on homepage placements.

 

5. For Sale Mandates

The reason we ask for the sale mandate as well as the rental is to encourage one of the top three estate agents in Cape Town to join our network.

Which creates another ‘circular event’ most property owners who are selling would not mind to much if one of the top 3 estate agents in Cape Town had the first attempt as selling the villa when it was time. Especially as the ZAR 1,000,000 in marketing will in itself increase the sale price, and it makes a lot of sense to work together on the sale.

If Villa Secrets secures the first option to sell for most of the villas it mandates with, the Villa Secrets real estate franchise will be an attractive idea for the top realtors.

For the above reason we ask that for the first three months, the Villa Secrets nominated estate agent has first crack at the sale.

The exact financial details of which are yet to be finalised

 

6. Itemized list of all costs incurred in the ZAR1,000,000 marketing budget.

The following are from the ‘Magic Mandates’ spreadsheet. To download the spreadsheet, click here

a. Web Design, Content Marketing, SEO & SEM

a.i. Content for 11 pages (11 Days)
a.ii. Photography & Photoshop (7 Days) (3 shoots + Photoshop)
a.iii. Website Customization by Programmer (3 days)
a.iv. Website Customization by Graphic Designer (3 Days)
a.v. Website Customization by HTML5 Designer (3 Days)
a.vi. SEO 1 – Local SEO (7 Days) (Add to over 300 SA Directories)
a.vii. SEO 2 – Guest Blogging (2 per year – 6 in total) (6 Days)
a.viii. SEO 3 – 10 Links from Network – Flat Fee
a.ix. Creation of 20 Social Networks and Auto Updates (15 Days)
a.x. WordPress Blog 1 – Theme & Plugins – Flat fee
a.xi. WordPress Blog 2- 18 Blogs Written 0ver 3 years (18 Days)
a.xii. WordPress Blog 3- Photos for 9 Blogs (9 Days)
a.xiii. WordPress Blog 4 – Uploading & Admin of 9 Photoshoots (9 Days)
a.xiv. WordPress Blog 5 – Create 18 layer sliders (6 Days)
a.xv. Website & Blog Manager – Director – 5 Days
a.xvi. Website & Blog Web & SEO Master – 5 Days
a.xvii. Media Collector and Uploader – 9 Pieces
a.xviii. Pro Video Including Drone (outsourced)
a.xix. 3 Layer Slider Videos with voice 0ver (outsourced)
a.xx. Website & Blog Other 15 days

b. Web Advertising

b.i. Google AdWords and Microsoft + AdRoll & Google Remarketing Budget ZAR 225,000
b.ii. Create Campaigns (Villa Secrets CEO Nick Ray Ball)
b.iii. Design of HTML5 Ads
b.iv. CSS & HTML 5 Coding for Ads
b.v. Management

c. PR

c.i. PR- (Getting Villa on TV and in magazines) – (10 Days per year)
c.ii. PR Event at Villa (1 per year)
c.iii. PR Web Premium 1 Entry per year
c.iv. Management

d. Subscriptions & Directories
d.i. HomeAway Platinum Subscription for 3 years
d.ii. HomeAway Platinum Organization and Optimization
d.iii. Other Subscriptions for 3 years
d.iv. Other Subscriptions Organization and Optimization
d.v. Best of the Web – 1 Entry = 7 links (3 entries/21 links)
d.vi. Blog catalogue – VIB+ 1 Entry
d.vii. 10 Other Directories Including Free Directories
d.viii. 10 Other Directories Organization and Optimization