20180630 Does size matter?

20180630 (Sat)

Does size matter?

One Thousand vs 100 Thousand – a matter of scale.

The scenario I want to give is about selling property to different segment of market. Developers have various products like Car Manufacturer (Toyota – Camry, Altis and Vios). The expensive Camry is for premium market, while Vios is for common market.

The type of market would determine the strategy of marketing. Selling a RM1mio house is different from selling a RM300k house. Both has however, a cost element. To investors, RM300K with rebate is the same as RM1mio with rebate. The % – say 5% may be the same but it’s magnitude of RM15,000 (5% of RM300k) vs RM50,000 (5% of RM1mio) is way different in amount.

Therefore, within the same market segment, this rebate can really make a big difference. Take for example, a doctor who makes RM30k a month. This category of investor would have already invested in many properties. He can be rich on paper, but who does not want freebies? Thus, the rebate of 5% to a RM1mio property might be just what he needs to buy another investment.

On the other hand, a clerk in office with 3 kids schooling, making a mere RM2,500 salary a month must save on a shoe-string budget to afford a RM300k house. The rebate is no doubt minor (RM15,000 vs RM50,000) however its effect on the decision making can even be more crucial than the case of a well-to-do doctor.

This is what it means “size does matter”. If you have RM1,000, you cannot make much choice of investment compared to when you have RM100,000. The opportunity to a RM100,000 investor is much better compared to a RM1,000 investor. 5% being equal, but the magnitude is different.

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