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Introduction and Background
The Hensley Company is a company with very deep
roots in marketing. The company was founded using practical
marketing ideas and has developed into a successful group of businesses
that employ sophisticated marketing programs.
The Early Days
The company was founded by Herschel Hensley and
was originally a mule trading business. Those were the days of
World War II when Collinwood, Tennessee, was a thriving town.
The main business at that time was mule trading. Mule trading
may not seem like much now, but in those days, the war was in progress
and the area was still rural farm country. Farmers in wartime
were faced with a serious dilemma
...how production could be increased when machinery was not allowed
because all machine production was dedicated to the war. One
could give up farming and take on another occupation, but that was
not acceptable because Americans were the most patriotic people in
the world and any farmer who tilled American soil would raise crops
to feed American soldiers. Enter the role of the mule.
Mules were great for farmers because they replaced tractors while the
war was in progress and mule traders were the absolute masters of
marketing at the time.
Herschel was a master mule trader and his son
Billy learned many important lessons from his father about presenting
a product. First, Herschel told Billy that he was never to show
a mule without cleaning it thoroughly. This consisted of brushing
the muck from the animal's coat that had accumulated on the train ride.
Then, the mule had to have its hooves trimmed. And last, the
animal's teeth had to be brushed. This was Billy Hensley's first
encounter with marketing. He learned to never show a product
that does not look its absolute best. When Billy grew up, the
mule trading business had begun to decline. The town of Colinwood
was also declining economically, but Billy and his father had a good
idea . . . lumber.
They decided to enter the lumber business in the
town of Florence, Alabama. It was a small town but there was
great potential for growth. Billy was determined to help make
it happen. They bought one small piece of property and a truckload
of lumber on credit. It was the spring of 1947 and Billy sold
his first supply of lumber very quickly and repaid his debt.
He later opened a sawmill and built a shed on his lot. A few
of his friends from Tennessee came down to Florence and began cutting
raw timber from contract lands in Waterloo. Hensley's business
began to grow. Soon, he began buying land that had good timber
and his business expanded rapidly. The secret to its quick growth,
he believed, was because he had a loyal crew of workers that were
dedicated to their jobs. Being able to depend on his entire
workforce, from truck drivers to saw men made all the difference in
the world.
Soon, he began to build houses and his work force
grew to about six crews. Together they were capable of finishing
one house every four days. It is doubtful that this feat has
been accomplished in Florence since that time. He was also an
innovator in building. He built 20-25 different plans that he
knew from memory and customized them to the buyer's desires.
This technique gave him a "customer oriented" approach to potential
buyers. This way of thinking proved to be very advantageous in
a time when competition could be fierce. He mastered his marketing
techniques and it showed on the bottom line.
He an increased cash flow, he was able to look
into other investment opportunities. Panama City Beach, in Florida,
was a small beach town that he believed could become something big.
He had an idea which materialized and became known as Tourway Inns
of America. The first Tourway was built on Beachfront Road.
It was one of the first of its kind in Panama City. He quickly
made friends and a few of those friendships developed into other businesses
that are easily identifiable today. Captain Anderson's was started
by a man with help and advice from Mr. Hensley. It is now one
of the best fresh seafood dining establishments on the Emerald coast.
The Holiday Inn, made famous by MTV, and "headquarters" for many American
teenagers during spring breaks was also developed from advice and help
from Mr. Hensley.
His motel, The Tourway, was one of the most popular
motels in Panama City in the early seventies. It occupied about
thirteen acres of land with 250 yards on the gulf beachfront.
The Tourway quickly made good on its investment and soon he had motels
throughout Alabama, Tennessee, and Florida. Another town in which
Mr. Hensley invested his time and money was Gatlinburg, Tennessee.
He built a state of the art lodge in this town and watched it prosper
for several years. He then further expanded his business to include
new property developments, apartments, duplexes and commercial income
producing rental property [Hensley, interviews].
The Present Situation at Hensley
Today, Mr. Billy Hensley might not be able to
recite a textbook definition of "marketing" or even "logistics."
However, if one could hear him explain what, when, and how he wants
something done, anyone would certainly be impressed with his skills
in business strategy and management. His life has been built
from the ground up and his expertise in marketing has taken 70 years
to be fully developed.
The Hensley Company now owns and manages more
than 1,000 income producing rental units in the Florence area.
The two authors of this paper are presently employed at the Hensley
Company and are officers of the corporation. They have worked
there for a total of 15 years. They began careers as teenagers
by cutting grass and cleaning-up. They now deal in construction
of residential structures and in property management. They use
marketing skills daily. The marketing aspects (Four P's) of the Hensley
Company will be covered in the following sections this paper.
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Products Marketed by the Hensley Company
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The products of the Hensley Company are very
important and considered the core of its marketing effort. Without
products, there is nothing to market. And, there would be no
need for "place, promotion, and price." The Hensley Company currently
provides three distinct product lines, each of which are related to
the others.
Lumber and Building Materials
The first products of the Hensley Company was
lumber and building materials. The Hensley Company has sold
these items to local and regional contractors and builders for more
than 50 years. This was the company's most profitable product
line for many years. At one time Hensley had five sawmills under
contract to cut timber to produce building lumber out of pine and
oak. The company also found a use for sweetgum wood. Sweetgum
is wood that was considered virtually useless at the time, but there
was a lot of it in the Tennessee Valley. The Hensley Company
used it to make shipping crates for appliances which were sold to a
manufacturer in Memphis. Innovations such as this helped to keep
the lumber company profitable when it otherwise might have failed.
Although lumber remains an important part of the
business, its function is not to make large profits through sales.
The purpose, now, is to save money so that the company can build houses
at a much lower cost than the competition [Hensley, interviews].
The real advantage in owning the building materials company is that
these items can be purchased (by Hensley) below the current market
price. This avoids the need to pay sales tax until a contract
is signed for the job. The lumber company allows Hensley to bypass
the lumberyard or wholesaler and save money while serving the customer
[Class web site].
Construction
The construction company became the most profitable
segment of the Hensley Company. Over the years, it played a major
role in the development of single-family residential areas in the
Shoals. The Hensley Company's construction arm developed such
neighborhoods as Norwood Park, Hickory Hills, Lakeside Highlands, The
Cedars, and Weeden Heights. Until 1996, the construction company
had stopped building residential developments for many years in favor
of building apartment complexes.
When properly maintained, apartment complexes
would provide a continuous source of income with the ability to finance
other projects. The complexes that the construction company has
built for Hensley Property Management are Cambridge Arms Apartments,
Cypress Gardens, North Florence, Georgetown, Quail Run, and Hensley
Square. Other upscale living communities include Alpine Village,
Polynesian Village, and Contemporary Village, all near Old Chisholm
Road.
Rental Property
Hensley Properties is the newest addition to a
company that has been expanding into wider markets for more than 50
years. Mr. Hensley feels that constant expansion into new markets
will help insure the prosperity, even survival, of the company.
This shows a clear understanding of the PLC or product life cycle [Boone
and Kurtz, p. 383].
Each of the Hensley Properties complexes promotes
different features but they all retain five important characteristics
that the potential lessee expects when deciding what complex is right
for them. These five characteristics are: (1) a safe atmosphere,
(2) a relaxing setting, (3) a convenient location, (4) a competitive
price, and (5) a trustworthy relationship with lessor. It is
felt that these characteristics are important standards to uphold in
rental property.
Rental products are continuously improved by
surveying tenants about what could be changed to make their rental
experience more pleasing. With the answers received, lists of
amenities are compiled that are shown to be most appealing to
tenants. These features are then incorporated into the new complexes
which are in the planning stages. More importantly, these
improvements not only attract customers, they generate revenue.
This is only one aspect of how the PLC is lengthened. Another
technique, with which Mr. Hensley is most familiar, is the development
completely new products. Product lines to date have evolved from
lumber to construction of houses, crates, hardwood flooring, furniture,
to home mortgaging, to motels and nightclubs, to restaurants, and
finally to rental apartments.
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Place Strategies for the Hensley Company
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There is an old saying in real estate... the three
most important considerations are location, location, and location.
This goes along with a basic idea in the top marketing textbook by
Philip Kotler. He explains that a product "must be made available
to its customers at a convenient time and place, and that utility is
increased when this is done" [Kotler, p. 436]. Place considerations
are an extremely important part of marketing at the Hensley Company.
Apartment Rentals
In the apartment rental business, complexes need
to be located conveniently near a person's place of employment, schools,
or popular roads. This is a fairly easy task to achieve in the
short run. But, as as populated areas grow, our society is being
forced to become more mobile. This trend toward mobility makes
choosing places to locate new rental properties even more important.
It is necessary that the properties be selected that are in the path
of growth so that they will continue to be desirable in the years ahead
[Census Bureau web site]. Picking those places in the Florence
Metropolitan Statistical Area is risky, and becomes a longer term
challenge [Hensley interviews].
This is an example. This is an example
of a fourth level subhead. Notice that the underlined subhead is indented
and actually a part of the text but it has a period at the end. Also
notice that one never uses a heading when there is only one item, and
this is true for any subheading.
This is the second item. This is
another example of a fourth level subhead. Notice that the underlined
subhead is indented and actually a part of the text but it has a period
at the end. Also, notice that references should never be used in the
summary and conclusions part of the paper. Those are YOUR summary,
conclusions, and closing thoughts.
One way that Hensley Properties successfully finds good
locations for its properties is for its managers to play an active
role in the development of the town itself. This is a strategy
that has consumed vast amounts of time over the years, but because
of this strategy, the town has literally grown-up around Hensley properties.
Mr. Hensley has served on the Florence Industrial Development Board
for many years and helped to bring in some larger companies in the
Industrial Park.
People who are employed in the Industrial Park
need a place to live near their jobs and Hensley Properties offers
them alternatives such as Polynesian Village, Alpine Village,
and Contemporary Village. All are all within two miles of this
industrial center. Other complexes are located in the North Florence
area with college students and retirees in mind. Quail Run,
Hensley Square, and Cypress Gardens are all wonderful places for a
college student to live while attending UNA. These complexes
offer a youthful atmosphere where making college friends is simplified.
All of these complexes are within three miles of the campus and perfect
for students who simply prefer not to live in cramped dorm rooms.
The complexes of North Florence and Georgetown
were both designed and constructed with the retiree in mind [Hensley,
interviews]. They are on quiet streets where walking or talking
with a neighbors might be the only distraction. These two complexes
were constructed very close to the central part of town so that lessees
would not feel isolated. Also, they can run afternoon errands
quickly and comfortably.
Cambridge is the newest complex and it was
constructed with the family in mind. With its quiet, country
atmosphere and its spacious yards, families are almost constantly on a
waiting list for three bedroom apartments. Cambridge is also
the smallest complex with only 19 units. It is felt that this
promotes a feeling of closeness and friendliness that is not possible
in a larger complex.
The Motel Business
Place utility has been important in the apartment
business, but in the motel business, location continues to be "everything."
When the Tourway Corporation was formed, traveling salespeople were
the target market. These travelers needed to stay at a relatively
low-cost, clean motel that was close to the calls that needed to be
made. Tourway built many motels in convenient locations in many
of Alabama's economic "hot spots" like Birmingham, Mobile, and
Montgomery. Another target market was the family on vacation.
Research shows that they prefer to stay on the beach or in the mountains,
not just within driving range of these places. Tourway
offered a solution to their problems by building motels where the people
wanted to stay [Roy Graves, interview].
Construction Sites
And finally, when construction of single family
residences was the main aspect of the business, Mr. Hensley would plan
huge neighborhoods and then donate adjoining parcels of land to the
city for schools, or sell land at a lowered price to persuade churches
or other social organizations to move to the area [Hensley, interviews].
All of the developments completed in the past now have either schools
or churches, or both, in the vicinity.
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Promotional Methods Used by the Hensley
Company
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Prospective customers will not purchase a product
if they do not know about it. The tasks of informing, persuading
and reminding people of the availability of products and services is
the function of promotion. Promotion at the Hensley Company involves
communicating with the target markets so that they are aware of housing
opportunities. Hensley products must be kept in the minds of
consumers. This is an expensive, time-consuming activity, but
it can insure that occupancy rates remain high and that expensive investments
do not sit idle. Promotion vehicles include advertising in print
and on broadcast media. Personal selling also plays a
role in showing the properties and explaining features and benefits
of each unit. Some sales promotion efforts, and publicity, are
also used.
Newspapers and Apartment Guide
Marketing research is an on-going activity.
Data are constantly gathered by asking prospective customers how they
learned about available Hensley properties. It has been determined
through this research that the majority of potential lessees read about
Hensley properties in the Shoals Area Apartment Guide and
the Times Daily Newspaper. The Hensley Company, therefore,
has primarily built its promotional plan around local print media.
Radio and Media Efficiency
Advertising is also done on local radio, primarily
using WQLT and KIX 96. These two stations have been shown to
more efficiently reach selected demographic target market(s).
The Hensley Company chose these stations for their ability to gain
a very high percentage of radio listeners at a given time. Spots
are scheduled to run from 10 a.m. to 11 a.m. on WQLT and from 5 a.m.
to 6 a.m. on KIX 96. On the average day, up to 39 percent of
the area population may be exposed to Hensley products as a result
of this medium [Nick Martin, interview].
Television - Advantages and Weaknesses
Television ads have been considered, but the price
is quite high when compared with the results that are typically obtained
through significantly more efficient media. Television spots
would probably be more feasible in larger city, but in Florence, the
commercials seem to reach a small market share [In House Research,
p. 27]. Comcast Cable commercials are now being studied for possible
use by Hensley [In-House Research, p. 31].
Nick Martin is a promotional consultant at WQLT
and offers assistance in coming up with promotional ideas. One
idea that seemed to generate a great deal of interest has been a "tenant
party." This promotion essentially sought to establish a type
of relationship selling [Boone and Kurtz, p. 651] with existing and
prospective customers.
Experience with the Internet and Other Media
Another means of promotion that did not generate
expected revenue was a web site in which people could look at several
Hensley apartments on-line. This web site was dedicated to helping
promote Internet marketing activity for small businesses. The
site was relatively cheap to create, but in a period of seven months,
only one signed lease could be directly attributed to this web site.
The web site did a great job of promoting Hensley apartments to people
who would never have known about them. However, they never seemed
to generate concrete results [Roy Graves interview].
Billboards are another potential medium in the
area. They are good because they produce very high promotional
visibility. About one out of every fifteen local people
can recall a Hensley billboard. This figure is significantly
higher than estimated typical recall scores [Boone and Kurtz, p. 617].
One billboard location currently being used is at the corner of Helton
Dr. and Florence Blvd. The copy features bright, patriotic colors
and a locally famous Hensley house with the slogan, "Your Money's Worth
in Housing Since 1947".
Institutional advertising also plays an important
role in the Hensley media program [Boone and Kurtz, p. 609].
For more than fifty years, the Hensley Company has been associated
with quality construction, lodging, and materials. Over this
time, the company name has become a "household" word. It is one
that all except a few people in this area have at least heard someone
discuss. Favorable comments are heard every day at the office
where potential lessees are searching for an apartment. When
they are asked, "How did they hear about Hensley?" many simply reply,
"Who else is there?" [In-House Research, p. 73].
Sales Promotion - Specialty Advertising
Another form of promotional effort that the Hensley
Company takes very seriously is sales promotion, particularly specialty
advertising [Boone and Kurtz, p. 627]. Potential lessees are
given pot holders, key chains, refrigerator magnets, ice scrapers and
post-it note pads with the Hensley message imprinted on each item.
Mr. Hensley believes that this is simply another way that potential
customers can remember the Hensley name and how they can reach the
company [Hensley, interviews].
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Pricing Strategies of The Hensley Company
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Price is probably the most difficult aspect of
marketing at the Hensley Company. However, this common problem
can only be addressed when four factors are considered: (1)costs, (2)
demand, (3) competition, and (4) laws [Class Web Site].
Fixed and Variable Costs
Market factors are an important item in profitability,
but the real factors in apartment pricing are fixed costs and variable
costs. Fixed costs for the Hensley company include mortgage principal
payments and interest payments along with insurance, property tax,
and licenses. Most variable costs at Hensley Properties include
payroll, advertising, contract labor, yard maintenance, and apartment
repair supplies [Roy Graves, Interview].
It is the job of the staff to effectively control the
amount of variable costs in order to maximize profits. To do this,
every month, the property managers for each complex work together with
purchasing agents to come up with a projected income and budget expense
sheet in order to anticipate cash flow. To anticipate cash flow
more accurately, wage laws must be taken into consideration.
Many of the jobs are lower skill, minimum wage jobs and when minimum
wage changes occur, they must be taken into consideration. In
September 1997, minimum wage rose to $5.15 per hour. This may
seem like an insignificant change. However, when the rise in
labor costs is coupled with an increase in payroll taxes, the total
impact can add up quickly [Federal Government web site]. There
are many separate factors controlling the price of rental units in
this area, and it requires marketing knowledge to effectively price
housing units.
Supply, Demand, and Competition
Businesses are confronted with price questions
constantly and must look for solutions through the "market."
The market for Hensley consists of all the other rental units in the
area and the fluctuation of prices caused by supply and demand.
The fluctuation of these prices depends upon the demand for rental
apartments at any given time. Although the company does not necessarily
follow competition when they set prices, new tenants must be compensated
with rock-solid service on which they can depend.
Competing on a Non-Price Basis
Research shows that many marketing
factors are involved in the selection of living quarters. People do
not often select the lowest- priced deal. They look for the best
living environment at a reasonable price. Although amenities
and services are intangible benefits, they are obviously a major competitive
weapon. When properties are desirable and in demand, people are
willing to pay more for them. The following property descriptions
make it easy to see why Hensley has prevailed as the largest property
management firm in the area.
The apartments are some of the few in the area
that offer large spacious yards for children to play and a pleasant,
wooded atmosphere in which tired workers and managers can relax.
The great thing about Hensley prices is that rental possibilities offer
almost everyone in the Shoals area a diverse price range. Prices
begin at $250 per month on one bedroom and $300 per month on two bedroom
units. The prices then rise (with respect to the amount of tangible
benefits offered) to $350 per month for a one bedroom to $500 per
month on the largest, most accommodating two bedroom facility.
Everyone, however, retains the same quality service and staff advice
regardless of which complex a lessee chooses for their apartment home.
At $250 per month, a college student may choose
a one bedroom at Cypress Gardens, Hensley Square, or Quail Run
complex. If they choose to live with a roommate or two, Hensley can
offer them a two bedroom apartment at each of these complexes for
$300 to $325 per month. For the family that wants to reside in
a country atmosphere, but elects not to buy their own home, Cambridge
Arms offers two bedrooms beginning at $325 per month and three bedrooms
beginning at $425 per month.
For retirees on a budget, the smallest complex
(North Florence) features two bedroom apartments for $325 per month.
The Alpine, Polynesian, and Contemporary Village apartments were designed
for the lessee who could afford to buy their own home, but would prefer
to avoid all of the hassles of owning a house. Prices for a one
bedroom in Polynesian begin at $325 per month and $365 Alpine Village.
Two bedroom apartments at Polynesian Village begin at $375 per month.
Two bedrooms at Contemporary and Alpine Village begin at $450 per
month. Polynesian Village offers several luxury two bedrooms
which offer 1350 square feet. They have separate dining areas
and breakfast nooks, and feature oversized rooms with a large balcony
for $595 per month.
Alpine Village offers sixty-five fully furnished
executive apartments that are unique to this area [Apartment Guide,
p. 12]. Prices are $750 per month for a one bedroom and $950
per month for a two bedroom unit. Prices quoted are "per
month prices" only and lease prices include all fees applied over a
twelve-month period. Fees include twelve months rent, a $250
security deposit, and a $50 clean and setup fee. These
are minimum prices, since there is no way to decide whether the lessee
will cause damage to the apartment that might exceed the $250 deposit.
This process is based on competition in the area, the need for rental
housing, and the maximum price for which a given apartment will rent.
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Conclusions and Closing Thoughts
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From the days of brushing a mule's teeth to the
present emphasis on color coordination and ample kitchen cabinet space
in modern apartments, the Hensley Company has always paid close attention
to the importance of marketing. Over the years, the Hensley Company
has increasingly combined the four P's of marketing into their offerings
to provide quality products that always lead to satisfied customers.
It is hard to argue with success. The Hensley Companies have
been and will continue using the proven marketing formulas that
have worked for more than 51 years.
Hensley is actively seeking new
opportunities for continued expansion in the future. Although
these projects must be kept confidential at the present time, readers
will learn about Hensley's new products in the months and years ahead.
Future management teams are being trained in practical and proven marketing
concepts and strategy development. These leaders will continue
to stress the values that Hensley was built around ... planning ahead,
consumer orientation, marketing research, community involvement, value
for the consumer, and honesty. These are the "secrets" that
made the organization what it is today.
Few suggestions for improvement can be offered
by the authors of this paper. Perhaps, additional internal marketing
is in order and can be undertaken. Everyone in the organization,
from those who answer the telephone to building and maintenance
personnel, can benefit from seeing the customer's point of
view. Also, more advanced marketing research techniques are needed
and could be implemented by the organization. Further, new and
improved promotion possibilities are always important and an effort
should be undertaken to become more effective and efficient in this
area.
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