First published on Inman News 7.1.2009
A brokerage model of the future is coming.
Some might suggest they’re already here.
One might be stealing your client right now.
In the blink of an eye Hawaii Life Real Estate Services launched and became the No. 1 real estate site in Kauai. Soon after, they went from a pretty for-sale-by-owner site and search portal to a full-fledged real estate brokerage. Their lava has now spread to the Big Island, destroying some of the old growth that lay in their path.
You may be wondering what you’ll do if they open in your town. Stop. Start wondering what can you do right now to make sure that if they do, they’ll fail.
Repositioning yourself for the future
Yours could be a brokerage of the future. Your small boutique with 25 amazing agents could easily displace the old brand that has been there forever and has, over the long haul, brought nothing new to the table. Or you could be that old brand — the sleeping giant — that decides to wake up and roar.
To achieve this, here are three simple steps up the ladder of repositioning yourself for the future.
1. Determine your customer’s frame of reference. For the most part, consumers have a clear understanding of the space a brand occupies. When Volkswagen, the “people’s car” company, attempted to slide into the luxury class with its $94,000 Phaeton W12 it failed because it ventured far outside the frame of reference the marketplace has with VW.
The same argument can be made for the myriad of social networking sites seeking to engage consumers in a format outside their frame of reference. Consumers typically do not socialize with real estate companies. Instead, their frame of reference is centered around searching and finding homes — not friending and RSS (really simple syndication) subscription.
Repositioning a brand first requires the brand to thoroughly nail the basics of what its consumers expect from them as opposed to abandoning those critical elements in wake of introducing gimmicky new ones.
As it pertains to real estate, as long as your IDX feeds, response times, service promises and Web sites remain second rate, and as long as you continue to not offer market data, local insight or tools to help users make better decisions, your efforts to reposition will fail.
Tweeting sure is fun, but your customers don’t need you to be their Twitter follower. They need you to be their adviser and they need your site to be as amazing as you say you are.
2. Connect consumers’ frame of reference to your vision. As a Porsche enthusiast, the Cayenne made perfect sense to me once Range Rover officially closed the drawbridge between how far consumers were willing to pay for SUVs. Had Porsche released a $100,000 Cayenne in 1995, odds are it would have backfired.
When brands reposition, they must create connectors that segue their relevant and known benefits from the present to the future. Zappos successfully built those connectors through their accelerated service proposition that allowed the brand to move beyond being an online shoe retailer.
Brands must build connectors — or bridges — that help carry their customers from where the brand is to where it intends on going. Those connectors include products, services and experiences that continually suggest the forward path the brand is on.
Apple nailed it by taking its already left-brained users into the music world through iTunes, then segueing them into hardware with the iPod, which created the frenzy for the iPhone. Quite arguably, as a result of this successful repositioning, if Apple wanted to release an iCar, it could.
Building this connector also requires the brand to have a deeper connection with its customers. Zillow, for example, continues to endure, invent and reposition themselves year after year by pushing the boundaries of what they are as a brand.
Part of your success formula is attributed to their brand stewards — over a dozen — who actively and consistently define Zillow’s relationship with their customer as well as translate the customers’ understanding back to the brand.
Are you building those connectors? Do you have a brand steward? Without both, your bridge to tomorrow sports a gaping void preventing the marketplace from following you forward.
3. Keep your promises. Create a brand promise to help locate the brilliance that resides inside your company and turn it on. It’s a promise that you must deliver on every day, for every client, or face brand death.
Real estate makes too many promises and claims it doesn’t keep. You can’t guarantee you will deliver dreams. You can’t assure me that all your agents are the best in the market. So stop trying.
The future brokerage will make one promise. With great precision it will hitch every available brand touch point to that promise. And ride it from dust till dawn, delivering on its every word.
For your brokerage of today to be the brokerage of tomorrow, you will have to remove every agent who can’t support that promise — and probably every managing broker who can’t assist in drilling your brand ideals down through the ranks.
The brokerage of the future will no longer license products from vendors of the past whose products and services don’t help your client walk your talk.
The brokerage model of the future will become deft at the art of removing and replacing everyone in its marketing department who cannot find 50 new ways to push its commitments out to the marketplace and steward their brand.
The brokerage of the future will be profitable. Nimble. And its general manager will don a five-pointed star on her lapel next to her Realtor pin, clearly expressing to the consumer that when it comes to the most important purchase in their lives, there’s a new sheriff in town looking out for their best interests.
That’s how the brokerage model of the future will roll.
- Davison
Twitter: 1000wattmarc
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Brilliant. Too bad people like you don’t run RE brokerages.
Ah… but there are. They are out there.
I agree with the brand strategy you’re proposing. Only when we answer the question of what is right for the customer will we also solve what is right for the broker and agent.
In my humble opinion, then, an overriding question for the industry is how can this strategy be realized when the traditional revenue drivers are under constant attack? Even when the current challenges of fewer transactions and lower sales prices are in our past – whenever that day comes – the average brokerage will still be faced with ever-shrinking broker commission rates and ever-increasing splits. Most brokers have already cut costs to the bone.
The one major cost area left, for most, is office space.
Somehow, I believe, this ties into the overall picture. The rebirth must involve a rethinking of space.
Only the best will survive. In an economy like this one, we have had the best luck with having the newest technology to help us do our jobs right. It makes a big difference to a client when you are quick and tech savvy.
I agree completely Nicolai.
Over the course of the last 9 weeks I have visited many operations. Some occupied 36,000 square feet, others in 16,000 square feet and some in 2,000 square feet.
I have also visited with companies with many locations spread all over town. Some brokerages are stuck with long terms leases, others own the buildings – but all feel the need to somehow consolidate these holdings, shrink down and rethink their strategy.
Overall, it was hard not to notice the big waste of space and many empty cubicles and not view them as they are – black holes sucking green matter right out of their wallets.
The longer this continues, the harder it will be for these firms to correct themselves.
IN 2004, I attended a RISMedia conference with my tablet computer and dashboard e-signature software in hand. While in the audience I asked the panel of Broker CEO’s (Dottie Herman, Lennox Scott, others) if they saw brokerages continuing to grow their sq footage as they have been or resizing down into small offices that offer hoteling and paperless solutions.
They saw palaces in their future. And snickered at the notion of paperless.
At the time I thought that odd considering this panel, led by Stefan Swanepoel, included his presentation illustrating the history of real estate with all its cyclic ebb and flows which are so richly ingrained in real estate’s past.
They did not.
Side note: That same year, Brian and I put together an analysis/idea which we presented to the SoCal NRT group regarding this very issue. Betty Graham and her crew took the baton and launched this – 2005. I think they and others should have done this all over the country.
http://www.youtube.com/watch?v=KrViEmbEX7k
Today’s brokerages did not pay attention to their own knowledge. They disregarded their own data. And the reality that history will repeat itself.
They occupy Neverland Ranches. Many are in default.
The future brokerage, I think, will proceed based on something other than ego, flashing faux wealth and tunnel vision.
[...] « There is no Web 2.0 bubble – and real estate technology ain’t what it used to be Repositioning for the future [...]
Thank you for your well-articulated summary of what faces the industry going forward. As the owner of my own small, independent brokerage, this helps me think about the things I’m doing right, and the things I need to do better.
I apologize for bringing up such a trivial detail in the wake of a post of this magnitude: your twitter username link has a typo: it points to the non-existent 100wattconsulting
@Kathleen. It’s certainly not trivial. When I posted this, it was late and I was operating on only 100watts!
I’ll fix now.
As for what you are thinking through – consider your brand the hub of wheel. Consider every agent, every email, every signature file, every promise, every everything that comes from it a spoke that serves to connect your hub to the tire that is the consumer. If one spoke is wobbly, doesn’t fit. etc., you jeopardize whatever it is that wheel is carrying. In this case, your brokerage.
marc
Nicolai -
Since you’ve reviewed thousands of brokerage financials, what % of a broker’s expenses is taken up by facilities cost (occupancy costs for office space)? The now-outdated RealTrends Broker Performance study had leasing costs at single-digit % of GCI from what I remember.
I don’t think that’s going to be the solution, frankly, when 100% agent split models are taking over the industry.
But I may have bad data on this one. Can you supply us with better data points on occupancy expenses, expressed as % of GCI, that the average brokerage spends?
Thanks,
-rsh
Marc, These are exciting times. As always, another thought provoking article on where our industry is heading.
Keep your promises is really key to any brokerage of the future, the consumer will demand it.
@Rob -
If I start with the RealTrends study you cite (which was based on ’07 data)and work in a few assumptions, my best national estimate is that we’re now at about 10% of GCI, possibly higher. The more telling metric, at least I think, is that this would represent about 1/3 of the company dollar (or gross profit), which is a more important number for the broker to measure off of.
If my estimates are right, this percentage has probably gone from +/- 25% of company dollar to +/- 33% in little over one year.
I have some other thoughts but don’t want to steal our own thunder (if that’s possible) as we’re putting the final touches on our take on the topic that we’ll write about really soon.
Great article! I was just telling myself that the setbacks we are experiencing are not a bad thing. This is the time to re-adjust, research, explore and look to how the brokerage can be better in so many ways. Delay is not a bad word-I started my own little brokerage a couple of months ago and am already getting ready to launch a new site with loads of consumer information, of course, it will be decisive content after much deliberation. I believe being tech savvy is half the battle. Thanks for the inspiration.
[...] Marc Davison has a two part series I’d recommend – Part 1: New brokerage model & Part 2: Repositioning for the future [...]
I agree with the brand strategy you're proposing. Only when we answer the question of what is right for the customer will we also solve what is right for the broker and agent.
In my humble opinion, then, an overriding question for the industry is how can this strategy be realized when the traditional revenue drivers are under constant attack? Even when the current challenges of fewer transactions and lower sales prices are in our past – whenever that day comes – the average brokerage will still be faced with ever-shrinking broker commission rates and ever-increasing splits. Most brokers have already cut costs to the bone.
The one major cost area left, for most, is office space.
Somehow, I believe, this ties into the overall picture. The rebirth must involve a rethinking of space.