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As we move into the new millennium, there is much
discussion about the future of the real estate business. Unfortunately,
the crystal ball is cloudy and one must resort to future predictions
based on a combination of observation, intuition, and conversations with
others in the business. Whether this approach results in accurate
predictions remains to be seen, but at the very least, it should spark
thoughtful discussion and debate about what's ahead for the brokerage
business as it races toward the turn of the century. Here are some ways
our business may be changing. 1. From high touch to high tech and high touch Up until now, technology has been added value.
Properly used, it has been a way to increase productivity and
differentiate oneself in the marketplace; but it has been an option.
Today it is a necessary tool. The consumer is beginning to utilize
technology to access information about real estate (and most everything
else!) and the expectation is that the real estate professional
has and uses a full technological toolbox. In the last half of 1997,
nearly one in five of all homebuyers reported using the Internet to
screen properties to visit. Today, you can bet the percentage is even
higher. This doesn't mean that the high touch aspects of
working with buyers and sellers have lost value. It means that the best
real estate professionals are combining technological savvy and services
with high touch personal service. Technology alone or people skills
without tech tools won't cut it in today's competitive marketplace. 2. From agent task structure to unbundled tasks In yesterday's industry structure, the agents
performed all the tasks associated with delivering the brokerage service
to the consumer. Today, brokers are wondering if some of those tasks
should be shifted off the agents' do list and performed instead at the
company level. For instance, brokers are implementing call coordinator
programs and finding that the prospect call capture rate goes up with
professional telemarketers handling the phones. This leads to using
those same phone experts to make outgoing prospecting calls, with the
resulting business being sold to agents for a referral fee. An aggressive telemarketing operation may then grow
to include a company direct mail effort using sophisticated, targeted
databases and past client and customer lists. Combine these efforts with
ongoing affinity marketing and relocation related corporate and referral
business and the emphasis on agent personal marketing dwindles. Team this with the rise of closing coordinators who
assume responsibility for taking the contract and then guiding and
tracking it through closing. This generally has the benefits of reducing
contract fall-out and freeing salespeople to do what they should do
best., SELL. Productivity
should go up. Charging agents a fee for this service is reasonable. They
are freed to do more business and the company has income to offset the
costs of providing the service. This realignment or unbundling of tasks may have
broad implications. Rather than one provider of all service, a firm now
has employees who perform the prospecting function and employees who
handle contract to closing tasks. These employees are probably salaried
with some sort of incentive bonus. The independent contractor
salesperson does the selling. Will there be an inclination to rethink
the salesperson's independent status and commission compensation? Will
we see salaried employee salespeople? Perhaps. 3. From old commission structure to compensation
experimentation As brokers unbundle agent tasks and look for ways
to recapture profitability, we are beginning to see experimentation with
agent compensation and a shift toward charging agents for more things.
It's too early to tell what might evolve in the way of compensation, but
expect more testing of salaried agents. There are already a
number of firms testing the salaried agent concept. Is this the wave of
the future? It's too soon to tell but, I'd bet money that in five years
a hefty percentage of agents will be on salary. 4. From a "go it alone" philosophy to
strategic partnering and more diversification Yesterday, brokers had the
luxury of just having to deal with the brokerage business. Today, profit
margins are tight, the market is competitive, and the consumer is
increasingly interested in convenience. As a result, cross selling a
variety of products and services makes more sense than ever. The latest
research by the National Association of Realtors revealed that 66
percent of recent homebuyers reported that the next time they buy a
home, they'll select a brokerage company based on the availability of
one-stop-shopping for a variety of products and services. This is not the same marketplace that Sears and
Merrill Lynch entered more than a decade ago with their cross-selling
attempts. This is a new world, one where diversification is a viable
strategy and where brokers are talking about being in the homeownership
business. We've gone through the learning process with cross
selling and have defined the key success factors. The motivation to
diversify is also high. When your core business isn't very profitable,
adding other potential profit centers becomes an attractive strategy. Coldwell Banker's recent introduction of a Concierge
Service offering consumers an entire spectrum of homeownership
services and products is causing other firms to consider the value of
diversifying and to feel some pressure to act quickly to compete. Does
this mean agents will be asked to sell these added products and
services. Probably not. Instead agents will introduce their buyers and
sellers to customer service experts who will offer a list of
homeownership-related products and services from suppliers who have been
screened by the brokerage firm. 5. From commission pricing to pricing innovation
The consumer is starting to ask, "Am I getting
my money's worth?" and questioning whether the service we provide
is worth the generally expected six or seven percent commission. In
addition, some brokers are attempting to steal market share and perhaps
tap into the FSBO niche by discounting. Pressures from the consumer and
from the competition can be expected to drive brokers to experiment with
new pricing approaches as well as new services to add value and justify
costs. This will accelerate the move toward changing agent
compensation, too. Fee for service, performance-based fees, consulting
charges are all approaches we're hearing brokers talk about as possible
options for pricing brokerage services. If the pricing structure
changes, brokers will also have to look for new ways to pay agents. 6. From mass marketing to database marketing The new concepts of one-to-one marketing are making
their way into real estate. The inefficiencies of mass marketing
supported the development of agent personal promotion to farm areas and
centers of influence. Today, many believe that kind of targeting can be
done effectively and more efficiently at the company level (and the
resulting business referred to agents). In the future, brokers may stop
pushing agents to develop effective farming and follow-up programs.
Instead, those tasks will be performed centrally. The ability to target
and the emergence of interactive and addressable media will allow
companies to build Realtor-for-life relationships between the brokerage
firm and the consumer. This will be aided by the amount of information
available about each consumer. 7. From market share to "share of customer" Building market share is important, but watch for
the new recognition that a critical part of capturing market share is
the ability to capture a high "share of customer". This simply
means that rather than taking the view that there's another customer
around the corner, one attempts to maximize the business from each
customer one deals with. Not only do you want a customer's current
transaction, you want their future business, and the real estate
related (read cross-selling) business. In addition, you want the
additional potential business that customer has control or influence
over. For instance, you want their children's business, their parents'
business, the business of their co-workers, their neighbors, and their
acquaintances. You want them to have such a strong relationship with and
loyalty to your firm that they will be out in the market prospecting for
you. These kinds of relationships come only from hard work, quality
service, and constant follow-up. 8. From "do the deal" to quality
service To capture share of customer, the industry mentality must change from one of "just close the deal" to one of quality service. The idea that the deal is the objective must be replaced by the concept that a satisfied consumer is the real bottom line. This shift in mindset will actually result in more business. 9. From the old delivery system to an
information-driven delivery system (with an entertainment component!) We have moved from listing information index cards
to MLS books to computers to the Internet! The source of information
marches on and guess what? The consumer wants and is gaining access to
information that was strictly in the Realtors' domain. Although we are
no longer the only source of home availability information, comparable
data, mortgage information, and other transaction related information,
we can remain an important source. Teaming information with one stop
shopping service is probably a workable strategy. We must, however, remember that the consumer wants
more than just good information, they want it presented in an easy to
use, interesting, entertaining way. Tomorrow's buyers are the MTV
generation. They'll tune in the information source that they perceive as
accurate, complete, and FUN. You cannot be in just the information
business, you have to be in INFO-TAINMENT! And you thought it was
complex before! 10. From personal promotion to building and
leveraging the firm's brand nameAs the broker begins to assume more
of the prospecting function, it becomes more important to build the
firm's visibility in the market. In fact, the experience of other
industries tells us that brand recognition leads to a consumer's
propensity to do business with that brand. What's more, if a firm is
offering a variety of products and services under one brand or through
brand relationships, it is important to promote the brand. This will
tend to lessen the emphasis on personal promotion by the agent. Personal promotion will also become less effective
as more affinity groups (such as USAA and Costco) spring up and
consumers may forgo working with agents they've used in the past in
order to take advantage of some affinity benefit like frequent flyer
miles or rebated commissions (where they're legal). Again, the focus is
shifting to the firm — its brand strength, its product line, and its
affinity relationships and business development efforts. Times are changing. This writer believes the industry is on the cusp of reinventing itself. Where it will be in ten years, who knows? But, it does seem safe to predict that we have a period of innovation and experimentation ahead as we try to respond to the consumers' changing demands, technology's rapid acceptance, and our own desires for profitability. Hang on, the ride may be rough. It certainly won't be dull. |
