Over the past two years most brokers have grown to understand and appreciate the need to transition their operations from the traditional “agent centric” configuration to the contemporary “consumer centric” philosophy. Today the brokerage community is working hard to understand just what being consumer centric entails.
Brokers seem to understand the need to create positive customer experiences. Likewise they understand the importance of creating an extraordinary brokerage value proposition that can command the very highest of commission revenues. These of course are two of the easier elements of the consumer centric formula. What the experience and value proposition challenges have in common is the fact that they both involve tasks that brokers can do internally to prepare their brokerages to be consumer centric.
The third task on the journey to creating a consumer centric brokerage involves an external technique called “value calculus.” This idea was first developed by strategist Michael Silverstein in his book Treasure Hunt (Boston Consulting Group, 2006).
The basis of “value calculus” lies in the evolving American consumer market environment. At the risk of over simplification it can be said that the civic generation generally lived a fairly frugal life style Even civics families who had money tended to save it for a “rainy day” elected instead to watch each expenditure to ensure that they would not run out of resources and find themselves in the same situation many of their parents fell into during the depression. Prudent expenditures were the rule of the day, luxuries were few and far between and toys were considered irresponsible.
The Boomer generation rejected frugality in grand style. This generation fielded not one but two bread winners. Children were delayed until financial statements reached acceptable levels and conspicuous consumption became the rule of the day. The Boomers invented the multi thousand-dollar mortgage payment. Family values for the Boomers had more to do with trade in prices for BMWs than time spent with the family. For the Boomers luxuries became necessities and toys became expectations. Boomers wanted it all and were willing to do whatever it took to get it. Years of high economic growth provided funding and inspiration.
The “X” generation was born into a significantly different place in history and accordingly developed a vastly different philosophy relative to financial security and expenditures. Earlier in their careers it became obvious that they would probably not have the incomes that Boomers enjoyed. Part of this was by the increasingly popular choice to have one parent stay home to raise the children. An era of corporate downsizing meant that job security had become a fantasy. In short this generation is on course to live a higher quality life with less resources.
It is at this point that the concept of value calculus was born. Here was a generation that still wanted it all but was not going to be able to afford it. Choices were going to have to be made. The concepts of trading up, trading down and trading off came into play. How the generation spent its money became a matter of balancing priorities, emotions and aspirations. This generation became the first in history that had to balance the emotions of wanting it all with the realities and disciplines of wanting to be safe and responsible. The process through which this decision making is controlled is call “value calculus.” It is an internal decision making formula that governs the expenditure of billion and billions of consumer spending in today’s market place.
Understanding value calculus and its process will be critical for any brokerage that hopes to work successfully and profitably with today’s consumer.
Conflicting emotions control the value calculus process. Some consumers are driven by a need to be safe and secure, others by a need to protect their families, still others by a need to be social and still others by a need to feel good about their lives. In most cases some combination of these emotional states will combine to control the decision making process.
From the perspective of the real estate professional “value calculus” constitutes a serious roadblock to the traditional “agent” centric approach to customer service. Today’s consumer is much less likely to fall victim to the type of institutional sales “hype” or manipulation taught by some of the leading industry coaches. While it may seem to the agent that this consumer needs help making up their mind, the introduction of information and pitches that either violate or are inconsistent the consumer’s value set can be dangerous. In other words, the consumer may be having a hard time resolving their own values conflicts but they will clearly reject any attempt by another party to introduce inconsistent value statements to their value calculus formula.
A good example can be found in attempts to motivate buyers and sellers through the argument that the current market environment has created a positive financial opportunity to invest in real estate. This argument will only resonate with a consumer for whom a good deal is the driving force. A consumer who is focused on providing a safe environment for their children or sees a first home as the logical next step for their young family will be turned off by the suggestion that economics would play a commanding role in the “emotional” house buying decision. Not unlike deciding not to provide the same children with a medicine unless it can be purchase cheaply.
The relevance of all of this to the brokerage is simple. Providing great demonstrable value and superb consumer experiences (largely internal tasks) is the first step to consumer centricity. In the second step brokers must ensure that their sales team is first, taking the time to discover how the customer’s value calculus is effecting their real estate decision making process at any given time during the transaction and secondly, that those agents and team members who are responsible for delivering the sales or buying services provide services that are consistent with, as opposed to in conflict with, the consumer’s value calculus. These objectives are all about brokerage wide system, training, monitoring and consumer feedback.
