While it is true that a hot market provides both brokers and agents with a sense of success and productivity, it is also true that its organized chaos is masking many of the realities of the new market. In many parts of the country this year’s hot market is very different from years past. Those whose focus is upon the traditional measures of market share, commission rates and days on market may well be missing a whole new set of statistics that much more accurately reflect the rapidly changing rules of competition in today’s real estate marketplace. The concept of “competiveness” is now a critical element in the industry’s success formula.
*How did the industry get to this new place in the sun? Part of the explanation lies in the fact that more than 60 percent of the industry’s production is now under the control of investor owned firms. For these firms the traditional concepts of market share and agent count can no longer be used as an alternative to the more critical concepts of profitability and return on investment.
A host of new brokerage business models has further contributed to this change in competitive styles. Freedom shops, discount firms, entry only, flat fee, core service and online lead generation companies are all making a unique contribution to creating an increasingly complex and competitive marketplace.
Today’s leading edge firms are using listing management, pricing tactics, customer value propositions, selective compensation, variable cooperation and Internet lead strategies to differentiate themselves from the competition.
*While the perfect combination of these elements has probably not yet been determined; what is clear is that in today’s super competitive market only firms with a fierce sense of competitiveness are likely to win.
The focus of this discussion is on one simple question. What is your firm doing to define and sharpen its competitive advantage?
The following questions will provide a starting point for conducting competitive evaluation:
• Are your executives, managers and agents thinking and executing like a team or merely following the “them and us” mind games of the traditional brokerage business model? There is no way to win the external game if you can’t win the internal one.
• Has your brokerage team reached an understanding that they are dealing with a whole new real estate consumer? Has your team developed and is your brokerage delivering a unique consumer experience? Treating today’s consumer as if they were their parents is a sure formula for disaster.
• This year more than 23 percent of business volume will come from the Internet and that percentage will grow significantly over the next few years. What Internet strategy is your firm following for success in this highly competitive space? What program ratio are you following to ensure that your team is developing in-house lead generation and management skills as well as third party lead purchasing and harvesting competencies?
• What is your firm’s plan with respect to its business model? Have you asked yourself the simple question, “What business are we in?” There is no clear future in the industry for the traditional business model. Migrating to one of the new models is job number one for many contemporary executives.
• Is your firm carefully tracking the changing competitive environment within your marketplace? Don’t be the last company on the block to rise to the challenge of the new competitiveness. Firms that make this discovery too late in the game may have little choice but to enter into a destructive “price point” business strategy.
• Has your firm considered initiating a listing management program? While listing management policies seem radical in the face of the traditional “share the listings” approach, they are both responsive to current consumer demands and can be very positive contributors to profitability.
Some combination of these six internal inquiries will provide the ultimate formula for your firm’s new competitive advantage.
*In executing your new competitive strategies be very careful not to violate statutes and regulations regarding anti-trust behaviors under either federal or state laws. Another feature that is distinctive about this year’s marketplace is a historic level of anti-trust and fair housing enforcement. Do not fall prey to this threat. What your brokerage does to sharpen its competitive edge should be both proprietary and unique to you and your team.
There is a new business competency out there. It is the competency of “competiveness”. It is a skill set that will mark the success of those brokerages that will control the new American real estate market. Get in the game, set your outcome mark, benchmark your success and enjoy the new marketplace.
Remember that age old business cliché; “If you aren’t the lead dog the view never changes.”
