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As today’s real
estate brokerage advances its journey into the new brokerage business model, one
of the most complex challenges it will face will be the transition of all or
part of its traditional compensation model.
Re-engineering the one size fits all “bundled services” commission
based model into a contemporary “unbundled” menu driven unit priced system
requires careful attention to cultural, accounting and operations details. Few will venture
down this road without at least a cursory stop at the “why do we have to do
this?” discussion. While the
reasons for the transition will vary from market to market and from company to
company there are certain factors that have become universal. In most cases this discussion should start with an
understanding that the present system was not delivered on a tablet from on high
but rather evolved from market factors quite different from those that are
currently taking control of the real estate market.
For most of the
past twenty-five years the North American real estate marketing system has been
provider centric. That is to say
that the majority of the power was vested in those who delivered services as
opposed to those who received them and accordingly the system was tilted in
their favor. Sellers signing a
listing agreement were not given a list of things that would definitely happen
but rather were told that whatever services were required to reach the objective
of selling the listed property would be provided.
The services
actually rendered in any specific transaction varied widely within any given
market and even within any given company because agents were empowered to make
all marketing decisions based upon their interpretation of what was necessary
and appropriate. Regardless of services provided the cost to the consumer
remained constant. It was
universally accepted by the service provider and generally understood by the
consumer that the property successfully marketed would have to pay for the
marketing costs incurred by the property that didn’t sell. In understanding
the success of this system it is important to note that the service provider
was, throughout this period, in control of all of the information necessary to
make informed decisions regarding the marketing process.
This informational vulnerability was probably critical to maintaining the
pricing system. Without such information even the most empowered consumer was
unable to make informed decisions regarding the process. Today’s real
estate marketplace presents a remarkably different environment for the
consideration of the pricing issue. Over
the past three years changing economics, new sources of competition, evolving
informational technologies and the ever-increasing profile of the Internet has
significantly impacted the real estate industry.
These factors have combined to create a new market equation.
The most immediate impact of this chemistry has been a significant shift
in the traditional balance of power. Nowhere is this
shift more obvious than in the increased power of the real estate consumer.
Empowered by information gained from new marketing options, the
“publicization” of the listing inventory and a tidal wave of “insider”
consumer information today’s real estate consumer is a much more powerful and
informed force in the marketplace. It
is the exercise of this new empowerment that is driving much of the demand for
menu driven real estate services. The Internet
empowered consumer is not the only force that is contributing to the new
brokerage business model. The
record setting real estate boom of the past four years has produced another
realty. Faced with declining
profits brokers have had to come to grips with the fact that their traditional
business model may no longer be functional.
While agents have enjoyed record incomes during this period the same
cannot be said about brokerages. Across the
industry brokers who “get it” now understand that their future business
success will depend upon building direct customer relationships and revenue
models that recognize “consumer centricity” and the need for long-term
relationships and service programs that address the entire property ownership
cycle. Under this concept services
delivered both before and after the closing ceremony will be carefully
identified and quality delivered. Over the next
year some combination of the factors discussed above will cause most successful
brokerages to begin unbundling their services.
Most will attempt to do so by introducing a new marketing track that will
run parallel to their traditional offering. While the specific menu of each brokerage will vary depending
upon a number of factors, the onset of the overall process must begin with a the
simple step of creating the unique customer experience that will become the
company’s marketing niche’. This
unique set of services will become the basis of the company’s branding
program. Combining the
ideal set of services to create the perfect consumer experience is something the
best agents within each company do all the time. Unfortunately a significant
percentage of customers may not be fortunate enough to encounter such a high
standard of practice. The
difference in this case is that with an unbundled system the consumer is able to
view the menu and will be empowered to select the service or combination of
services that most closely fit their marketing needs. At the same time, the brokerage service representative can
evolve into a coach whose advice becomes essential in picking the service
package that will affect the perfect result. A successful
service menu will cover the entire spectrum of brokerage services.
The menu should present services on a continuum that begins upon the
initial contact prior to listing or seller needs assessment and continues
through the entire spectrum of home ownership.
The menu should include “value packs” which are combinations of
services frequently used by consumers to achieve certain results.
The menu design should pay strict attention to both customer needs and
broker profitability. Buyer and
seller assist packages should be included to allow the customer to access lower
intensity services at the onset. Experience
suggests that a satisfactory interaction at this level will generally lead to a
more intensive service level as the process continues.
Rather than a quick sell program that leads to a listing that may net the
broker two hundred and fifty dollars in profit the design should aim for a long
term relationship that builds an ongoing relationship and several thousand
dollars in profits over a several year period.
Often the profit potential of these “assist” packages alone exceeds
the profit potentials of the traditional listing. Although consumer
satisfaction and broker profitability are the key components of a successful
menu program, effective communications and efficient delivery also play a
crucial role. Transaction
management is essential to the delivery process.
Both the consumer and the brokerage must be able to track the performance
and impact of each service unit as it is delivered. The unbundling
process begins with the brokerage identifying managers and agents within its
ranks who understand this new environment and are willing to work within its
dynamic. The second step involves
menu design and branded packaging. Most
brokerages will find that a successful test will require segregating the managed
transaction from the traditional track. Combining this team approach with the new “customer for
life” relationship will provide the company with a predictable and accountable
track into the new business model. The decision to
offer an unbundled real estate service menu is an important step on the road to
a successful future in the new real estate transaction.
It is an idea whose time has arrived. |
