It Ain't All Big Hair and Cadillacs

The value chain for real-estate is usually pretty simple in linking a buyer and a seller. It could get more complicated if other roles like builder or mortgage lender are central to the process. This complexity actually creates differentiting opportunities.

Assuming that the simple value chain of buyer and seller matching and deal consumation is the primary focus then the consumer's perception of value will usually be an issue of time and price. On the seller's side, the effort the real estate agent puts into differentiating the property and targeting the right potential customers will affect the selling period and the price point.

Real estate agents are perceived as first pushing for the lowest listing price to shorten the sales cycle and minimizing their required effort. The impact on their revenue is minimal compared to the impact on the seller. If a real estate agent offers this approach with a commodity type marketing plan with minimal effort to differentiate the property then they should expect pressure on their commissions. There are too many real estate agents out there for commodity type solutions not to have this impact.

I consider a commodity type marketing effort as including a listing on the major web sites, pictures of the property, a sign out front, and one or two open houses. Anyone can do this.

Consumers are willing to pay for value based upon knowledge of the local market and the ability to create differentiating marketing plans. The foundation of good marketing is understanding the customer base. The biggest mistake real estate agents make is that they are pushing a product by showing it is available and not targeting customers to create new interest. Agents should create a target customer for homes and help sellers understand how their home aligns with the target customers. The agents should then help the home owner make the right minor improvements that will increase the value of the home to that targeted customer. By truly targeting customers they can reach customers in differentiated ways. This could include advertisements in certain locations, group newsletters, magazines, etc. All of these are the step beyond the commodity plans.

Having homeowners make minor improvements such as updating light fixtures or other low cost but differentiating features aimed at the right target customer can produce tremendous value. That is only if you know who the right target customer is.

There are lots of ways to segment customers. They include demographics, lifestyle, psychographics, etc. Whatever the segmentation approach is customers have to identify with it. In today's environment they should also have a way to opt-in to receiving messages about homes in their customer segment.

These are a few thoughts. They are based on my experience selling a house a year ago. I listed with an agent that seemed to have the most listings in the area. I thought that meant that she was a good agent trusted by lots of people. I was wrong. Every conversation was about cutting the price. She could only talk about average buyers. She did not want to think about how the special features of my house would keep nine out-of-ten people from buying it but one-out-of-ten would have to have it. I was one of those one-out-of-ten when I originally bought it. The house sold in a relatively short period of time to one of those one-out-of ten people. I also managed to maintain the price.

Another area of value is in creating realistic negotiation strategies and negotiating processes. There is much more room for creativity than what is used in the market today by most agents. It can be a differentiting skill that agents don't invest in.

Messages from Jim Uchneat (1):

RE: What does the value chain look like for the purchase and sale of real estate?
posted 1 hour ago | Reply to Jim Uchneat | Flag answer as...