by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
Housing Panic (housingpanic.blogspot.com) ALMOST got this one right.
I frequent Activerain.com; I cut my blogging teeth there and have made many friends and business connections through Activerain.com. Though I criticize the site frequently, I criticize it because I love the sense of community there and want it to thrive.
New Bloodhound, Barry Cunningham, hosted Broker Bryant (see Bloodhound interview here) on RealEstateRadioUSA, Tuesday. The topic was defending the fees you charge your customers. The interview is pretty interesting and the Barrys couldn’t quite get Broker Bryant to articulate it the way they might have liked. I’m lucky; I know the Barrys and listen to RealEstateRadioUSA. I think they were looking for a practitioner to properly define the services he offers and “dollarize” the offering- Bryant didn’t do that.
Broker Bryant defended his position, on his Active Rain web log, and tried to flip the question around to the Barrys. I think Bryant walked in unprepared for the interview. He usually does an excellent job defining his value, in public, and has hundreds of happy clients who comment on his ActiveRain web log. I don’t think the Barrys wanted Bryant to line-item his “costs” as much as they wanted him to line-item the value the costs incurred bring to the consumer. The Barrys are quite meticulous about defining your value to a consumer; I remember that on each and every customer call, now.
Here’s where the Housing Panic boys ALMOST got it right. They exposed a featured post, on Active Rain, about how fees are split. REALTOR Kim Carpenter did a great job with graphics explaining how she greases lots of people to get a house sold. That’s EXACTLY what a consumer DOESN’T WANT TO HEAR. I don’t care who YOU have to pay to sell my house, I care how much I pay to get my house sold. Here’s Kim’s conclusion:
So, there it is! Please don’t ask me to cut my commission. It has been cut! FOUR times, it has been cut! I promise I will give you everything I’ve got in order to sell your home! I want it to sell as much as you do! That is how I make a living – I don’t get paid a dime until I effectively market and sell your home!!!
The Housing Panic crew tried to make this a commoditization issue. They likened her explanation to an economics problem by giving us a rudimentary lesson in elasticity of demand. The problem is that Housing Panic is right. If you don’t quantify your value to the consumer and explain that they are SAVING money, over the long term, by employing you for your expertise…you are JUST A COMMODITY.
Jeffrey Fox, author of the “Little Book” series, defines the dollarization discipline here:
The Dollarization Discipline shows organizations and marketers how to effectively communicate the economic value created by their products and services. Too often, when companies compete using conventional sales and marketing approaches, they force customers to make financial decisions (how much to spend), based on non-financial arguments (product features and benefits). On this playing field, the company that can show true financial advantage in real dollars and cents wins every time. This book offers a step-by-step strategy for doing just that.
Every day, good companies suffer because they create value for customers but aren’t able to keep their fair share. This is because most marketers can’t fully explain the value customers get from their products, and the argument falls to the lowest common denominator-price. The solution is an approach to sales and marketing that goes beyond articulating features and benefits, but calculates the monetary value a customer receives from a product or service. This enables the seller to price the product as a true reflection of its value-and also let’s the seller prove it to the customer!
I talk about it, on Active Rain, here and here. The posts are “members only” so you must join ActiveRain.com to see them. It’s free and you can join right here.
There’s lot’s of room for practitioners, real estate brokerage and mortgage brokerage, in the high end of the fee schedule. The problem? The two words “That’s customary” just ain’t gonna cut it with the consumers any more.
Barry Cunningham says:
“If you don’t quantify your value to the consumer and explain that they are SAVING money, over the long term, by employing you for your expertise…you are JUST A COMMODITY.”
By boy is getting absolutely badgered over on Active Rain and many of the respondents had not even listened to the interview. A blind charge up the hill to rescue a comrade in arms who just could not muster the right words.
Unprepared? I don’t think so. I thnk it’s more that things have been such that for so long most agents have not had to conduct business,,the way business is to be conducted and now the words just don’t come to them in a way a veteran agent’s words should come.
Joe Montana was mentioned and I venture to say his contract talks were pretty simple. Hey Joe..why should I pay you this?
1. I throw touchdowns
2. I throw less interceptions (mistakes)
3. My team supports me and I they
4. I put butts in the seats (concessions, parking, merch)
5. You want me in the clutch and I perform
6. I throw touchdowns
7. Jerry Rice can’t catch if I don’t deliver
8. I Win!…and I throw touchdowns (did I say that)
Now pay me or else.
Pretty compelling argument. It states value and the intangible (#5) becomes even MORe valuable.
Bryant missed it, and many of the AR faithful are oblivious to it.
When we began this entire plan..it was to take Jeffrey Fox’s Dollarization Discipline and see if Realtors had any clue about this. Sadly Fox, Godin and others do not seem to tickle the fancy of most real estate agents. Unfortunately that may well end up being the demise for many.
Brian..you are astute and you have exposed us and that which was center to our plan!
March 20, 2008 — 9:32 am
monika says:
It saddens me that so many REALTORS don’t get that they should define their value. Saying that I’m worth it, that I’m an expert..blah-blah does not cut it in my market area. I do a lot of teaching in my state and I teach a lot of newer agents. I work with them, helping them see and hopefully define their value. When we start out they have a hard time getting beyond the usual list of what they do. I keep pushing for the “and then what else do you do” and the “what is that worth” and most importantly how is that a benefit to the person that is paying you. Hopefully I’ve succeed and they understand that they are worth what they charge and why. And if they don’t and they can’t convince themselves that they are worth it…maybe they should seriously think about what they are doing for a living.
March 20, 2008 — 6:55 pm
Brian Brady says:
Barry and Monika,
Experienced REALTORS and originators have the LUXURY of being able to say, “pay me for my performance or else”. They can because they’ve “thrown enough touchdowns”.
However…and it’s a big however…80% of the practitioners must define their value; dollarization is one way to do it.
Moving forward…wouldn’t it be good to be able to say “here’s why I’m worth every penny” every time you’re asked?
March 20, 2008 — 7:59 pm
Allen Butler says:
I’ve had some good training on this issue over the years. It’s real easy to demonstrate that if you list your home with me, you will:
1.)Actually get it sold.
2.)Earn 3-5% more money than with the board average.
3.)Sell an average of 30 days faster than the board avg.
What this means to the consumer is that they will make significantly more money, in less time, if they list with me. If you get poor analysis of the market by an inferior agent, you may not sell for quite awhile, if at all. That’s plenty expensive. If I get you 3-5% more than the average agent, that’s like getting my tremendous service for free, plus some! Also, since I sell it faster than the average agent, you make one less house payment on a home you no longer want to pay for.
I think it really boils down to being able to clearly articulate the difference between features and benefits. The points above are clear benefits of listing your home with me. The features, on the other hand, are myriad, and the citing of them leads to being pigeon-holed and itemized. It’s not about the features. It’s about the benefits. It’s absolutely the track record that counts!
Allen
March 20, 2008 — 11:33 pm
monika says:
Being able to say “here’s why I’m worth every penny” every time they’re asked…is hopefully what I teach the new agents in my classes. Some get it some don’t. Problem is educating the owner brokers who dictate what their agents charge. I know when I was new, many years go, I was told this is what you charge. There was no why or how come…just this is it. I had to learn to dollarization it.
March 21, 2008 — 4:15 am
Jeff Brown says:
My clients tell me my value isn’t just that I’ve increased their net worth beyond what they thought possible. It’s because I stick with them, making the entire process as seamless as possible — including the periods in which they’re not buying or selling real estate.
In other words, I’m with them come hell or high water.
They’ve been perceiving value in that proposition for decades now.
March 21, 2008 — 9:40 am
monika says:
I’m there come hell or high water… and that is worth a lot. Jeff…my cell phone is never off and my clients know they can talk to me even when I on vacation. If they need me I’m there no matter what. Like your clients mine perceive value in that as well.
March 21, 2008 — 5:36 pm
Bawldguy Talking says:
Sorry for the delay, Monika, but I just got off the phone with a very cool lady from Oregon. 🙂
I’m not available during the rare vacations we take though.
March 21, 2008 — 8:16 pm
monika says:
We’re lucky enough to own a big motor home so we try and get away as often as we can. We have a office set up in it so we can play and work at the same time. So unless I leave the country, I’m usually very reachable.
March 22, 2008 — 4:42 pm
Sue says:
I think having a track record certainly helps in that you can show data supporting our track record. I also think its very important during your listing presentation to point out the specific activities that you do that set you apart and the benefit to the seller. The benefit to you, the benefit to you, again and again. I know some agents that base their entire listing presentation on their accomplishments, nice to know that they are successful, but I think its important to know the hows and whys so that the seller can see the benefit to them. 🙂
April 7, 2008 — 5:03 pm