4 P’s Manifesto
Join the 4 P’s Movement!
In the fall of 1963 I stood in line before a blocking sled 700 miles from home on a windswept practice field in northern Indiana. The pair of freshmen linemen in front of me were bigger, faster, and more talented than anybody I had ever played against and would both eventually go on to have NFL football careers. They also seemed undaunted by the cold mid-western chill on that gray day. I remember that moment because it was precisely then that I knew I was in over my head, at least in terms of football.
I stayed on the team all four years of school as one of those anonymous souls in all major football programs that simulate the next opponent’s plays all week during practice and only play in major routs. Like lots of students from modest backgrounds, it eventually became just a job to help get me through college. It just paid better than most (I had a full grant-in-aid) and the hours were OK if you didn’t mind getting a little beat up occasionally.
And it was interesting. In fact, I got my first real lessons in management as part of that team. That first year the head coach who had recruited me left suddenly and an “interim” coach was named from the existing staff. This guy was an older gentleman who had actually known the legendary Knute Rockne and was beloved on campus, but had no head coaching experience.
That season was a disaster. We had two wins and eight losses. I had no frame of reference to understand what had gone wrong until the new coach was hired. It was like night and day in terms of planning, organization, and motivation. There was also an emphasis on the fundamentals of blocking and tackling that had been missing the year before.
That first year under the new leadership we had nine wins and one loss and literally lost the national championship in the final quarter of the season. Two years later, my senior year, we won it.
So what’s this have to do with real estate?
I’ve been reading the musings of the real estate industry gurus during our present economic difficulties. It reminds me in many ways of that first year in school where everybody was talking hopefully, if not wistfully about returning to an era of glory. I see the same thing here, adjusting brokerage models, defending our MLS data, winning one for the Gipper! Blah, blah, blah.
Some of this stuff is downright silly. To the average real estate professional worrying about how to pay this month’s bills the discussion is abstract and pointless. The real question on the minds of most of us is what can we do now to survive? We can’t wait six months or five years for new “brokerage models” to emerge or the market to turn around.
What’s needed by most of us is some solid advice on what to do now to improve our personal effectiveness, not wait for the industry to shake itself out. It’s pretty clear that it’s time to challenge some assumptions about what we are and how we do things. It’s back to the fundamentals of blocking and tackling.
My objective is to start a conversation about how to do that with some observations based on a marketing career that stretches almost all the way back to those college days. We have to be good. There will be no more easy wins!
Residential real estate is a unique profession.
For many of us real estate wasn’t our first profession or one that we studied for in college. When we entered the industry we assumed that our brokers would have all the answers and maybe we didn’t examine what they told us too closely because if we were energetic we could earn a decent living.
What happened!? Everybody was winning! Sellers saw appreciation they could tap by selling, refinancing or taking on an home equity line. Agents were making good commissions. Brokerages were prospering by actively recruiting agents. Lenders were supplying the grease to make it all work and keeping nice fees. The economy kept growing as people tapped those equity lines and lenders kept expanding the limits of who would qualify for a loan. Everybody was happy…until, suddenly the banks couldn’t leverage anymore, sub-prime loans started defaulting and the home prices that were rising in some places purely on speculation, suddenly collapsed.
In the middle of this train wreck, it’s time to examine some of the assumptions that we bought into and develop a grass roots strategy for survival. I don’t have anything to sell you at this point and I sure don’t know all the answers, but I have some ideas. If any of what I have to offer below makes sense I hope you will join the dialogue and the effort to redefine this industry at the agent level where the action takes placel.
My career in marketing spans almost 35 years but only the last 5 or so have been in real estate. Like almost everybody else, I drank the kool aid, and didn’t question what I was told about how the industry operated. I had some nagging concerns but they weren’t enough to cause me to change course as long as things were going well.
Let’s start with a really basic question. “What the hell are we?”
Sometimes we call ourselves “agents” and in most places we do have limited agency relationships with fiduciary responsibilities for our clients, but in truth few of us can or should act independently on behalf of our clients in all but relatively superficial ways.
Sometimes we call ourselves brokers. The dictionary defines a broker as a mediator or intermediary between buyers and sellers. But we seldom are involved in “making the market” for home buying and selling the way a securities broker would for stocks.
Sometimes we call ourselves salespeople but what we have been taught to do primarily is sell ourselves, not real estate. Most of our marketing efforts go into competing with other agents for clients.
Sometimes we try to position ourselves as consultants or counselors but seldom do we charge directly for our advice like a business consultant or a lawyer would do.
So what are we really, the foot soldiers in this million person army that actually does the leg work in the industry?
Many of us are women and mothers and chose real estate as a career because it adapted well to the ebb and flow of child rearing and managing a household.
For many the profession has also been appealing because it isn’t associated with “hard sell.” On the contrary, nurturing tendencies and and need to be a self starter fit the profession well. It’s no accident that there is a lot higher percentage of females in real estate than in car sales.
The answer to the question of what we are exactly won’t emerge completely until we explore what is different about today that requires this assessment.
Right now the easiest job in the world is being a buyer’s agent.
There are lots of attractive home choices and buyers have more negotiating leverage than they have had in decades. The hard part is getting the job! There are fewer qualified buyers out there and more and more agents are competing aggressively for them.
Is the answer redoubling our efforts to generate buyer leads? Do we need a better website? Do we need to learn SEO (search engine optimization) and buy into Google Adwords? Do we need to join more civic groups and give our cards and brochures to waiters that serve us and the clerks at the grocery store that check us out? Do we need to buy leads from online aggregators? Do we demand that our brokers provide more and better leads? What prices should we pay for these activities and leads? Good questions all. Lead generation will always be important but it is not the real problem in the current environment.
Following discussions about the future of real estate I’m often left with the impression that our situation is similar to what critics of the military often charge, that is, that armies traditionally prepare to fight the last war, not the next war. According to some things I’ve read, we’re still developing weapons systems that were conceived when the Soviet Union was our primary threat.
As professional real estate people our “threat” is different than it was just a year or two ago. We will not die in battle like soldiers but we might have to abandon a profession we enjoy because we were not prepared by our leaders for the new reality or a new battleground in real estate.
Unlike soldiers we don’t have to blindly follow our leaders and are free to find our own solutions if they can’t deliver. This can be both scary and empowering.
But who is going to lead such a grass roots revival of the real estate profession? Maybe it will be NAR and the local associations but I don’t think so, especially if their primary focus is to find shelter for the industry through exclusion of potential competitors such as banks…as if banks didn’t have enough on their plates at the moment.
Will it be the real estate commissions at the state level. Of course not. These were established to protect the consumer, not the industry or the professionals in it.
Will it be the developers of all the designations we collectively like to put behind our names? Maybe, if they define the challenge correctly but I haven’t seen any evidence of that.
I believe that the change will come about from the professionals that are serving clients. A new leadership must emerge. It is the average practitioner who has the most at stake if new leadership doesn’t emerge to challenge the status quo. That’s you and me. We are the ones that have everything to lose when our traditional leaders fail us. A few enlightened brokers will join our ranks but way too many are too invested in the traditional ways of doing things, both literally and figuratively.
So how do we do it?
To me the basic shift in the battlefield is this..there are more homes for sale than there are buyers. This is a complete reversal from the way markets were in most areas of the country a little more than a year ago. We should assume that for the next several years at least, this imbalance will remain. This means that the competition among home sellers is much more intense.
The NEED is for better marketing of homes.
In the short term, this will not change the imbalance. But if we gain some marketing sophistication and serve our listing clients better it will help us survive today and prosper when the pendulum swings back…if it does…during our careers.
Maybe…just maybe, better marketing can reignite the American dream of home ownership that for many victims of the sub-prime crisis has turned into a nightmare. Maybe owning a home is not right for everyone. Maybe not everyone should stretch to buy super-sized, energy wasting McMansions. But we must not throw the baby out with the bathwater either. Home ownership stabilizes communities, creates wealth and is a worthy goal that drives progress.
I want to say again upfront I’m not trying to sell anything, at least for the time being. What I’d like to do is start a conversation about selling homes. We’ve spent so much of our time during the boom chasing clients that we forgot what we knew…if we ever knew anything…about marketing homes. My goal is to find the best tools for our current situation and become a “re-marketer” or add value by negotiating good prices for our subscribers, provide feedback to the providers and educate when necessary. In other words, be a user group for our subscribers. More about that later. Let’s get back to the first question, “What the hell are we?
My contention is that we really split our time between two roles that are much more distinct than we often realize. For any particular client we function as a buyer agent or the listing agent. Sometimes we do both for a client but the roles are totally different.
“Duh,” you say. But think about it this way. How is a business that sells products organized? There’s the CEO, of course, but unless it’s a really small company one of the most important members of the executive team is the marketing director. The marketing director will put together and execute a marketing plan for the company.
I remember distinctly going over a “marketing plan” for a home with my first mentor in real estate. It was basically a list that included things like “enter home in MLS,” “take pictures,” “print flyer,” “put up sign.” I kept waiting for the real meat because this was a list of tasks, not a plan. There was nothing there that a reasonably handy high school student with a drivers license couldn’t do. So how was that going to distinguish me if I was competing for the listing?
What I naively concluded was that you needed a real marketing plan to sell a home! What I finally realized was that in boom times you don’t. The real competition isn’t selling the home, it’s beating out the other agents to get the listing. Then, unless you really had a dog of a property, crazy clients, or committed some terrible faux pas the home would eventually sell and you would get paid.
But these are not boom times.
Getting the listing is now only part of the battle. If we ignore that fact, we’re like the army preparing for the last war, not the new one. So we need to sharpen our marketing skills and prepare our clients to compete with lots of other homes. This may require some skills and tools we don’t have or haven’t used in a while.
Even though it is unquestionably more difficult to sell a home in this environment, the first step is still getting a client. An agent that can demonstrate that they have marketing skills, improves their chance of getting listings in good times or bad.
Getting through tough times is not the only reason for developing some additional marketing expertise. Even during the boom times, sellers were beginning to question whether listing agents were really providing “added value” worth the traditional 6% commission. The so-called “discount brokers” were making in-roads because, whether we want to admit it or not, most agents were not investing much time or money in marketing homes. Many sellers were concluding, quite correctly, that if their home didn’t require any marketing, there was no reason they should pay for it.
A Real Marketing Plan for a Home.
Marketing plans are usually hung on a conceptual framework called the “marketing mix.” Traditionally the marketing mix consisted of what were known as the four P’s of marketing, product, price, place and promotion. It’s still a good way to think about a marketing plan for anything, including real estate. Let me describe each briefly and I think you will see how this concept can help develop meaningful marketing plans for homes.
The First P…Place.
In very basic economies the distribution system is very simple. A farmer produces something, say eggs, in a greater quantity than the family can use so she gathers them and takes them to a market to exchange for something else. The market is the “place” or her distribution system. The more complex the economy, the more complex the distribution system can be. In some cases, a whole series of middlemen form a distribution chain.
We are the primary distribution system for real estate. Collectively we have established practices through NAR, local associations and the 900 or so MLSs in this country. Instead of delivering the product to the buyers we bring the buyers to the product. But the real estate distribution system is undergoing some changes brought on by new technologies, market challenges and regulation. Many feel threatened by this but it is also creating opportunities to gain a competitive advantage in your marketing plan if you are willing to break from tradition.
The most important “P”….Product.
In the pizza business, Domino’s proved that you could win the marketing game with a superior distribution system when they first started delivering on a wide scale. But in real estate the product will usually be the most important element in the marketing plan. What many have failed to realize is that the product is more than bricks and mortar. The agent that can work with the owner to put together a superior package will beat out a similar structure that’s simply presented as a house.
We say that real estate is all about location, location, location. But most of us simply assume that means good, better or best. The key is understanding subtle differences and taking advantage of them in the marketing plan.
And close behind is the third P…Price
All agents are given some basic training on doing CMAs (Competitive Market Analyses), but few are really good at it or understand the implications of improper pricing. It would seem paradoxical, but pricing is more difficult but less important in two key segments of almost any market. Understanding this may give you much more flexibility in pricing than you thought possible and make your listing more competitive and provide a better net for the seller.
The fourth P…Promotion
You can tell the real veterans in our business by their abbreviations. When they learned to write ad copy they had limited space to be creative in those “little house and little head” ads that ran in the newspaper, which was in the Sunday paper where I grew up. Good copy writing is not difficult but it’s rare in our industry because for so many years it didn’t have to be very good. Everything sold eventually no matter how poor the writing or how bad the pictures.
And why is it that we keep saying how important location is and immediately forget it when we start writing copy? Even the most celebrated copywriter will not sell a home based on the copy she writes. So don’t even try. The purpose of your promotional activity is to get showings.
Most listing agents also haven’t figured out that you are promoting to two audiences. There’s the buyers and there’s the distribution channel, meaning the buyer agents, and their interests are not the same.
How do we learn this stuff?
We all remember the old saw that the best way to learn is from experience…other peoples’ experience if you can.
Other industries have gone through wrenching transformations too. Long before today’s banking crisis and even before the saving and loan crisis, our financial system faced another crisis that wasn’t self inflicted like the two mentioned.
When money market mutual funds were invented by the securities industry in the 70’s they began to suck the deposits out of banks and savings and loans at an alarming rate. The banks were helpless because they were still operating with the restrictions and protections that followed the Great Depression. Because of these regulations most marketing done by banks was pretty superficial. They had virtually no control of three of the four Ps, product, price, and place and were even limited in what and how they could advertise and promote. To attract deposits, banks would promote give-aways of all sorts for certain levels of deposits and there was endless debate about the value of “image” advertising.
As the regulations dissolved and technology advanced, banks found that they had to learn marketing in a hurry. It was in this situation that I began my marketing career. New realities in the market place then, just as now, required us to become more sophisticated. Many of the lessons I learned in my 15+ years of bank marketing have broad application to the current situation in real estate.
Marketing Homes E-Book
To entice you to join the conversation, I’ve written an e-book on the subject of marketing homes in the new environment for real estate. The get the e-book all you have to do is register and I’ll send you the e-book one chapter at a time. It is the serialized account of one agent, Marty Maven, struggles to get her new real estate career off the ground after a slow start where she had dutifully tried to do it the old way. She finally falls back on a skill set she developed working for a marketing agency applying, guess what, the 4 P’s of Marketing. And she cobbles them together with the help of a veteran agent, desperate to revive the fun of selling houses.
OK, it’s a little corny and I don’t expect you to buy into everything the e-book describes because I’m certainly not the last word on marketing. But by using the collaborative tools on 4PsRE.com I think we can create some real energy to move the marketing professionalism of our industry forward.
Register below to get the ebook about these two fictitious agents who collaborate to gain marketing sophistication and start having fun again. The title is The Evolution of Real Estate Marketing or How to Make Selling Homes Fun Again.