On the comments to my post about Zillow-Dotloop last week, this happened:
My readers — the smartest, best informed readers in the real estate industry! I told Leslie that the answer was a post in and of itself, but as it happens, I’m heading out to California next week to talk about this precise topic with a bunch of brokers. I figured it doesn’t hurt to put some words and thoughts down on digital ink to sharpen up the concept.
So if you’re a broker, manager, or even an agent particularly concerned about Zillow, about Dotloop, about all this technology stuff happening so fast, and you’re wondering, what the value of the broker is… read on. If not, have a very nice day.
Begin the Beguine
The issue, as Matt Dollinger put it succinctly, is if the broker isn’t providing tools, technology, awards, and events, then what exactly is the value of the broker?
In fact, the three pillars of brokerage value, used in one form or another by every single brokerage and national franchise company in real estate, are Leads, Technology, and Training. I gave a presentation a while back addressing this, and I thought it might be faster to just post the slides.
My concern when I created these slides was and remains today that the brokerage really hasn’t adapted to the incredibly rapid advances in technology, including but not limited to, the Internet.
Prior to the advent of the Web and inexpensive computing power, those three things — Leads, Technology, and Training — were completely valid value propositions. Prior to the Internet, brokerages did in fact generate a ton of leads, whether from newspaper advertising or retail storefronts or whatever. The individual agent could also do some lead generation on her own, but there were real economies of scale in marketing and lead-gen by brokerage companies. Technology also cost so much money — think color copiers in 1994 — that brokerages really did provide tremendous value to its agents. Training remains valuable today, but again, the advances in technology means that an agent can sign up with a coach from anywhere, use webinars, online education resources, and the telephone to receive world-class training without relying on the brokerage.
Furthermore, my strategic consulting relies on a few core principles. One of them is that organizations need to find out what they do better than anyone else, and then focus on that thing even to the exclusion of everything else. With brokerages, they were never better than anybody else in technology, because they were not technology companies. They were never better than anybody else in training, because they were not education companies. (Note: Keller Williams actually thinks of itself as a training/coaching company with an ancillary real estate business.) And if they were once better than anyone else in lead generation, those days are far behind us now as tech-savvy companies like Zillow have utterly dominated the real estate broker in lead-gen.
So now what?
What Remains to the Brokerage
If one removes Leads, Technology, and Training as value propositions of a real estate brokerage… what’s left? That’s Matt Dollinger’s question. We can explore hundreds of possible options, or plug our ears and loudly deny that brokerages are no longer best at lead-gen. (“If we only stopped sending Zillow our data, why then the consumer would have no choice but to come to us!!11BBQ!11”) Or I can just save us all a bunch of time — although, fun discussion topics — and lay out the two things that I think remains to the brokerage. Let’s do that.
The first core value, I’ve been calling it “providing actionable intelligence”. What does that mean? Let me explain by way of anecdote.
My first job out of college was at a hedge fund in New York City. I then spent a summer working at Goldman Sachs, the giant investment bank. So I’ve had early exposure to the trading floor in the days before the Internet. And trading floors, even today, have something called the Squawk Box. The first thing in the morning, the Squawk Box used to come alive and tell the traders and the salespeople the important news of the day. Here’s Investopedia’s definition:
Firms use squawk boxes to inform their brokers about current analyst recommendations, market events and information about block trades. This line of communication helps to keep brokers updated on important market factors and allows the firm to guide its brokers’ trading. While many other forms of communication have arisen as a result of technology, the squawk box is still used in most investment banks and brokerages.
I think the concept applies to real estate brokerages as well. An investment bank or a stock brokerage itself doesn’t call on clients or execute trades — its traders, brokers, and salespeople do that. What the firm does, and does very well, is to look at all of the things going on in the marketplace, throughout the global economy, and on trading floors and provide the traders, brokers, and salespeople on the front lines with actionable intelligence.
Actionable intelligence to me refers to information that directly influences or translates into action. General information about IDX rules is interesting and may be strategically important, but it’s rarely actionable intelligence right away. Market price movements, however, could be actionable intelligence. Maybe a REALTOR has a potential buyer who’s been waiting for a dip in prices to jump in the market — getting that person market stats that show that very dip is probably actionable intelligence.
Quite a few brokers (or even agents who are team leaders) track and provide market stats to their agents. They might do that work themselves, or subscribe to some service. But market stats are not the only actionable intelligence in real estate.
Let’s say that the zoning board just approved the plan for a major shopping mall in your town. Is that not actionable intelligence? Of course it is. What about news that the abandoned warehouses on the outskirts of town was just purchased by a real estate investor who’s thinking about converting it into a mixed-use office, retail and multifamily development? Or that the local city council is debating rent control provisions?
All of these non-statistical things are actionable intelligence. They’re precisely the sort of thing that the consumer doesn’t know and wants to know.
This sort of hyperlocal actionable intelligence items are also the exact sort of thing that big technology companies, like Zillow, are not good at doing. Zillow has people like Stan Humphries who can take all the data and crunch it and show all kinds of interesting things, but it doesn’t have people who can attend a local zoning board meeting to find out what’s going on.
But shockingly, it is incredibly difficult to find brokers, office managers, and brokerage staff today that really pay attention to local actionable intelligence. Instead, they’re spending way too much time thinking about, worrying about, and talking about the same old Leads, Technology and Training.
Might I suggest that brokers stop bemoaning their inability to compete with companies that do Leads, Technology, and Training better than they ever could and focus instead on the things that none of those guys could do better than they can? Actionable intelligence — that’s the value of a broker.
And frankly, if you’re a broker but you don’t know enough, don’t have enough experience, or can’t be bothered to provide your agents with insight, wisdom, and local actionable intelligence… might I suggest you seek a different line of work? The industry is fond of saying that there are too many agents running around who have no business being in business. Sorry, but that saying applies to brokers too.
Guarantee of Customer Service Experience
The second value proposition that I believe brokers can do better than anybody else is in the “guarantee of customer service experience”. The funny thing is, every broker in America talks a good game about customer service, and so few actually do anything about it.
Think about it. Every brokerage, every agent, on their websites talk about how they care so very deeply — oh so deeply — about service. They talk about “client for life” and “extraordinary effort” and so on and so forth. Every brokerage talks about how they only recruit the very best, who fit the broker’s philosophy about unparalleled client service, and so on and so forth and yadda, yadda, yadda.
As a threshold point, if every single brokerage in America is so concerned about customer experience and client service, how is it that we have so many crappy agents providing utter crap customer service and besmirching the reputation of the entire industry for so many years?
Truth is, a lot of brokers talk customer service game, but walk the “get money” game. We all know this. Agents who are borderline charlatans not only get away with it, but are given awards because they are “top producers” who make a ton of money — although they have extraordinarily low rates of repeat business or referral business, because their clients end up hating them. Brokers talk about superior client experience, then routinely encourage brand new agents who have only a passing acquaintance with Mr. Jack and Mr. Squat to take listings to “help” a family sell their biggest financial asset.
As Cris Carter might say, “C’mon man!”
Thing is, brokerages who talk the talk without walking the walk are leaving one of the biggest value propositions they could have on the table. Study after study shows that brokerage brand is utterly meaningless to consumers, but those same brokerages and those same brands do next to nothing in consumer outreach of any kind. C’mon man!
The biggest value for the real estate consumer from an institution — not an individual agent, but an institution of any kind — is the guarantee of customer service experience. We all recognize just how hard it is for consumers to know if they’re getting a solid pro who really gives a crap about them or if they’re getting a used-car-salesman type of shyster who only cares about the commission check. Brokers know. Brokers ought to know. Brokers have to know.
And if you don’t know, then you need to be doing everything you can do find out.
My friends Jeff Turner and Laura Monroe are involved with a company called RealSatisfied. They’re making huge inroads into the brokerage community, which is a great sign. But shouldn’t every single broker in America be knocking down that door (or some similar company’s door) to put in systems that measure customer satisfaction and find out about the customer experience that their agents are delivering?
As a brokerage, you don’t provide any service to the consumer: your agents do that. You work your ass off to round them up and deliver them as leads to your agents, but that’s not exactly appreciated by Mr. Homebuyer and Mrs. Homeseller. Your training programs, even if wonderful, have no impact on consumers. So why would you imagine that the consumer, whom you ignore so completely, would give a crap about you?
Answer: they don’t and won’t, until you do and will give a crap about them. And having given a damn, you do more than lip service and pretty lies on a website to show the consumer some love. Just imagine if brokerages were as paranoid about customer service delivery as they are about getting sued. The shape of the real estate industry, and the value of brokerages, would look very very different today than it does.
The traditional fear of the independent contractor — “I’ll lose agents if I press too hard on customer service” — will lead brokers right down the flower-strewn path to irrelevance. Get over it, because if you have no relationship with the consumer at all, then eventually, your agents will have no reason to have a relationship with you.
Now, having done the thunder-and-lightning bit, the good news: this is another thing no one can do better than the brokerage. Zillow and Realtor.com could care a whole lot about the customer experience, but they don’t manage real estate agents. They are entirely limited in what they can actually do to ensure and guarantee a customer service experience. Associations of REALTORS can do all the Code of Ethics dancing they want to, but they can’t enforce customer service standards better than a broker can. The MLS has no business enforcing any kind of customer service expectation, so that’s right out. Think about it. Who can do this better than you, the broker?
This got long. But it was useful, since this forms the basis of my strategic advice to brokerages. Obviously, there are individual situations and individual market conditions and individual issues that makes each brokerage different. But at the larger level, these two things make up the value of brokerage in the post-Information Age: actionable intelligence, and the guarantee of customer service experience.
Let me put it this way, as a way of conclusion.
Not every brokerage needs a Chief Technology Officer. But every brokerage needs a Chief Analyst. If you’re not large enough to hire a Chief Analyst, then you the broker needs to be the Chief Analyst. If you’re incapable or unwilling to become the Chief Analyst, then you need to find a different line of work, or team up with someone who can and will do that work.
If you find in looking through your annual budget that you spend more on agent awards and “team outings” than you do on measuring and delivering the customer service experience your firm wants to deliver, you need to take a long hard look at your business. If you spend more on your website than you do on surveys of people who have done business with your company, you need to rethink your priorities. If you spent more on your office space than you did on customer service delivery systems, think about what’s really important to you.
I could be dead wrong of course, so feel free to give me your $0.02 in the comments. As always, questions and thoughts and comments are welcome.