Brokerage Design: Did you hear the gun go off?

By Jeremy Conaway

TRAVERSE CITY, Mich. – The 19th annual Real Trend’s Gathering of the Eagles conference took place last month in Dallas. Once again, it was the only place to be for those who really want to know what is happening in today’s American real estate industry. The Gathering, as it is known, is a “by invitation only” real estate industry institution that attracts the industry’s top thinkers and most dynamic leaders. It is three days of nonstop intellectual challenge and collaborative thinking.

With 246 brokers in attendance, this was the largest Gathering since 2005. The program was relevant in design and tight in execution. The information was well-reasoned and focused on the unique interests of the audience. The lessons learned represent critical information for firms that wish to lead the new industry.

So what news came from these sessions?

• The good news is that the recession and the down market may be over and that a new “normal” has arrived.

• The focused news is that this new era in the history of the industry is one of learning, reengineering and reinvention.

• The important news is that the real estate consumer now expects to be in total control of the market and the transaction.

• The financial news is that controlling costs and overhead has now morphed from a business skill to a survival skill.

• The sharpening news is that the events of the past five years have created a whole new real estate services practice environment in which the consumer is in charge.

• The sobering news is that a significantly evolved brokerage business model will be required to succeed in this new business environment.

• The exciting news is that the experience that lies ahead will be more exciting, stimulating and rewarding than that which has brought us to this present day.

• The critical news is that leadership will be the defining skill for brokerages.

Interestingly, many of these themes were repeated again during the NAR Mid-Year meetings in Washington, one week later. In this case however, the performance of local and state Realtor® associations during the past eight years, were brought into question. The issues of innovation and creativity were discussed, especially after the NAR Game Changer presentations were made.

The Game Changer competition seems to have answered the question of whether or not Realtor® associations can be innovative. However it seems to bring into focus the question, not of whether or not they can be innovative, but rather why are they not exercising innovation.

One could not help but be impressed with the amazing results of the Game Changer program. The effort gave rise to 10 fully-functional programs, all of which have the potential to help move the Realtor® association into the new era. This was yet another example of how NAR CEO Dale Stinton is quietly providing the executive support and guidance necessary to take Realtors® into the future on a positive and competitive basis.

What lessons did both the Gathering and the Mid Years provide to the industry? Perhaps most important was the almost-universal acknowledgement that in fact, a new era has arrived in the Industry. At both sessions, even the most experienced and anchored participants gave due notice to the fact that everything is now different. However, reports from a number of other industry meetings have noted that many senior leaders are now adopting a rather combative attitude regarding all things X and Y.

A second observation would focus on the fact that, in both spheres, a whole new brokerage and association leadership cadre is emerging. It was interesting to watch the attendee’s struggle with the concept of whether the term “new leaders” was a synonym for “younger leaders.”

Though it was not possible to determine whether a definitive resolution was reached, there did seem to be a consensus that too many senior leaders were not paying attention to the needs and expectations of those younger than 45, and that if this situation is not resolved, consequences are expected.

A possible indication of complications to come was the fact that the leadership “chairs” for many organizations seem to be packed with senior boomers trying to have their consummate leadership experience before it is too late. In some cases leadership positions, three and four years out, are already spoken for.

The solution for this dilemma is quite simple. It is philosophy and leadership style, rather than chronological age, which makes the difference here. Older leaders, who have taken the time, and demonstrated the respect, to learn and exhibit the values of Generations X, Y and the trailing Boomers, are doing just fine. On the other hand, “younger” leaders, who demonstrate a lack of respect for tradition thoughts and processes, are not succeeding. Both brokerages and associations would do well to provide real “leadership,” rather than “governance” training, for their leadership teams.

The third observation that rises from these meetings relates to how exactly the industry, marketplace and transactions themselves will be different from the past. Much of this transition will be driven by changes in how the American real estate consumer feels about the marketing, ownership and/or possession experiences within the real estate industry. The events of the past few years have clearly impacted how today’s consumer approaches each of these events. Their responses are well-documented and offer easy learning for all who are interested.

In conclusion, we return to our original question, shown in the title of this article. Did you hear the gun go off announcing that the new era in real estate has arrived?

Please note that the word “future” did not appear in this article. We are no longer talking about what could happen, but rather what has happened. As soon as possible, get a handle on this new era. Learn its challenges and its opportunities. Figure out its do’s and don’ts. Appreciate its joys and be prepared to live through its trials. But most of all, take the time to celebrate its arrival, and the contributions it will make to the rest of your days.

Jeremy Conaway is a recognized and leading expert in the field of real estate brokerage, association and MLS design, and a leading source of strategic and tactical ideas and applications for the real estate industry. He is a nationally known speaker, author, and facilitator.

Designing your post-recession marketing message

By Jeremy Conaway.

The government announced it was over last fall. Conservative financial experts are suggesting it will be over next June. Whoever one listens to, there is a high level of disagreement regarding when the recession was, or will be, over. Regardless of when your brokerage’s management team officially decides it has tired of the recession and is ready to move into recovery, it is clear that there is much to be done inside your firm’s marketing program.

The confusion in declaring the recession’s death is, to some extent, brought about by the fact that making these types of market calls is, for real estate professions, a very emotional decision. It works both ways. Many real estate professionals refused to admit that the market had tanked in 2006. For this group such declarations were considered bad luck and the kiss of death. Accordingly, well into 2007 they were still telling everyone who would listen that “their” market was grand and that the key was to work harder. Oh, the power of positive thinking!

Now, in the spring of 2010, we are at the other end of the spectrum. Now this same group is dragging their feet at the idea that a normal market has returned. Yet industry experts, such as Steve Murray of the Real Trends organization, are telling us that their research indicates that over the past thirty years the average market performance has been 4.93 units per one hundred households. Adjusting that for real time (adjusting is the sign of an expert you know) one would come up with a figure of 4.84 residential transactions per 100 household units, a number that is dangerously close to the 2009-year end production numbers.

So, regardless of how your firm will go about declaring the recovery process has arrived, the first test of success will be universal acceptance of the decision within your firm. If half of your management team and agents are still in doubt, your efforts to adopt a recovery mind set and marketing program will fail.

successThe next step to adopting a successful recovery mindset is to understand and accept the consequences of the recession. Its impact will affect millions of American families for years to come. That same group that wanted to deny the down market in the first place will now work to convince everyone in the office that “their” clients were, somehow, untouched by the recession. This is simply not the case. Real estate consumers in every socio economic category have lost wealth through the devaluation of their property and financial holdings. Pretending otherwise will only further damage existing and new customer relationships that will already be strained by the financial events of the past few years.

Firms that have traditionally dealt with wealthy clients and luxury homes will find the new economic order especially challenging. On one hand, a whole new generation of Americans may now be able to afford homes that, at their 2005 prices, were out of reach. In the same vein, clients, whose 2005 level of wealth and affluence would have allowed them to live anywhere, may now find themselves downsizing into much more restricted circumstances.

Consumers in all ranges will be looking to enter into a whole different kind of relationship with their real estate broker. That broker’s, or their agent’s, insensitivity to their new status or plight may not be consistent with such a relationship.

Another key element of the post recession brokerage strategy will be continuing to emphasize both value propositions and consumer experiences. A recession, like heart surgery, is over years before its effects upon the patient wear off. Over the next several years a significant percentage of real estate consumers will be focused upon value in everything they approach.

In the same vein, many consumers, especially those who were hurt in the recession, will be focused on getting back into a local community environment. Many Americans will associate the recession with the global economy. For this group being a global citizen may not be as attractive as it was ten years ago. This attitude will embrace buying into familiar neighborhoods and re-engaging lost social contacts. Expect to see a rise in “made in America” marketing messages.

Now, more than ever before, consumers will be seeking out and attempting to capture the “essence” of their local communities and even neighborhoods as they create new lifestyles. Brokerages with long histories in the community will want to emphasize this quality in their marketing. A word of warning here would be appropriate. Don’t market traditional roles and values unless the entire company team is prepared to deliver them. Be sure to train managers and agents on the fine points of delivery this unique kind of value proposition.

Smart brokers will be focusing on marketing strategies that communicate effective messages in good markets and bad. The concept of “what matters most” captures this idea. Again, recognize the fact that consumers whose priorities previously included impressing friends and social contacts and enjoying 20% annual appreciation may now just be focusing on owning a nice home with friendly and non-judgmental neighbors as a place to raise their families.

This is also a time in which innovation will be both recognized and appreciated. In this context, innovation is not so much about bringing in new things as much as it is about improving existing things like procedures, processes and outcomes. Successful post recession brokerages will review their marketing and transactional services with an eye towards making the home buying process more dependable, more stable, with less surprises and unforeseen consequences. While the consumer of 2000 may have been willing to tolerate significant levels of hassle on their way to fame and fortune, that same customer in 2010 will recognize these shortcomings for what they always were – a failure to respect customers and an unwillingness to provide a quality and accountable experience.

This is not to suggest that innovation will not include new products, programs and services, for it certainly will. Over the next two years, lifestyle services will become critically important as consumers work hard to adjust to their new social, economic and living environments. The provision of lifestyle services will also represent a key opportunity to expand brokerage profitability.

In summation, whether brokerages engineer their post recession success through transitional messages, product mix or innovation, the single most important element of this new energy will involve updating and refining the brokerage’s relationships with its new and old customers. Think of it as “dating” your customers. They are looking for new experiences, and you are looking for a new space and increased profitability in the marketplace.

We can do this. Now is the time to start.