Future Brands in Real Estate Sales Organizations

INTRODUCTION

The business of branding in real estate sales organizations is changing. In a previous paper entitled “The Future of Franchising in Residential Real Estate Sales” I wrote that it would be naïve to assume business will continue as usual. Relentless competition, advancing technology, a faltering business model, unfavorable industry trends, and demographic market forces all pose a threat to continued profitability. So, if this is true, where do we go from here?

Al Ries and Jack Trout are probably the world’s best-known marketing strategists. Although their simple book, The 22 Immutable Laws of Marketing,[1] was written thirteen years ago, it contains valuable information for understanding the coming shake-out in residential real estate brands. Unfortunately, most marketers fail to accept that there even are laws of marketing. Concepts that win awards rarely drive the success of a business; a strategic and well-executed plan that respects the laws of marketing does.

The balance of this paper is essentially a speed review of Ries and Trout, with illustration to our present situation where applicable. It closes in a brief description of three branding opportunities suggested by the lessons learned.

SPEED REVIEW

The Law of Leadership: “It’s better to be first than it is to be better.”[2] The basic issue in marketing is creating a category you can be first in. It is better to be first than it is to be better. Charles Lindbergh was the first to fly the Atlantic Ocean solo. Bert Hinkler was second; but although he did it faster and more efficiently, no one remembers him. Century 21 enjoys international leadership because it was the first to successfully introduce the franchise concept to organized real estate.

The Law of the Category: “If you can’t be first in a category, set up a new category you can be first in.” The third to make a solo flight across the Atlantic was Amelia Earheart. We remember her name because she was the first woman. Re/Max achieved market awareness by being first to exalt the individual salesperson.

The Law of the Mind: “It’s better to be first in the mind than to be first in the marketplace.” It is very difficult to change a mind once it is made up. Capturing mind-share – early on – should be the primary goal of the marketer.

The Law of Perception: “Marketing is not a battle of products, it’s a battle of perceptions.” Most people have a sense of personal infallibility; they believe they are better perceivers than others. Many marketers make the mistake of focusing on facts because they believe in objective reality. But the ‘everybody knows’ principle means perception may be more important than reality.

The Law of Focus: “The most powerful concept in marketing is owning a word in the prospect’s mind.” You burn your way into the mind by narrowing focus to a single word or concept. The most effective are simple, and benefit-oriented: ‘The Neighborhood Professionals’; ‘Above the Crowd’.[3] Focusing on a single concept takes courage; it is the ultimate marketing sacrifice.

The Law of Exclusivity: “Two companies cannot own the same word in the prospect’s mind.” When a competitor owns a word or a position in the prospect’s mind, it is futile to attempt to own the same word.

The Law of the Ladder: “The strategy to use depends on which rung you occupy on the ladder.” The mind is selective. Prospects use imaginary ladders to decide which information to accept or reject. In general, a mind accepts only new data consistent with its product ladder in that category. Everything else is ignored. There is a relationship between market-share and your position on the ladder in the prospect’s mind. You tend to have twice the market share of the brand below you and half the market share of the brand above you. This means three leading brands is not a battle of equals. Seven seems to be the maximum number of rungs on a ladder, and there are fewer rungs on infrequently used products or services – like real estate sales. There are specific strategies to use for No. 2 and No. 3 brands; for those lower on the rung, the best strategy is to switch to a different ladder by creating a new category.

The Law of Duality: “In the long run, every market becomes a two-horse race.” A new category is a ladder of many rungs. Gradually, the ladder becomes a two-rung affair. And time frames vary: fast-moving markets play out in two or three seasons; slower moving ones (like real estate sales) may take two or three decades. Early on No. 3 or No. 4 may look attractive. However, knowing that marketing is a two-horse race in the long run can help you plan strategy in the short run. As time goes on, customers get educated and want the leading brand, based on the naïve assumption that the leading brand must be better.

The Law of the Opposite: “If you’re shooting for second place, your strategy is determined by the leader.” Wherever the leader is strong, there is an opportunity for a would-be No. 2 to turn the tables. Discover the essence of the leader and present the prospect with the exact opposite – upstart versus old reliable. There are two kinds of people: those who want to buy from the leader and those who don’t. Too frequently, potential No. 2 brands try to emulate the leader; the first brand to capture a concept is often able to portray competitors as illegitimate pretenders.

The Law of Division: “Over time, a category will divide and become two or more categories.” Categories are dividing, not combining: ‘full-service’ real estate companies won’t happen. What prevents leaders from launching a different brand to cover a new category is the fear of what will happen to their existing brands. Honda did not make this mistake when they introduced their premium brand, Acura. While timing is important – you can be too early to exploit a new category – it is better to be too early than too late. In order to get into the prospect’s mind first, you must be prepared to spend time waiting for things to develop.

The Law of Perspective: “Marketing effects take place over an extended period of time.” Long-term effects are often the exact opposite of short-term effects: ‘sales’ don’t work in the long run; and line extensions, like specialty markets, dilute the brand.

The Law of Line Extension: “There’s an irresistible pressure to extend the equity of the brand.” Line extension is taking the brand name of a successful product or service and putting it on a new one you plan to introduce. One day a company is tightly focused on a single product that is highly profitable, the next it is thinly spread over many products and losing money. Why does top management believe that line extension works in spite of overwhelming evidence to the contrary? One reason is that, while line extension is a loser in the long term, it can be a winner in the short term. Further, management is frequently blinded by an intense loyalty to the company or brand. Line extension is imagined to be the easy way out. Launching a new brand requires capital, in addition to an idea or concept.

The Law of Sacrifice: “You have to give something up in order to get something.” This is the opposite of extension. There are three things that can be sacrificed: product line, target market, and constant change. There is no truth to the theory that the more you have to sell, the more you will. Generalists are weak; specialists are strong. There is no need to cater to everybody? Coke and Pepsi coexist by appealing to different segments of the market. There is no need to change your strategy every year at budget time. It is often better to stick with what works and sacrifice the rest.

The Law of Attributes: “For every attribute, there is an opposite, effective attribute.” Don’t emulate the leader – it is much better to find an opposite attribute. The key word is opposite – similar won’t do. If you do not have your own attribute, you’d better have a low price – a very low price. Sometimes it will be necessary to choose a lesser attribute.

The Law of Candor: “When you admit a negative, the prospect will give you a positive.” Positive statements must be proven to the prospect’s satisfaction. No such proof is needed for negative statements. Marketing is often a search for the obvious. Admitting a problem opens minds. This, however, must be used carefully and with great skill. The negative must be widely perceived as a negative, triggering instant agreement; otherwise it will create confusion. You must then shift quickly to a positive.

The Law of Singularity: “In each situation, only one move will produce substantial results.” Marketing is not the sum total of many small efforts beautifully executed. History teaches that the only thing that works is the single, bold stroke. Think about military strategy. Most often there is only one place where a competitor is vulnerable, and that place should be the focus of the entire invading force. This may mean exploiting the unexpected. To find what will work, you must know the market.

The Law of Unpredictability: “Unless you write your competitors’ plans, you can’t predict the future.” Although you can’t predict the future, you can get a handle on trends; the danger comes in extrapolating how far a trend will go, or assuming the future will be a replay of the present. Research measures only the past, new ideas or concepts are almost impossible to measure. Build in flexibility. There is a difference between predicting the future, and taking a chance on the future.

The Law of Success: “Success often leads to arrogance, and arrogance to failure.” Small companies are mentally closer to the front than big companies.

The Law of Failure: “Failure is to be expected and accepted.” Too many companies try to fix things rather than drop things. Tom Peters coined the phrase: ready, fire, aim. Take risks: It’s hard to be first in a new category without sticking your neck out. When the senior executive has a high salary and a short time to retirement, a bold move is highly unlikely.

The Law of Hype: “The situation is often the opposite of the way it appears to the press.” When things are going well, a company doesn’t need the hype. When you need hype, it usually means you’re in trouble. History is full of marketing failures that were successful in the press. No one can predict the future. Forget the front page. If you’re looking for clues to the future, look in the back of the paper for those innocuous little stories. Real revolutions arrive unannounced in the middle of the night and kind of sneak up on you.

The Law of Acceleration: “Successful programs are not built on fads, they’re built on trends.” A fad is a wave in the ocean; a trend is the tide. A fad gets lots of hype; a trend gets very little. Fads are very visible; trends are almost invisible but very powerful. The best thing to do with a fad is dampen it, stretch it out and make it more like a trend. One way to maintain long-term demand is to never totally satisfy it.

The Law of Resources: “Without adequate funding an idea won’t get off the ground.” Very few ideas are ever accepted by large companies. The best bet is to find a smaller company and persuade it of the merits of your idea. Investments in new ideas should be front-loaded (i.e. take no profit in the first 2-3 years, plowing all earnings back into marketing).

LESSONS LEARNED

These laws point to a variety of possibilities for real estate brands. This section will briefly describe three: fee-for-service, premium branding, and local experts. The first two involve creation of a new category in a related market, and the third requires reclamation of an formerly well-established niche.

Fee-for-Service: Trends really do sneak up on us. If the plethora of ‘for-sale-by-owner brand’ upstarts ever get their act together, or combine and conquer, we will almost certainly see the first legitimate fee-for-service real estate brand. This is effectively the creation of a new category, and will gain market share most effectively if they position themselves as a fully licensed financial service rather than going head-to-head with the established real estate brands. By focusing exclusively on the opposite of the traditional notion of real estate brokerage, an à la carte real estate brand could align itself with the likes of lawyers, accountants, consultants and financial planners, posing a significant threat to the status-quo.

Premium Branding: There is presently no nationally recognized brand targeting high-end homes. Most of the current competitors have a brand extension that attempts to capture this market (e.g. Fine Homes and Estates), however, none carry the sway of a fully dedicated brand. Significantly, according to a recent survey of commission rates garnered on average and high-end homes, the latter seems to be the only segment of the market that continues to sustain ‘full-fee’ premium real estate services. Although this amounts to a niche market, it may prove to be a highly profitable one.

Local Experts: Century 21 once owned the term: Neighborhood Professionals. “Archrival Century 21 had a new commercial in which they were using children in a neighborhood setting. Damn, they were good. Everyone could see how powerfully that message came through. The company’s ‘neighborhood professional’ image was having a big impact. That’s what real estate was all about – kids; neighborhoods; families; and your friendly, helpful, always-there-when-you-need-him professional real estate representative.”[4] Re/Max knew they had to come up with an idea for a message that would become a household brand – a word, a slogan, or a feeling. And, whether intentionally or by accident, they came up with an exact opposite strategy: real estate is about the individual sales person. Most large real estate organizations have since followed suit, abandoning the neighborhood team approach to brokerage.

Today, an astute real estate franchise organization could likely claim a niche in Canada through a bold approach of targeting young, ambitious, well-qualified, media-savvy, team-builders and self-promoters. This would necessitate recruiting directly from universities and local colleges. This is where the top financial organizations go to recruit the very best – those who will command six-figure salaries – not unlike the income available to skilled real estate operators. The necessity of age and experience in this business is a myth propagated by a mature and forgetful industry.

There may well be room for highly-educated, well-informed local teams in the industry. Sell turnkey franchises on campus to business-oriented graduates who already know about studying and paying for credentials. In order to qualify as a franchisee in a clearly defined territory (neighborhood), they must demonstrate leadership by attracting a team according to specific criteria outlined in their franchise agreement. The franchisor must provide complete education, including: cutting-edge prospecting and promotion through technology; the most sophisticated information available on managing teams; and media training. Once established, everything the franchisor does focuses on promoting and propagating the image of a neighborhood professional – which means making the franchisee a credible local expert and celebrity because of his or her relationship with the brand. The franchisor and franchisee must also acknowledge in advance that protégés will inevitably want to break off and develop markets of their own. In order to facilitate this, there should be clearly defined markets, as well as incentive for the development and release of team members, which would lead to system growth.

Considering these and other approaches in light of the 22 immutable laws described by Ries and Trout, there is indeed opportunity ahead.

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[1] Al Ries and Jack Trout, The 22 Immutable Laws of Marketing: Violate Them at Your Own Risk (New York, NY: HarperBusiness, 1993). This review is based largely on this work; page numbers and some quotations have been removed for readability as this article is not intended for publication.

[2] In a later work, this principle is referred to as “the survival of the firstest.” – Al & Laura Ries, The Origin of Brands: Discover the Natural Laws of Product Innovation and Business Survival (New York, NY: HarperBusiness, 2004).

[3] When you develop your word or concept, be prepared to fend off the lawyers: they want to trademark everything. The trick is to get others to use your word: to be a leader you must have followers.

[4] Phil Harkins and Keith Hollihan, Everybody Wins: The Story and Lessons Behind RE/MAX (Hoboken, NJ: Wiley, 2005) 87.