Over the past two years virtually every sector of the American business community has been struggling to come to grips with the emerging concepts of the creating and applying product and service value propositions. This focus can be attributed to the emergence of the value proposition as the ultimate consumer evaluation tool, along with increased consumer reliance on expanded databases that demonstrate the nature and quality of the past consumer experiences.
Some experts suggest that the real estate brokerage sector is a bit behind its compatriots from other industries with respect to consumer experience research and transitions, due in part to its reliance on agent centricity. However, even within real estate, there is a growing understanding that quality determinants in the provision of real estate marketing and transactional services have not traditionally been set by brokerages, are seldom set by agents, and are now being defined by consumers.
The issue before the industry today is not whether brokerage wide standards should be set. The consumer centric nature of the contemporary real estate marketplace has mandated that requirement, which leads to the question within our industry: how have these standards have been developed, implemented and monitored?
Here again the answers are somewhat simple. Standards development, implementation and monitoring are simply not an integral element of the traditional real estate agent’s mindset. Volumes could be written about why this is the case, but for the purposes of this piece it is sufficient to say that a single minded focus on “closing the deal” at any cost is almost totally inconsistent with the creation a real estate service experience that meets consumer expectations and demands, creates a long term positive consumer relationship and drives an appropriate risk management environment.
Given these factors it is neither realistic nor practical to suggest that agents develop their own standards or even that each agent have their own standards. With all due respect to those who continue to advocate agent centricity, it is well understood across regulatory, management and marketing circles that an effective standards program must be an essential element of the brokerage’s quality control, administrative and management system. Accordingly there has to be one set of standards that is capable of being monitored across every transaction and consumer interaction generated by the brokerage and programs, products and services.
The good news is that the task of designing and implementing standards for a winning brokerage consumer experience and value proposition became a lot easier with the publication of the September 2016 issue of the Harvard Business Review. The entire issue is dedicated to the subject of What Does Your Customer Really Want and How to Figure it out. Over the past two years we have been working with a number of our brokerage clients on the development of standards. We were thrilled when notified in January that the HBR Standards Issue would be published in September, and have spent a great deal of time over the past month digesting the several articles contained in that edition and converting their concepts for use with real estate practice and lexicon.
While every brokerage executive and manager should take the time to read all of the articles (keep in mind that reading the HBR can be a painful and lengthy experience) the article entitled Elements of Value by Bain and Company’s Eric Almquist, John Senior and Nicolas Bloch on page 47 is a “must read.”
The value proposition of this article is significant. The industry is already on notice that price is not the primary determinant of either quality or satisfaction. It is further aware that consumers have become very aggressive with respect to what elements of a vendor’s experience they like and, more importantly, what they don’t like. Those steadfast agent centricity advocates must also facilitate the understanding that consumers, not agents, are in full control of the value proposition evaluation process.
The Bain Company research as reflected in the September HBR is wonderfully broad and considers a full range of consumer related issues. The objective of this article is much more limited. It is aimed at focusing the executive’s and/or manager’s standards creating efforts on the very components that the brokerage will use to create a customized brokerage value proposition.
The Bain Company contributors organized their findings around the famous theory proposed in behavioral scientist Abraham Maslow’s 1943 publication of A Theory of Human Motivation. The vast majority of our readers will recognize this work from their adventures in Psychology 101 in college. Maslow expressed his theory around the factors demonstrated in the following graphic with the most basic (physiological) at the bottom and the most sophisticated (self actualization) at the top.
The Bain researchers identified and developed some 30 specific value elements that are common the all consumer experiences. These values fall into four categories of human need; functional, emotional, life changing and social needs.
The HBR elements of value issue incorporates a really efficient Elements of Value Pyramid tool. Reviewing the components of this tool illuminates one of the central truths of brokerage standards design. The driving force behind brokerage value proposition/experience standards is not to create a “cookie cutter” industry. In fact it is quite the opposite. Using the pyramid tool, responsible brokerage executives and managers can create a unique and highly competitive value proposition/experience like none other in the industry. Use vacation planning as an example, it isn’t that everyone must go to the same destination using the same transportation and eating the same food. The Pyramid tool simply recognizes that every vacation must have a destination, a mode of transportation, and some manner of sustenance and/or nutrition. The Pyramid tool establishes the requirement that every brokerage standards program must address functional, emotional, life changing and social impact issues. Each firm is free to adopt their own interpretation of those factors.
How a specific brokerage addresses each of these elements is completely up to (1) the powers that be in that brokerage, (2) the legacy practices of that firm, (3) the unique demands and expectations of that firm’s customers and (4) the specific regulatory requirements of the firm’s marketplace.
For those readers who are exclaiming that it really can’t be that simple the answer is: “yes it can.” The starting point here is that the vast majority of brokerage’s in the United States have absolutely no formal standards in place to protect consumers who engage their services. This state of affairs reduces the firm’s marketing prowess down to “trust our agents,” which is not a winner with today’s consumer.
Consider the fact that when firms are audited by regulatory agencies (including the CFPB), and asked what documents or policies they have in place to protect consumers, the most frequent response is “why would we do that?” Imagine the response of a court adjudicating a malpractice claim against a brokerage whose representative testifies that brokerage standards are not their concern and that any standards that exist are totally up to the discretion of the agent, with no articulation or monitoring requirement.
The standards development process represents a fascinating opportunity to focus and positively effect brokerage profitability, productivity, and team building, as well as delineate the firm’s value proposition and fine-tune its competitive advantage. Standards are not an entrepreneurial aneurism but rather a highly effective capitalist tool. Get on board with standards.