Envisioning the Consumer Centric Agent

The spring industry meetings of 2014 provided a rich insight into the industry’s thinking on a number of critical issues. The subjects of off MLS marketing practices, mergers and acquisitions, the vibrating MLS, the specter of increased regulation, the oscillating portals, visions of profitability, the continuing emergence of the empowered consumer, changes in the brokerage business model and the ultimate impact of the Wall Street invasion, just to name a few, provided an invaluable opportunity to observe and measure the industry attitude and perspective moving forward.

Of all of these issues I found the most valuable to be those regarding what steps brokerages would be taking to better align themselves with whatever market changes their CEOs found compelling. If one were to boil all of the information down to basics the result would be standards, accountability and transparency. It would appear that the brokerage community is now anticipating that some combination of consumer demand, profitability, and regulatory issues will converge to require that the residential real estate process be governed by standards. Given this development its stands to reason that someone other than the brokerage will have to be responsible for compliance with those standards and lastly that the process by which standards and accountability come together will be subject to transparency.

Frequently the consideration of these issues lead to conversations about the evolving role of agents and, more specifically, the current and future legal and supervisory status of agents. It would appear that industry thought leaders are increasingly of the opinion that the long standing independent contractor status of agents is losing relevant and may no longer be either useful or appropriate.

Screen Shot 2014-07-08 at 1.49.29 PMFollowing up on these matters I subsequently spent three days working with clients in Omaha, Nebraska. For those who are not familiar with Omaha in the current age it has replaced Peoria, Illinois as the place were modern day American can be discovered, touched and experienced. My specific objective was to undertake research regarding a number of changing employment environments. What is happening in other work settings will have a direct impact upon the real estate industry environment. The results of this type of research have a high level of relevancy to the efforts of our industry to prepare for the rapidly approaching standards, accountability and transparency era.

Screen Shot 2014-07-08 at 1.46.46 PMMy first Omaha stop was at an ATT retail outlet. There I connected with Michael a 24-year-old college graduate who had just started his second year of employment selling cell phones and related gear. Michael was willing to convert our commercial transaction into a personal interview and matters proceeded from there. He is now into his second year working in this position and, at his current rate of production, should generate an income of $58,000 in 2014. His compensation is based upon a 40/60 salary/commission schedule. His knowledge of both his industry and his product was most impressive. He shared that his employer had come to the conclusion that since there was little difference between the technologies it offered and that of its competitors thus the only real differential was its customer experience. He talked positively about the initial and ongoing training he received. He scored a 9 out of 10 on the company loyalty test. At the conclusion of the interview he pointed to a very well dressed young women near the entrance to the store and pointed out that she, without a degree, was in her first year and was on course to make $65,000.

Screen Shot 2014-07-08 at 1.48.30 PMThe next stop was at a Target Super Center. The contact there was made while trying to determine whether to buy a national brand of cottage cheese or take a gamble with the house brand. A young man named Tom approached to see if he could be of any assistance. I explained my challenge and he responded by suggesting that I buy both and conduct a taste test. I pointed out that I was traveling and he responded by suggesting that if I bought the house brand he would provide both a spoon and the national brand. We thereupon conducted the test with positive results for the house brand. Of course at that point the interview was on and the information began to flow. Tom is a 28-year-old college graduate who is in his third year with the Company. When I suggested that his approach wasn’t consistent with my previous experiences he gently pointed out that the Company had recently had a problem with its credit card program.

With an impressive level of detail and respect he explained that senior executives had decided use the credit card crisis as the basis for a whole new approach to customer services. He spend the next fifteen minutes explaining, with an amazingly high level of pride, all of the positive changes Target had made in both their credit card and customer service systems. He then disclosed that he was second in command at the store, made something north of $85,000 annually and was really proud to be part of the Target team.

Screen Shot 2014-07-08 at 1.52.49 PMThe final Omaha stop was at the emergency room of a large local hospital. Depending upon the time of day the ER environment can be a gold mine of information. Sure enough I lucked out and was able to beg my way up to an interview Dixie the 63-year-old nurse executive in charge of this and three other ER facilities within the chain. Dixie explained that she had been with the hospital for 30 years. She further explained that over the past eighteen months her employer had gone through a total cultural reorganization that evolved it from being provider (physician) centric to consumer (patient) satisfaction centric. She talked about how difficult it had been at first trying to balance the issues of a critical care environment with the requirements of a patient satisfaction environment. She pointed out that the process had not been without its casualties, in this case in the form of four ER physicians who were unwilling to participate in the employer’s new priority. With a very high level of pride she pointed out that the choice was a simple one. Existing in a world of patients armed with social media simply didn’t allow for anyone walking away unsatisfied. She additionally pointed out that her department tracked the customer experience reporting in every ER in town and they were clearly the best of breed.

The forces of profitability, consumer satisfaction and regulation will soon force the real estate industry to take a whole new approach to its relationships with both consumers and agents. This in turn will require a number of new skill sets and competencies. The relative stress this process will cause will be in direct proportion to the level of preparation brokerages expend. It’s time to start considering the alternatives before they become mandates. We can do this.

One Comment

  1. Posted July 8, 2014 at 3:16 PM | Permalink

    Great commentary, as always. Nothing better than field work to bring forth a synthesis on where we stand and where we are going as an industry. I love your focus on the inflection point that our industry pivots around – what you call “direct proportion to the level of preparation brokerages expend.”

    What is complex about preparation brokerages expend is that the preparation is very dynamic and very much in a competitive cross fire. I would propose that the National Association of REALTORS, State Association of REALTORS, Local Association of REALTORS, MLSs, Franchisor Organizations, and many other trade groups are all on the battle field to “help the broker in that preparation.” The reason being, those who help the broker prepare get a share of broker dollar. Theres the rub.

    Large firms do the heavy lifting of delivering solutions to create those agent skill sets and competencies – or at least they try – or at the very least, they think they do. By the way – that is their job as a Broker of Record for sales associates and licensees. They feel that anyone other than the broker playing a role in developing those skills for licensees levels the playing field. They want every broker to tow the agent by themselves because they know that small firms will not survive without the subsidy of agent development by Associations and Franchises. As such, large firms lobby for limited services.

    Small firms love Associations and Franchises – they enable them to exist without the need for training and support. Small firms (by and large) do not provide much if any preparation to allow the agent. As such, small firms lobby for full services.

    It would be great if you went to small stores the next time to visit Omaha and reflect about your field work there. In my opinion, there is little difference in the way real estate is organized than the way our form of government and society is organized. It is a battleground of special interest with a tipping point.

    In cellular services – the tipping point has been reached – are you on Verizon or AT&T? In retail, the tipping point has also been reached – Walmart, Target, or Kmart?

    Will there be a tipping point in our future? If you look at NRT – $151B, HomeServices of America $63B, Long and Foster $73B, Howard Hanna $26B – you see these big drops in revenue at the top. One firm over $100B. One firm over $50B. One firm over $25B. Nine firms over $5B – you see that the current structure favors small firms. their are thousands of them doing less than $100M in sales.

    If you do the math, the owner of a firm smaller than $100M in sales has a business that generates such small broker dollar (if there is any at all after expenses) that it is hardly worth being in business. Those firms would be better off as agents at large firms. The only thing stopping them is the support of Associations, MLSs, and Franchises – who all profit handsomely by supporting this group. Remember that more than half of the MLS particpants and Association members did not participate in a single transaction last year. Those non participating subscribers and dues paying members subsidize the producers. Should we thank them for paying for services they never use or kick them to the curb and pay higher fees for shared services. That is the great debate and as a fellow consultant, I am only too happy to join you and others to get paid to facilitate the discussion.

    Throughout history, there has been a consistent pattern of empire building followed by implosion and fracturing. Our universe acts this way (according to most scientists), our Nations act this way, and so too our industry acts this way. For me – consolidation is on the horizon. The little guys will be gobbled up then we will become too big and implode. Then consolidation will start over…. Agree?

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