Lessons from Counterinsurgency, Part 2: Petraeus on Local

In part 1 of this series, we discussed Information Operations and the importance of integrity in counterinsurgency strategy.  I took lessons from the U.S. Military, and the author of those doctrines Gen. David Petraeus, and applied them to the real estate industry.  In this installment, I’d like to take a look at another key principle of counterinsurgency and how those lessons apply to Big Real Estate: Importance of Local.

Petraeus On Local

Counterinsurgency is intensely local, and reflects lessons of Fourth Generation Warfare. Digression follows!

First generation warfare is all about formations, line and column, and massed infantry.  It is what Napoleon was a master of, and conquered half of Europe with, until he ran into better-trained British infantrymen.  [Making this digression even more of one, for a really entertaining look into first generation warfare and what that looked like, check out the Richard Sharpe series from the British historical novelist Bernard Cornwell.]

Second generation warfare emphasized massed firepower (aka, “massed artillery” and machine guns ) instead of massed manpower.  The idea was that artillery would bombard the enemy into submission, while the rifleman simply mops up the mess.  World War I was mostly a second-gen affair.

Third generation warfare emphasized speed and maneuverability (“blitzkrieg”) to neutralize the advantage of massed artillery.

All of these approaches concerned themselves with taking on an established, uniformed opposing army.  When the enemy disperses and become guerrilla forces or insurgents, then these strategies are of limited utility.

Fourth generation warfare is precisely this sort of war — insurgents, terrorism, propaganda, information operations, where the line between combatants and civilians is intentionally blurred, etc.

With all that said… here’s Gen. Petraeus:

Securing and serving the people requires that our forces be good neighbors. While it may be less culturally acceptable to live among the people in certain parts of Afghanistan than it was in Iraq, it is necessary to locate Afghan and ISAF forces where they can establish a persistent security presence. You can’t commute to work in the conduct of counterinsurgency operations. Positioning outposts and patrol bases, then, requires careful thought, consultation with local leaders, and the establishment of good local relationships to be effective.

Positioning near those we and our Afghan partners are helping to secure also enables us to understand the neighborhood. A nuanced appreciation of the local situation is essential. (Emphasis added)

Conducting counterinsurgency means getting close to the local situation, having boots on the ground in the local community, providing security to the local area, and truly understanding the local neighborhood.

He may as well have been talking about real estate.

The Disadvantage of Local

Tip O’Neill, former Speaker of the House, once said that all politics is local.  It seems obvious to the point of “Duh” to say all real estate is local.

Yet, Big Brokerage has yet to show that it fully understands the implications of Local.  It may be that Big Brokerages got that way by aggregation and expansion, and as they grew, they became more and more centralized.  Marketing, advertising, corporate governance, training, etc. all came from the top down, out of Headquarters down to the Branch Office.

This made sense when the primary competitors were other Big Brokerages.  You can’t compete against RE/MAX blanketing your area with broadcast ads, signage, physical office locations, outdoor advertising, print ads, mailers and so on and so forth unless you can do the same.  That takes a certain scale, a certain size, and Big Brokerage grew to cope with the competitive challenges of that era.

But Big Brokerage today is dealing with an insurgency as well as fighting off other Big Brokerage competitors.  While they were focused on fighting each other, technology companies and consumer websites have sprung up, enabling individual agents to go solo to an unprecedented degree.  Combined with the erosion of brand value in real estate, the result today is that Big Brokerage is at a disadvantage as it comes to the local market.

For one illustration, I did a Google search for “Colorado Springs real estate”.  This is a screenshot of the first few results:

Out of the first six results, the top result is an independent brokerage: Boylan & Company.  Second result is an agent team (who is part of the RE.net — Derek & Mariana Wagner) who belongs, nominally, to Keller Williams… but you’d be pretty hard-pressed to find evidence of that relationship on their website.  Third is another independent, apparently one Heritage Realty, whose site looks like an absolute mess.  Fourth is Yahoo!, and the fifth is a RE/Max agent who apparently is #11 in her office.  And at #6, we get Realtor.com.

In fact, not one Big Brokerage brand is represented in the first page of results.  Zillow and Trulia bring up the rear.

While Google rankings is by no means dispositive of the argument that Big Brokerage stands at a disadvantage when it comes to local, what seems clear from the various Google searches (e.g., do a search for “Colorado real estate” and NRT shows up on the first page, while a search for “real estate” brings many more Big Brokerage brands — Century21, RE/Max, and Coldwell Banker to name three — to the first page) is that Big Brokerage is still thinking too “nationally”, or too “regionally” instead of locally.

The result is that a networked swarm of independents and agents can (and are currently) taking away the “local expertise” advantage from Big Brokerages.  These individuals live in the local neighborhood, and can create content that speaks to local neighbors, in a way that the Corporate Marketing Team back at Headquarters simply cannot.

Take a look at this post from the Wagner iTeam about the local school district.  I can say with confidence that no national or large regional brokerage site has this much information about a single school district.  The effect then is that if you want local experts, you call the Wagner iTeam; if you want undifferentiated commodity services, you call the local Big Brokerage.

This is, I submit, not a good situation if you are one of the Big Brokerage brands investing millions of dollars into your branding as local experts.

You Can’t Commute to a Counterinsurgency

What is shocking about the situation is that the Big Brokerages have all of the resources to conduct an effective counterinsurgency campaign — they just have not thought to do it.

The one major advantage that Big Brokerages have, frankly, is their footprint.  Leveraging that footprint to establish truly local presence in each and every neighborhood is one way to deal with the local insurgents.

Big Brokerages must start to look at their local resources with a totally different perspective.  Long & Foster, for example, has some 13,700 agents in 200 offices spread throughout eight Mid-Atlantic states.  They are already plenty local.

But does Long & Foster leverage all that local talent, all those local resources?  Take a look at this page about Wake Forest on the L&F website:

(You may need to visit the site and take a look to see everything.)

Frankly, while the page design is nice and clean, and obviously high quality, those three paragraphs about Wake Forest could have been — and probably were — written by one copywriter working for L&F’s web design shop.

What evidence exists that Long & Fosters has dozens, hundreds of realtors on the ground, in Wake Forest, able to provide the insider’s scoop that the consumer is looking for?

Instead, why not find all of the agents who blog and interact with the public and stream their posts to this page?  If that means providing every L&F agent and office manager with a blog platform, why, that isn’t particularly expensive to do.

Put up the Twitter handles and Facebook links of all Long & Foster agents who work the Wake Forest market.

Select a few top agents who are good writers, and pay them to create a truly in-depth, Insider’s Guide to Wake Forest, and keep it maintained and up to date.  Some of them would do it just for the exposure, but Long & Foster would gain enormous local content and local credibility from having such a thing.

If you are a Big Brokerage, understand that you are already there; you don’t need to parachute in corporate marketing.  You just need to leverage the assets already on the ground.

That includes training, includes providing resources, includes giving them increased authority (see below), and whatever else you have to do, but you can take back the local neighborhood from the insurgents.

Nuanced Appreciation of Local Conditions

One area where residential real estate can learn something from their sisters in commercial real estate is in the creation of proprietary local market reports.

While imperfect, and difficult to do, commercial real estate firms task their agents (typically the junior ones) with going out and surveying the inventory in their local market periodically.  They may buy market reports and market data from firms like CoStar and REIS, but the good firms make sure that their own force of professionals are out there collecting proprietary data that can be used to create something unique to their firm.  They leverage their advantage in numbers to create unique offerings.

Big Brokerages should be looking at creating their own proprietary CMA’s and market reports leveraging the thousands of people who work for them.  There should be a qualitative difference in the service that a Big Brokerage realtor is able to provide to the consumer because of the large footprint that Big Brand has.  Otherwise, what’s the point of all that size?

With the advantage in resources, the Big Brokerage could (and should) have an economist or statistician crunch the numbers — public, private, and proprietary sources — to produce an extremely nuanced report on local market conditions.  No matter how good an independent agent may be, she’s still trying to make a living selling real estate.  She cannot do that, and collect local data, and crunch that data, and write analytics reports — not for long, and not without it becoming a major burden.

Furthermore, with the size and resource advantage, Big Brokerage can access information in ways that independents find difficult.  For example, the mayor of Wake Forest might not have time to give interviews to every Realtor, but he’ll make time for Long & Foster.  Same with zoning boards, city council, even the Federal congresscritters will make time and give access to larger organizations.

Being the first to consistently provide useful information about forthcoming changes in the property tax rate, the new proposed street cleaning schedule, or changing boundaries of a particular school district — these are all part of the “nuanced appreciation” of local conditions that provide real value to consumers.

Artillery, And Its Uses

This is a good juncture at which to explore the much maligned traditional marketing.

It needs to be pointed out that the American military doesn’t abandon its advantages in “traditional” warfare, just because it is going against Taliban terrorists.  When an entrenched enemy position needs to be taken out, the American military is extraordinarily effective in doing just that.  Take a look at this incredible video of an American AC-130 gunship in action for example.

Similarly, one of the reasons why Big Brokerage can beat the insurgents at the local game is because of the advantage it holds in “traditional marketing”.

Those responsible for Marketing at Big Brokerages need to look at the traditional methods as artillery (or air support).  There are times and places where it can make the difference competitively.  The current trend towards abandoning all print, all branding, and all broadcast in favor of “social media” is an overreaction to the perceived success of web marketing.

For example, suppose you do embrace a local strategy and are able to match the independents for detailed local information.  (A big IF, I know.)  In addition, you are leveraging your resource advantage to create the detailed Insider’s Guide to Wake Forest, and your Research department is cranking out proprietary market data for your people.

Now you blanket the neighborhood with local TV, radio, print, and outdoor advertising all focused on driving consumers to your much more robust local website/blogs.  Your signage, your posters, your postcards all tout the accuracy of your information, the proprietary data, and the detailed local expertise — along with footprint! — that you can provide.

Now, you unleash your PR and Corporate Communications people to go to the mainstream press with story after story about your company, your brand, and your agents who are all local experts.

Now, you stock every Open House with detailed Insiders Guides, with fact sheets, with beautifully executed brochures touting the promise of your brand and how your highly-trained agents are able to help consumers with their pressing questions and needs.

If you’re an independent… now what do you do?  Big Brokerage can match you on local, but can dominate you on traditional marketing.

If you’re a top producing agent, your company just made leaving that much more difficult.

Fourth Generation Real Estate: Brand Domination

The insurgents currently enjoy the information advantage, because the Big Brokerages have consistently neglected it.  Indeed, many of the managers and principal brokers aren’t even aware that they are in an insurgency.  While their eyes are focused on traditional competitors — each other — the new network of empowered agents is luring the best and brightest away and creating extraordinarily strong niche markets that will be difficult to break.

It takes talented people to pull off fourth generation real estate, just as it takes talented leaders for the U.S. military to conduct fourth generation warfare.  But the Army, that most hidebound and bureaucratic of organizations, is getting it done.  Thank God for that.  And Big Brokerages can learn the lessons and turn the situation around  as well.

However it’s done, and whatever the specific tactics used, the important thing to keep in mind is that Big Brands have to look at ways of leveraging their footprint to create qualitative difference to the consumer, while maintaining their superiority in traditional marketing.  All the things they do well today, they need to keep on doing well — that’s the job of Corporate HQ staff.  But in addition, they need to understand how to leverage local assets, how to push resources down to the local level, and how to leverage their footprint to create competitive advantages.

Combined with the restoration of Integrity in the brand discussed in Part 1, a Local-focused strategy helps to restore the value of the brand in the eyes of agents, peers, and most importantly, consumers.  That, I believe, is the key to the goal of fourth generation real estate: brand domination.

-rsh