Real Estate Insurgency Manual, Part 1: Outmaneuver and Neutralize

In my past writings, I’ve written about the seismic shift going on in the real estate brokerage industry from the perspective of Big Brokers and Big Brands.  You can find those writings here (and the parts linked there), here, here, and here.  At the same time, I’ve always wanted to write the other side of the debate, because the victory of Big Brands is so reliant on a major assumption: that they embrace major change, including putting new blood into the top executive positions, and changing the culture of the organization.  This is never easy, but nearly impossible while senior management is preaching the message of, “Batten down the hatches and get back to basics!” whatever that means.

While the Big Brands are struggling to figure out a strategy for moving forward, however, the Kristian Soldiers are hard at work trying all manner of new things, new strategies, new thinking, and changing the face of the industry.  They are winning far too many battles today, and may ultimately win the war.

This, then, is a series of thoughts on how the Real Estate Insurgency can out-maneuver, out-innovate, and ultimately defeat Big Brands.

First Principle: Never Fight On Their Turf

There is a saying in the retail industry: “You can’t out-Walmart Walmart.”  Any competitor to Walmart has to figure out some other angle of attack other than price, becaue Walmart with its buying power, its incredible computerized systems, and operational rigor, will beat you on pricing almost every single time.

In military tactics, an insurgent force taking on a regular army simply has to avoid direct staged battlefield contact, because it will get rolled over.

For the Real Estate Insurgent, then, the first principle of strategy has to be “Never Compete with a Big Brand Where They Are Strongest”.

One area where a Big Brand is strongest is sheer volume of branding.  If you are an individual agent, or a small brokerage, or an agent team, you simply cannot compete with a Coldwell Banker on yard signs.  At least, not starting out.  (Once you’ve established yourself and have taken over, then by all means, out-yardsign the Big Brands left and right.  See, e.g., Russell Shaw.)

For that matter, it is unlikely that an Insurgent can compete on advertising where a Big Brand can pour in literally millions of dollars into TV, radio, Internet, print, and direct mail campaigns.

Strategically, then, the Insurgent must achieve two things: first, outmaneuver the breadth of brand; and second, neutralize the breadth of brand.

Outmaneuver

By outmaneuver, I mean that the Insurgent simply concedes those channels where the power of Big Brands is at its highest, such as TV and radio advertising, and attacks where the Big Brands are the weakest: the Web, personal networks, and events.

While Big Brands can have a better, professionally designed, and a more feature-rich website, this is an area where millions of dollars make less of an impact than in advertising.  Plus, the Big Brand websites by their very nature have to cover a larger area — typically the whole country in the case of a national brand (e.g., Century 21), or a large region in the case of a regional brand (e.g., Long & Foster).

What this means is that the Insurgent is actually on relatively even footing — or at a competitive advantage — when competing for a smaller local area.  The design of an Insurgent website, for example, can reflect the local culture, local scene, and local demographics.  The very URL can be much more targeted, which a Big Brand website cannot easily do.  They must compensate with things like customized local landing pages, but in that case, they are starting out at a disadvantage to the Insurgent.

Furthermore, since the Insurgent isn’t looking to fight Big Brands via breadth of brand, the Insurgent can simply create more websites.  For example, see Agritopia Real Estate by Jay Thompson.  Jay doesn’t care that the Agritopia website isn’t called “Thompson’s Realty Agritopia” (although, perhaps he should).  That freedom means that the only limit to how many websites Jay can put up is how much time he (or his team) has to design, launch, and maintain a website.

Technology trends favor the Insurgent in this regard.  WordPress, for example, has grown to be a good enough content management system, and with some of the professionally designed premium themes (e.g., Woo Themes, Thesis) now available for just a few dollars, inexpensive, quick-and-dirty websites can have a surprisingly sophisticated look and feel to the consumer.

Add on personal networking.  Big Brands’s major weakness is that they are a brand, rather than a human being with a face.  No matter how wonderful Coldwell Banker’s Facebook page is, it isn’t a way to form real connections with a person.  Coldwell Banker cannot go out into the neighborhoods and meet people.  Long and Foster can’t throw a graduation party for local kids going off to college (hint: think their parents might have an empty nest after junior goes off to State U?).  Agents for CB and for Long & Foster can, of course, but then the Insurgent is on the same level playing field.

Events is something for Insurgents to think about.  Big Brands can do professionally produced major events, but those tend to be gatherings of the brokers and agents who belong to the Big Brand, rather than of the communities in which they are active.  Whether it’s a party or a seminar or a block party, there is no inherent advantage of a Big Brand in putting on a local event that will let real estate people meet and mingle with the local residents.  The GoodLife Team in Austin, TX is an example of an Insurgent using events to meet people, make contacts, and outmaneuver the Big Brands in a highly competitive market.

These are just a few examples of the Outmaneuver strategy.  The commonality behind all these methods is to avoid competing with a Big Brand where it is strongest, to bring the “battlefield” down to local levels and to channels where the inherent advantages of Big Brands aren’t as strong.  The other commonality is that Insurgents can be far more nimble in these channels simply because they lack the bureaucratic layers that a Big Brand must deal with.

Neutralize

Whereas Outmaneuver deals mostly with channels and tactics, Neutralize actually goes to the message and eviscerates the advantage of Big Brands if successfully implemented.

Without a doubt, Insurgents today can be successful in part because the Big Brands have taken their eye of the ball.  As Marc Davison of 1000Watt Consulting is fond of pointing out, real estate brands may be recognized, but they are bereft of meaning.  When a real estate brand in the mind of the consumer is defined by the weakest agent carrying that brand, the widespread lack of training, rigorous enforcement of brand standards, and constant churn are near-fatal flaws.  And therein lies the opening.

There are three broad strategies for Neutralization.  First is local knowledge; the second is attacking the weak underbelly of Big Brands — weak performers; the third is direct responsibility.

The one area where Insurgents can have competitive advantage is in aggregating and disseminating local knowledge.  Because they aren’t interested in national or regional competition, Insurgents can focus in a smaller market area and completely dominate it as it comes to information.  Blogs, Facebook, and homemade video are almost tailormade for Insurgents, because you have asymmetry of effort as compared to Big Brands.  What does that mean?

Let’s say that the Big Brand blog and the Insurgent blog both have 100 posts for the month.  The Insurgent blog will have 100 posts about the particular local market.  The Big Brand blog will have a mere fraction of that content about that market.  In order to just come even, the Big Brand blog must produce (100 x # of markets) in posts.  That is asymmetry of effort in favor of the Insurgent.

However, the Insurgent must take great care here and think about local content.  For example, take the ubiquitous “Market Conditions Reports” that virtually every single real estate brokerage or agent produces.  Frankly, most of these are canned reports generated from existing data from home sales data, from MLS data, and the like.  There are companies (e.g., Altos Research) that will produce market reports for a fee — and Big Brands can simply buy these reports in bulk, and buy higher quality data to boot.

If the Insurgent cannot leverage its greater focus on local knowledge to produce something more than data-driven reports, then it is conceding its greatest advantage in Neutralizing the Big Brand advantage.  If, on the other hand, the Insurgent can do things like proprietary data collection, do further analytics based on truly local knowledge (explaining the data, for example), or expand/clarify/extend the canned market reports, then it should be able to achieve information dominance.

For example, take this Altos Research report for Mountain View, CA.  One data point is median price:

Knowing this chart (or a chart like it) is available to any subscriber to Altos Research’s service, the Insurgent will then take pains to add local knowledge value here.

Perhaps it’s a “Market Report” that explains why between 1/1/09 and 5/1/09 there was such a huge drop in median price — going into detail about the eleven properties that went into foreclosure during that time, what happened in each case, what other properties might be in danger, what’s going on with the employment picture in Mountain View, CA, or whatever else that the Insurgent as a local “insider” with local knowledge can add.   Maybe as the Insurgent, you know that in February and March, 35 homes sold at an average price of $400K, thereby bringing the Median Price down.  That’s a sign of market health, not a sign of market deterioration — unless one is talking about the high-end above-the median homes.  And that would then be an added-value type of explanation.

Perhaps it’s adding proprietary data that the Insurgent has collected by surveying local homeowners, local banks, local mortgage brokers, etc. to show that actually, the median price is $931,121 instead of $915,552 as Altos Research has it.

Or perhaps it is taking the data above and extending it that puts a very different picture on it.  For example, perhaps by correlating the Median Price data with transaction counts, you can show that activity is picking up in the bottom two quartiles.

Whatever the method, it is important to realize that the Insurgent has to establish a qualitative advantage (value-add) as well as a quantitative advantage (frequency/volume) in local knowledg.  Too few Insurgents do this today.

Attacking the weak underbelly works as long as the Big Brand in your area is cooperating by making sure that it is focused more on getting warm bodies into the churn-n-burn machine than it is on delivering on the brand promise.  The Insurgent will win by promising performance and then delivering on it.  (What is critical, of course, is that the Insurgent actually be better at being a realtor than the average Big Brand agent.  Thankfully, most of those who break away from the Big Brand do so because they are the better agents who can’t stand being handcuffed by policies made far away.)

Point out the weaknesses of your competition — their lack of experience, their lack of transactions, their incompetent marketing — while highlighting your own expertise and know-how.  [In the next part, we’ll get into a bit more detail on how this can be achieved.]  Do so while remaining positive, as “going negative” can have consequences and must be done delicately.

Direct Responsibility means highlighting the essential alienation of the customer from the ultimate decisionmaker — it’s the best weapon of the small guy against the behemoth.: “If you have a problem, do you think Dave Liniger will return your phone call?  I will.”  Especially for a seller, the feeling of assurance that comes from thinking, “I know the big boss, have her phone number, and email” is not to be underestimated.  Especially when you’re playing it up.

Furthermore, since as an Insurgent, you are rigorously enforcing your own standards for ethics, compliance, expertise, and brand delivery, you have the ability to take direct responsibility.  Don’t fall into the trap of, “Well, that agent is an independent contractor, see, and I’m not responsible, see?”  That’s the Big Brand message; the Insurgent message is, “The buck stops here, and I’ll make it right, independent contractor or not.”  That is how you delight customers, build loyalty, and ultimately build depth of brand to neutralize the breadth of brand.

The ultimate goal is to achieve in the minds of the consumer the “McDonald Effect”, where she knows and has seen the Golden Arches everywhere, but thinks/believes that the quality of the food she is getting is crap.  Maybe that’s fine for a quick lunch, but not for a romantic evening on the town.  Buying and selling a house should always be equivalent to that romantic evening on the town, because how important a decision it is for the average family.  Then, the breadth of brand that the Big Brand possesses starts to work against it.

Then you win.

-rsh