SPECIAL REPORT: Preparing for Tomorrow s Real Estate Consumer

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1 SPECIAL REPORT: Preparing for Tomorrow s Real Estate Consumer Dominion Enterprises Homes.com /v

2 Two revolutions are reshaping real estate In real estate, there s no such thing as business as usual. Real estate is a revolutionary industry. In fact, you could say real estate is undergoing twin revolutions at once - a technology revolution and a consumer revolution. You can t really consider one without the other. Today we re going to talk about tomorrow - tomorrow s real estate market, and especially tomorrow s real estate consumers. 1. Technology Revolution Technology has provided real estate consumers with more information and more options than ever before. The Internet and other technologies have accelerated the pace of change in the real estate industry. When you consider how you run your day-to-day business, real estate has probably changed more in the last decade than in the previous 50 years. Ten years ago, interactive maps, instant messaging, smart phones and virtual tours were all experimental or emerging technology. Today, these tools and technologies are commonplace, and some of them have proven indispensable. The question is, which of these emerging technologies will become real estate s top tools in the next decades? Real estate pros can cut through the hype surrounding new technologies by asking a few logical questions: What s the return on investing time and money in new technology? How do I measure that investment? Which combination of technologies will produce the best result for my business in terms of growth and competitive advantage? Page 1

3 2. Consumer Revolution Consumers are taking a new look at real estate services and a more active role in their real estate transactions. Technology has revolutionized consumer behavior to produce a more demanding, diverse and knowledge base of buyers and sellers. The internet and other technologies have changed the nature of all marketing, not just real estate marketing. People spend more time online connecting with family, friends, and developing business and social relationships. But how do real estate professionals connect with these consumers? Because people are move diverse and have more complex needs, you ll have to find ways to make meaningful connections with you, your brand and your services. This is great news for real estate professionals. Emerging tools and technology offers agents and brokers the opportunity to learn more about consumers than ever before, identify profitable opportunities and create the kind of consumer value that builds repeat business, referrals and long-term relationships--which add add up to revenue. The key is to understand that real estate is no longer all about sales. It s more about managing the customer experience that s the customer s experience that counts, not yours! Consumer characteristics may be changing, but the importance of having a trusted guide through the largest financial transactions most people will ever make remains the same. Consider that people now buy and sell homes about every 5-7 years. With those numbers, more than 15 percent of your prospects are in market at any given time. That s why it s important to stay active and visible in your community during all market cycles. Those of us who have been through a few market cycles know that slow markets are an ideal time to increase your market share. Active real estate professionals have the opportunity to win some business from competitors who have decided to lay low until the market recovers. Page 2

4 Trend Watch Real estate author and trend watcher Stefan Swanepoel likes to say that home ownership is the American Dream, and we have sole this dream not only in America, but around the world as well. This U.S. Census Bureau tells us that immigrants are coming to the United States at the rate of more than 1 million people each year. many of these immigrants are skilled professionals who will enter the real estate market in the next few years. Clearly, the face of the American homebuyer is becoming much more diverse than before. By the year 2040, the make up of the U.S. population will be 53 percent Anglo and 47 percent non-anglo, according to the U.S. Census Bureau. Home ownership is expected to rise dramatically for African-Americans and Asians. The Hispanic population, the fastest growing minority group, is growing at four times the rate of the general population. If your real estate practice is in California, Florida, New York, Illinois, Texas or New Jersey, the impact of minority homebuyers will be even greater. This in important to consider when deciding how to make the most of your advertising budget. Page 3

5 From information overload to information advantage There are challenges in serving such a diverse population, but also great opportunities for those who understand the goals, languages and characteristics of their local buyers and sellers. There s a great quote that s attributed to Bob Metcalfe, one of the pioneers of computer networking technology. He said that getting useful information from the internet is like drinking from a fire hydrant with a soda straw. But well-informed consumers are not a problem for top real estate professionals - they are a great opportunity. First, you can accept the fact that they might have information you don t. Then, provide context for the information they have with your own expertise. Free real estate information is available all over the internet. The information advantage for agents and brokers isn t gone, but it s more of a challenge. You must be familiar with the information sources that consumers use and know how your exclusive information matches up. Page 4

6 Four ways real estate pros can gain an information advantage: One of the best ways to understand your audience and manage their expectations is to see what they see. Find out what sites they are visiting and check them out. It s easy to explain the difference between an estimate and a CMA prepared by a real estate professional. You have MLS information that consumers don t have. For example, local pending sales can provide insight on where the market is going, as opposed to the rear view mirror of recent sales. By analyzing MLS data, you can provide information about local market trends that may be quite different from today s broad indexes. The neighborhood is consistently the most important factor home buyers site in choosing where to live. If you re not providing neighborhood information, you re only giving home buyers part of the information they need to make the best buying decision. And sellers can almost always use neighborhood information to position their homes in the best light for a quicker sale. The internet provides large volumes of unstructured information. If you can provide visual knowledge--relevant neighborhood information in charts, graphs and personalized maps--you have a powerful tool to connect with consumers. Three revolutionary principles: Patricia Seybold is a well-known author who champions the idea that today, all businesses are e-businesses, and the most profitable businesses in the future will be built around customers, not products or services. She is not known as a real estate writer, but her ideas are certainly relevant. Her books include The Customer Revolution and Innovation: How Your Customers Will Co-Design Your Company s Future. Seybold has three principles of the customer economy. 1. Customers are reshaping and transforming business. They expect you to use technology to make life more convenient (not your life). 2. The value of your present and future customer relationships determines the value of your business. 3. Customer experience matters how customers feel about doing business with you determines their loyalty. Page 5

7 Agent Experience SPECIAL REPORT: Preparing for Tomorrow s Real Estate Consumer Consumers and technology are reshaping and transforming real estate. In a successful brokerage, it s easy to see how a large base of prospects, clients and contacts translates into future profitability. In fact, having a strong client / referral network often means the difference between success and failure when market conditions get tough. Many of us have created networks of people and resources that help us provide higher service levels and get transactions done. And these types of relationships are also one of the strongest reasons for prospects to use your services. What buyer or seller doesn t want to work with a real estate professional who has valuable local connections? If you have a strong network in place, be sure to highlight the benefits of your network in your marketing materials. Agent experience is important, but customer experience matters even more. On your website and in your marketing materials, is the focus on your experience and your sales awards? Or on your customers? It s important for agents and brokers to deliver a customer experience that s remarkable and that builds loyalty. When someone asks your clients what it s like to work with you, it would be OK if they said you were a good salesperson or a good negotiator, but wouldn t you rather hear: Working with that agent was a great experience. Agents providing the best customer experience today will develop the most valuable client and referral relationships in the future. Page 6

8 A more diverse and demanding information culture is here Ready? Consumers want: Local, personal real estate information Their choice of communication channels Real-time response to questions Transparent transactions Consumers not only want to access to information that they have found on the web, but they want you to share your information freely with them, including your own expertise. Regardless of the content of your customer communications, make sure you re using the right channels. Older buyers and sellers may have been OK with the idea that real estate transactions are huge, complex and risky but Generation X and Y consumers will want to know what s under the hood of the transaction. Who will be buying and selling most of the real estate in the next few years? Generation X and Generation Y. Who are these guys? Page 7

9 Generation X Born approximately between 1965 and 1980 Want school, neighborhood and crime reports Expect flexibility, buyer representation, personalized communications Half of Gen X group are already homeowners Generation X and real estate Gen X consumers tent to be more inquisitive and interactive than older consumers. They don t really have much interest in the conventions of traditional read estate, and may question the old rules. They want to know how real estate transactions work, how much they cost, who is involved, and how long it will take. They want to know about the trends and economics of the local real estate markets. They want to hear less about your sales awards and success stories, and more about what in it for them. Gen X buyers expect your communications, materials and presentations to be tailored to their particular needs. They are impressed by use of technology, personalized service and fast response. About half of Gen X consumers are not yet home owners - a huge opportunity for real estate pros who can add value by providing relevant, current information and local market knowledge. Page 8

10 Generation Y Generation Y was born between More than 70 million generation Y consumers in the U.S. They Blog, IM, consume videos, expect quick answers to questions. $172 billion per year in purchasing power Generation Y and real estate Here s a real reason to be optimistic about the future of real estate: About 70 million real estate consumers are heading our way, and a 2007 survey of college students by a company called Anderson Analytics showed that real estate is a real priority for Generation Y. Survey respondents were asked to complete this sentence: If I could buy anything, it would be - not an iphone or an Xbox - but a home. Housing was the top choice for 41% of the men and 49% of the women. This is an interactive group, and the ways they communicate and interact that seem like new media to us-blogging, online communities like Facebook, instant messaging - are simply everyday habitats to them. This is the way they interact with each other, and they will expect to be able to communicate with real estate professionals this way as well. $172 billion in purchasing power is an impressive number. In addition to their own money, this group of real estate consumers will benefit from a huge transfer of wealth from their boomer grandparents in the coming years. Page 9

11 The Trouble With Mass Advertising Broadcast messages are becoming less effective Technology enables targeting Real estate pros must improve on-line marketing, customer acquisition, measurement It s not really surprising that broadcast advertising isn t as effective as it used to be. Consumers are bombard by thousands of ads each day and it can be hard to cut through all the clutter. Not to mention, with our population becoming more diverse, it s going to be very difficult to have a single message that s relevant to everyone. Online marketing and prospecting are skills all real estate pros should work on. That includes measuring your results, which is actually easier online than with traditional marketing channels. Targeted Advertising for ROI Relevance is king Online vs. offline Integrated advertising Use direct mail strategically The keep it simple, we can define relevance this way: Do you have the right marketing message reaching the right people at the right time? For this reason, the debate between online and offline advertising is kind of academic. If your message is relevant, it doesn t matter if it s delivered through print or online media. In fact, it s usually a good idea to increase your reach by using both print and online media. In many cases, an integrated strategy that incorporates print can be very effective in driving traffic to your website. In the same way, don t discount print ads and direct mail. If you follow the principles of direct marketing, they can be very effective prospecting tools. Page 10

12 Real Estate Advertising Forecast U.S. real estate ad spending is approximately $12 billion annually Online spend hits $3.3 billion in 2011, surpasses print Rise of marketing metrics Agents, brokers invest in own web sites & campaigns Source: Borrell Associates Real Estate Advertising outlook from What is Social Media? Social media describes a set of web based tools and technologies that enable shared community experience both online and in person. Social Media Sites Video Sharing Sites YouTube, Google Video, MySpace Social Networking Sites FaceBook & Twitter, Second Life Blogging Sites Blogger, ActiveRain, Realblogging Photo Sharing Sites Flicker, Shutterfly, Photobucket Professional Networking Linked in, Spoke, Konnects Wikis Wikipedia, InmanWiki You may already use some of these promotional channels. Research shows there s a lot of potential to reach people with social media. But what comes next? Page 11

13 Now, Welcome to Social Commerce Twenty-two percent of all time spent online is spent on social networks Ad spending worldwide on social networks: $$2 billion in 2010, expected to hit $8.3 billion by 2015 Nearly two-thirds of all internet users are using social networking Social media is turning into social commerce as some smart marketers find ways to connect with people and build relationships using social media tools. The potential uses for social media in marketing are limitless, as more consumers come of age every day. Social Commerce for Real Estate Social media tools develop into valuable business tools Make community & personal connections Set and achieve goals Follow through Here are some ideas for putting social commerce to work in real estate: Choose the social media channels that are used by your prospects and clients. Use social commerce to get your message across Like any other form of marketing, measure your results and improve tactics Social commerce sites are filled with real estate agent profiles that were posted once and never maintained. If you choose to market yourself through social networks, stay active and involved! Page 12

14 Six Actions for Real Estate Professionals in Control Embrace the revolution and thrive Become the neighborhood expert Create visual knowledge Niche thyself Integrate online / offline marketing Build loyalty and referrals through customer experience Six Actions 1. Embrace the revolution and thrive: In real estate, there s no such thing as business as usual. You can recognize some of the changes and plan ahead, or wait until they affect your business Become the neighborhood expert: There s a great opportunity in any neighborhood to become an expert in local market and trends. It can be a great competitive advantage to be your neighborhood s best source of unique information. Create visual knowledge: It s great to have rich real estate information, but it can be tough to understand MLS printouts and spreadsheets. Create visual knowledge with charts, graphs and maps to get your knowledge across in a high-impact package. Niche thyself: With real estate consumers becoming more diverse and more demanding, it makes sense to develop specialized niche expertise. As Bill Cosby says, I don t know the key to success, but the key to failure is trying to please everyone. Integrate online and offline marketing: Integrate the online and offline channels you use to deliver your marketing message. For example, think about how print and direct mail can support online marketing, or how your can promote local events on your website. Build loyalty and referrals through customer experience: Finally, to wrap things up, we come back to building loyalty and business through a great customer experience. Remember, building your real estate brand is more about what you do than what you say. If you do the right thing by embracing the technologies and business practices that enables you to deliver the ultimate customer experience, you will have nothing but success with today s - and tomorrow s - real estate consumers. Page 13

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