One of the challenges for salespeople is that we sell in generalities when consumers really want specifics. If we stay in the generalities, we will lose.
We need to show the consumers specifically what they will receive when working with us; what specific results they can expect in sales price, net proceeds, timeframe, communication, and additional services and how that differs from the competition. We need to show them what type of guarantee we offer, if any. The commodity mindset a consumer possesses demands the specifics. If they don't receive them, it makes their decision to select the cheapest alternative a foregone conclusion.
The price of our service or our commission is really a marketing strategy. For anyone who has ever taken a college level marketing course, you will learn about the 5 Ps of Marketing. These four factors make up the elements of marketing. These five Ps are Product (or service), Promotion, Price, Place (delivery system), and Presence. When someone applies a discounting strategy to their business, they are really trying to apply a marketing formula to attract more opportunity. This is true of any business in the world.
Let's say you now own a pizza parlor. Your sales are lower than you would like. What do most pizza parlor owners do? They use one, or a combination of a few, of the 5 Ps of Marketing to increase sales.
1. Product or Service
As a pizza parlor owner, your product is pizza. You might offer salads, soda, and beer, but pizza is your revenue stream. There is not a lot you can do to change pizza. It is dough, some type of sauce (usually tomato based), with cheese and other toppings on top. Pizza Hut is always trying new types of pizza to expand sales, but other than changing a few toppings, pizza is very similar today to what it was 20 years ago.
As a Real Estate Agent, what changes can you make in service? I believe there are numerous options and differences in services we can provide. The core problem is that prospects don't see them because we have never bothered to really show them. There is a huge opportunity for us here ... unlike the pizza parlor owner.
For the pizza parlor owner, this is the area we, as consumers, see frequently. We see coupons in the paper, direct mail coupons, TV commercials, radio ads, and charity promotions, but the most common promotion is coupons of some type.
As an Agent, you can increase your marketing promotion through newsletters, direct mail, farming, sending all kinds of things to your past clients and sphere, bus benches, and shopping carts. Some of these techniques produce at a much higher level than others. You can always spend a lot of money on promotion to generate more leads. The possibilities in this area are endless.
The pizza parlor owner will use this one extensively. This one will often be linked with promotion. With a coupon for $2.00 off your next purchase, the promotion and price for this is often together.
For Agents, we often use this to attract more business. We feel that, by lowering our fee or giving the appearance that we are willing to consider a lower fee, we attract more people.
Another challenge with this strategy for Agents is the future business you might receive by either repeat or referred clients who will expect the fee to remain the same. As an example, the auto industry tried to increase sales after 9/11 through 0% financing. By offering no cost financing to their best customers, they increased sales. Years later, they are still stuck using 0% financing on vehicles to generate sales. One short-term price strategy to fix sales has led to catastrophic results years later. They can't seem to break away from giving away free money to finance their cars. Most of the automobile manufacturers make more money in the financing of the vehicles than they make on the sale of the vehicles. They promoted and priced away their profit margins.
As Real Estate Agents, we could be doing the same thing with all of our future business in repeat and referral business. We will never be able to get away from it, just as the automobile manufacturers were not.
4. Place or Delivery System
If you have a good business location, there is little reason to change. You might consider expanding to another market area. You can do this geographically as a pizza parlor might. As a Real Estate Agent, you could do this by market segment, rather than geographically, as well. You could start a farm; work expireds or FSBOs; create strategic alliances with lenders, probate attorneys, family law attorneys, and financial planners. Your place of business, in terms of market segment, is unlimited.
The most obvious choice to expand business is through increased advertising and reduction in the price. What is often the easiest is not always the best. The road frequently traveled by most people is the road to mediocrity at its best or the road to disaster at its worst.
I would encourage you to protect your commission through your service first and foremost by raising the value and perceived value the consumer receives. If you have a need for more leads, rather than marketing for discount leads, focus on promotion or expanding your place of business. Look at attracting and creating new lead sources, rather than marketing a reduced pricing strategy to increase the pool of leads and potential clients.