Thursday, September 24, 2009

Investigating ways we can further optimise sale results under extreme conditions

Thank you for your positive feedback on last week’s USA Study Tour 09 report. For those that missed it, we reported from the frontline of the USA property market. Genevieve Toop (Bachelor of Business - Marketing) accompanied me on this trip during which we learned a great deal, and not just about the market conditions. Most importantly (for Toop clients), we investigated ways we can further optimise sale results under extreme conditions. Hopefully as an outcome our clients will receive further enhanced services within weeks!

I noticed while I was away there has been some huff & puff about who is the king of the TOP end market in Adelaide. Interesting to compare the way the Real Estate Agents in the USA compete as compared to our own local market. Gen and I got a ‘behind the scenes’ look into the prestige operators in California and saw first hand the points of difference in the way they provide service. Now we are reviewing the information and compiling an implementation plan of anything worth adopting.

Basically due to the fees the real estate agents receive in the USA all ‘new’ concepts to our market need to be viewed and tested locally against sustainability and any cultural differences. To provide perspective; In the USA one half of one sale a month results in an annual income of approximately $200k. In South Australia agents essentially do 8 times that (4 entire sales ie handle both buyer & seller) to achieve the same annual income. There is an important difference with how the commissions work. Apart from the fact that in the USA they get approximately 3 times as much, the real estate sales person pays the marketing costs of every property. This one, seemingly irrelevant difference is driving a massive shift to online marketing…more on that later.

Our challenge has always been to systemise & streamline the real estate process to see how close we can get to their intimate service levels, while maintaining enough sales to exist. From previous trips our VirtualAgent selling system was born, automating communication to consumers. There are a lot who whinge about real estate agents in Australia, but those whingers, I assume, have no concept of how tough and low margin this business really is. We are an industry running largely on perception and bravado of success. We all run around in fancy cars and suits to ensure we exude confidence - the same applies in the USA. Only an elite few actually make serious money. Despite the 6% fees paid in the USA, agents are currently dropping out of the industry in BIG numbers.

Online advertising of property is MASSIVE in the States. Print is dying at a rapid rate, not through normal evolution but as a direct consequence of the changed market conditions and the way commissions are managed. Sales people personally pay all marketing costs and, given the long selling times, cannot afford the luxury of print advertising. Pretty simple, the less they spend selling a property, the more they get to keep.

Property publications were thick books 2 years ago, they are now VERY thin. Press ads are under extreme stress. We spoke to a lot of agents and with two exceptions they had, or were currently, exiting the papers. Clearly this was driven by costs to the sales person and not directly related to what the customer wanted. They are in survival mode. The premium end of the market has remained the strongest advocates of print.

Our investment in marketing technology is really paying off. We are moving up a notch and I am spurred on by what I have seen. We visited the ‘best of the best’ in California and no one has an in-house IT team the size of ours, nor anything that compares with our online marketing systems, and from what we saw we are way ahead in the online mobile space. Given this includes the best operators in the Silicon Valley we are more than happy to be challenged on this. Without being silly, I am confident Toop&Toop are the world leaders in online real estate marketing at the moment.

Back home…sellers, we have had a huge run of sales and are short of stock, we want to hear from you urgently. While we enjoy the profile associated with our reputation of TOP END sales excellence, we are strong across the entire price spectrum; it is just that you never hear about those successes in the paper. Remember, thanks to our technology and systems, it costs no more to have the best!

Anthony Toop, Managing Director.

© Toop Real Estate Group

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