Have you ever wondered if there’s another way to grow your real estate business? One that doesn’t involve cold calls, door knocking, or sending cards and emails to old clients that you know just end up in the trash.
Traditional real estate sales methods are high hustle and low pay-off. Maybe that’s why 87% of realtors fail within the first five years of business according to the National Association of Realtors.
Other reasons for such a high failure rate include the low barrier of entry for becoming a real estate agent and the way large brokerages recruit and train agents like they’re creating an army of clones. They teach every new agent the same ways to find sellers and buyers, the same tactics on how to land clients, even give everyone the same scripts to read from.
This leads to an overabundance of agents and brokers competing neck-and-neck for a limited market — what we call a red ocean.
Don’t Swim with Sharks – Create Your Own Waters
Blue ocean strategy says businesses that create new markets instead of struggling in existing markets find opportunities for growth that are rapid and highly profitable.
There are many well-known examples of this. Take Canon — the company that spawned the personal desktop copier industry. Or iTunes — Apple’s strategic answer to the illegal music file sharing boom that started in the late 90’s.
Instead of catering to office purchasing managers like its competitors, Canon saw that secretaries used copiers and printers every day and had different requirements that were not being fulfilled. The company built compact, accessible desktop machines that offered secretaries the features they wanted.
Apple took advantage of the shift from physical CDs to digital music by providing a legal way to buy individual songs at low prices — something that had never been done before. The company generated additional value with improved sound quality and a polished user experience.
In both cases, the companies saw opportunity in previously ignored demographics and formed new markets by offering products that provided enormous value at low prices. In other words, they created blue oceans — market spaces free of competition — through value innovation.
Value innovation is the key to creating a blue ocean. It is the combination of increasing end user value and decreasing price.
More Customer Value + Lower Price = Value Innovation
By providing a leap in overall value for customers, you make the competition irrelevant. You no longer have competition. Instead of fighting for your life in the bloody, shark-infested waters of a red ocean, you have a market all to yourself — a blue ocean.
Value Innovation in Real Estate
So how do you apply blue ocean strategy to your real estate business? It starts with a shift in mindset and ends with asking a few questions.
Traditional business paradigms are all about beating the competition. You ask yourself, “What is my competition doing, and how can I do it better?”
What that looks like in real estate is: how can I run more ads? How do I make more cold calls? Where do I find better leads? It looks like spending more on social media advertising, slick logos, and fancy flyers.
And what blue ocean strategy says in response is STOP.
Stop trying to beat your competitors because the more you try to beat them, the more you start to look the same. Don’t assume that because a competitor is doing something, you should too. Stop using predetermined industry practices as a benchmark for your business.
Instead, shift your focus from your competitors to your customers.
Remember, value innovation is the combination of increasing customer value and decreasing price.
So how do you do that? Four words, or questions:
Eliminate. Reduce. Raise. Create.
- What factors or processes can I eliminate that the industry takes for granted?
- Which standards in the real estate industry can be reduced?
- What standards should be raised?
- What can I create that the industry has never offered before?
Case Study: REX
One example of a successful real estate business that has, knowingly or not, followed blue ocean strategy is REX.
Founded in 2015, REX has since raised $115M and grown to 64 employees. It has done so through value innovation — offering customers a giant leap in value at a much lower price.
Let’s see how.
REX saves its customers time by assigning each customer a pre-screened agent and photographer, eliminating the hassle of choice.
Trying to find the best real estate agent to help sell a home or a good photographer to take professional pictures takes time. The process starts with research, then interviews, then making a decision — a long process that comes with no guarantee that you’ve made the right choice. REX removed that obstacle.
Instead of charging the traditional 5 to 6% commission, REX charges a reduced fee of 2% to sell a home. The company can do this because it eliminated the traditional agent/broker commission structure.
REX raised industry standards by implementing artificial intelligence and big data to provide its customers with more accurate home pricing and marketing.
Without the help of big data analytics technology, pricing and marketing a home is more art than science. Every real estate agent is taught to run comps and knows the result is an educated guess at best, and quality of marketing varies agent to agent. REX changed that.
By combining the above elements into an easy-to-use digital platform and system, REX created a simpler way to buy and sell homes.
What now? Think big.
You might be wondering — what does this have to do with me?
The same techniques that we have been discussing that worked for REX can work for any business, no matter how big or small.
Whether your goal is to start a multi-million dollar real estate business or beat last year’s sales, asking and implementing the four questions that lead to value innovation will help you generate more value for customers — leading to happier clients and a wealthier you.
So go ahead and eliminate, reduce, raise, and create.
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