I have always believed that there are two ways to go about selling a service. Sell the service or sell the price. There is a market for both.
I had a great mentor many years ago that taught me one lesson that I live by today. You can not win on price alone, because someone is always dumber than you.
A little background:
For many years I sold equipment and supplies in the printing and graphics business. I was very successful at it and enjoyed my work. I also took extreme pride in knowing my products and market better than any of my competitors. My service was always the best I could make it and I constantly strived to improve both my expertise and my service.
When I reentered the real estate industry a few years ago I approached selling homes the sale way I approached selling printing equipment and supplies.
The best way I can illustrate my approach is by sharing one of my favorite printing sales. True story from many years ago:
The largest print shop in Honolulu was building a new building and planning to merge a couple of their businesses under one roof. They went out for bid for their new pre-press department. This was in the days before desktop publishing. Everything was done mechanically on light tables and in a darkroom. Their request for bid included each and every line item as a separate quote. My competitors went line item by line item cutting their prices to the bone so as to win the orders for every piece of equipment and every little item down to the t-squares.
I spent a couple of days in the new building measuring the new area and evaluating their needs. I studied their workers and their work flow patterns. I met with manufacturers like Kodak and Agfa. We developed a new plan for the client, which included long term contract pricing for their major consumable purchases. It also included a commitment for their future business.
My proposal listed all of the lines items included, machines and everything down the t-squares. The one thing missing was prices. I had a total price at the bottom.
I submitted my proposal with a cover letter explaining my plan. I included contracts committing them to buying their supplies for the next three years from me. I also provided them contract pricing for the consumables the real carrot here. The spent many thousands of dollars every month on those.
The day of the bid opening came. I shortly after got a call from their purchasing agent requesting me to break down my proposal line item by line item. I politely declined and said it was all or nothing. I knew I was saving them major money and did not need to back down. I got the expected call a little later from their plant manager. After a great meeting with him and his department heads. I was awarded what was the largest local order placed to date. At that time I was 23 years old, the youngest and newest in the business. I followed that up by doing something similar at other top accounts in town.
Why did that happen? I moved their business forward, I brought added value to their business. I did not so the same old thing and try to shave a few pennies off the price. My competitors would have probably beaten me anyway.
I made my clients real money. I tied that in to a contract that would compensate me appropriately. Not one client tried to beat me up on price or profit margins, that was not even a discussion.
That was a long story. Why I am a sharing it with real estate folks? The products are different, the principles are the same. You can sell Price or you can sell Value.
Price
Value
Value Plus (premium service)
In future posts I will be writing about premium services and my plans to move my business towards Value Plus. It is harder than selling price, but the rewards are greater.
Associate Broker, ABR, AHWD, CRS, e-PRO, GRI "Not Just Another Pretty Face" Hawaii’s VA/Military/ 1st time buyer’s expert. My aggressive marketing programs bring top dollars for sellers.
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Some consumers only want price (forget that they may lose on what their home sells for) and will hire the cheapest warm, licensed body they can find.
Others want the Neiman Marcus of real estate service.
But most folks want the best value for their money.
You are right on target!
Randy,
Good post..now I wonder why you came up with this. Was it be coincidence?
Great points and as usual great writing! i still think you should also write...teach classes...etc.
I firmly believe that service (value) will overcome price 9 times out of 10. Good post
Timely post. I'm right there with you. One usually gets what one pays for.
Mary - There is a segment of the market who is only interested in price. That is OK, there are plenty of people will to compete on that basis.
Neal - I attended a great CRS class on Friday that has had me thinking about it and working on changes in my business plans.
Sally -I do teach chess classes. Thursday nights, you are invited.
Wayne - I do not know if will overcome it that often, but it will win in the long term. If you charge more for your services people will sometimes give it a second look. If you give poor service their attorney may be the one giving it the second look. You will also not be seeing referrals.
Klaus - I did not get in the business to give away my services or to do less than the best I can. I got in because when I bought my home it was a mess. There were incompetent people on several levels. If I had not been licensed in the past and on top of it, we would have wound up in court.
It just does not have to be that hard to buy a home. You pay quality professionals and they should make it a pleasant experience. I want every client I have to look back and tell their friends what a great experience they had buying or selling a home with Randy.
Randy--Funny, I didn't see you in the continuing ed class I took last week put on by our Minnesota Association. But you nailed the topic on how to do grow your real estate business in this changing environment. It is all about service! People are willing to pay more for high quality and if you as an agent cannot tell your client why you are worth the commission you charge, you probably are not worth the commission!
Also--I did sales support selling printing equiptment way back when...Interesting analogy! Obviously, you know how to do your homework to get a sale!
Excellent post!
Look at the pretty gold star - congrats, it is well deserved you did a great job - service is the key
Great Post! Your example of printing helped to make the point even better! Thanks for sharing your story and expertise.
Very good post. Thanks for the information Randy. I needed that one.
Teri - A printing background. I am sure that has helped you with you marketing decisions. I have always believed you get paid exactly what you are worth. In some cases those who are chopping their prices may still be over priced for the lack of service they provide.
Thesa - Thank you
Cynthia - The industry or business can be exchanged for another. The value you bring is the inportant part.
Lanre - You are welcome
Great post and way to break down the types of agents out there.
We run into the same problem with Mortgages. Everyone wants both the lowest rates and the best service. You always can't have both
Randy...In the absence of value, the consumer will always go to "cheap". It's up to us to show and prove our value. Then it becomes easy to demand full fee for service.
Regards...Jay
In most cases, people think they are looking for price, but are really looking for value. It's our responsibility to show them value - in the process, and in the final result. If you pay too little and don't get the job done, the price was very high. If you save on the commission but lose on the price you get for your home, you may be losing much more than you save.
Christy - Thank you
Ronnie - I had a client who had a sign on the wall. It said pick two:
Jay - Absolutely, if there is no perceived value, you will then have only price left.
Sharon - I had one client who mentioned the name of another Realtor who claimed he did it better and cheaper.
I pulled up his sales in the neighborhood. His average price was far below the average and his days on market were off the scale. I got the lisitng and sold it for the top price in the area. He never mentioned that other agents name again and has since given me a couple of good referrals.
Randy, if someone thinks they can stay in business buy competing on price alone, they will find themselves out of business very quckly, their will always be someone willing to go lower.
I rarely get into talking rates with my Borrowers, if I have to sell them on rate, they are a waste of my time, because they will be looking all over the place for that cheapest rate. It is a lose lose situation.
George - One of the things I see on your end is lenders offering a lower rate to steal the customer, then to only insert the higher rate later once they are deep in the process.
On the Realtor side we get a variation of that. Agents will list a home for a higher price to steal the listing. Once it sits and rots they then try to get the seller to lower the price back to where it should have been or even lower now that the property sat so long.
Great post and example! I agree about selling price vs. value and the service element.
Hi Randy,
In light of the 60 Mins show the other day (the r-fin commercial), your essay on Value vs. Price is very timely. I find great optimism reading these posts of yours. Keep it up, and I'll buy you a beer next winter at CRS!
Ana- Thank you
Patrick - I look forward to meeting you in January. I never did see the 60 minute show. I will have to go to the website.
Mott - Very true, you as a service provider have to decide who your market will be.
Randy-Never thought about it like that (value vs price). I do know that I dont SELL anything so to speak. I am involved in the transaction to FACILITATE the sale between the buyer and the seller. I will never call myself a SALESMAN because I will never coerce anyone into buying something that they dont want to buy. I will help them to buy something that they may not realize it is in their best interest to buy, but never something that only I want them to buy. Aloha!
David - I sell service, that is all I have to sell. They buy dirt and improvements and my services.
I don't even play chess
Randy-Thats it! Selling service doesnt sound harsh like being a "Salesman". I dont have anything people that are proud to be a "Salesman" but thats not how I think of myself. Somehow, I think my comments have nothing to do with your post and I dont know how I got here. I guess it must be tiime to go and get checked for Gulf War Illness again!
Sally - A handicap we can easily fix.
David - The CRS classes will really help clarify this issue. (not Gulf War Illness)
It's great to see that someone else (especially in the market today) realizes that there IS an actual difference in price and value. Sure the competition can lower the price of their products, but what they lack in price, they also lack elsewhere-quaility and service. Great post!
Maegan - Thank you, not everyone looks for value over price. The ones I look for as clients.