Marketing

Heidi Fleiss and the future of real estate

Author
Marc Davison
No.
45
Date
08/08/07

The escort business has brokers (madams) who oversee a stable of independent agents (escorts) who deal in very expensive and intimate transactions. All kinds of escort services coexist; luxury brands charging $10,000 a session to independent brands with rates that can be negotiated based on street market conditions. Like real estate, there is also a FSBO market of sorts where clients handle the transaction themselves without the assistance of a professional. 

Heidi Fleiss is an interesting case study for real estate. During a boom in her industry where competition was fierce, she decided to build a luxury model and charge the highest prices in the marketplace.

But the reverse occurred during the real estate boom. New entrants built discount models despite the fact that America was consumed by a luxury brand mentality.

Hour for hour, Heidi’s services were vastly more expensive than what consumers pay for real estate brokerage. Yet no one ever accused her of “stealing” from the consumer. In the midst of a profession rife with discounters, Heidi never worried about a deathblow from a street pimp.

So why is “traditional” real estate worried about Redfin, et al?

Seppuku

If a deathblow befalls the traditional real estate pricing model, it will undoubtedly come at its own hands, the culmination of a decades-long muddling of the public’s perception of what full service real estate really means.

Despite the hundreds of millions of dollars Realtors collectively spend in self-branding each year, can anyone tell one from the other? Confusion creates a global stereotype with a dense fog around commissions and value. It is here, inside this muck of Realtor independence, that the deathblow marinates.

Samurai were uniform. Systematic. They excelled on that account. Today business is adorned by Samurai beliefs. Starbucks. Quiznos. Starwood Hotels. UPS stores. Warrior models with a ladder of benefits that slay the millions of new decisions we’re faced with daily.

This ideology eludes real estate. Everyone is independent. Two million individual brands inside tens of thousands of broker brands inside dozens of corporate brands resulting in millions of individual credos and promises.

Aside from a few stellar exceptions, real estate companies have not aligned themselves to the consumer. We’re left struggling to make sense of it all. We hate doing that and that’s why we end up doing stupid things like buying homes without representation and paying unqualified agents to sell our most cherished asset. Consumers want leaders. And they’ve proven over and over that they’ll pay for it.   

The paths toward Princeton

Traditional pricing will eventually crumble in the absence of perceived value. Today, consumers can’t spend money fast enough buying high-end services & products. Enough bestsellers have made this clear. It’s the elusive value of real estate services that drives consumers away. The

The way I see things, no model puts another out of business. The only reason a model goes out is because it failed to make adjustments to meet the times.   

Even the strongest brands must continue to uplift public perception so value is clearly understood. Your current pricing model is safe as long as you continue to deliver a ladder of valuable benefits that differentiate you from cheaper models. If a madam can do it, you can.

A good place to start is here:

  • Build a W2 model that works so you can mandate consistency and service propositions across the board.
  • Embrace the ethos of Web 2.0, which is fundamentally about talking with rather than talking at friends, family, prospects and clients. There’s never been more opportunity to demonstrate value.
  • Enhance customer service to Zappos-like heights.
  • Forbid newly licensed agents from representing anyone on their own. Apprenticeships must be enforced.
  • Mandate agents upgrade everything – tech tools, websites, education, etc. — so they are perceived to be a better value than their competition.
  • Mandate and control branding. Forbid agents to use any unapproved material across the board. More damage to consumer perception is done by this one action that anything else.   
  • Rework all advertising so that your ads aren’t interchangeable with your competitors’.
  • Insist all agents stop spending $10,000 to create useless tri-fold brochures that depict them “as human” — playing tennis, hugging their dog and walking on the beach with their spouses. Not one consumer cares about that. Instead enforce investment into continued education.
  • If you cannot enforce agents to comply, show them the door and send them and their bad habits to your competitors.
  • Accept the fact that the consumer believes you charge too much money and respond by creating more value.

If you don’t want to suffer the deathblow you have to prove value. Wal-Mart will never put Neiman Marcus out business and Help-U-Sell will never put Coldwell Banker out of business ” as long as the differences between them all are crystal clear.      

— Davison and Boero