Differentiate to Attract New Real Estate Customers

By Harry J. Lew

Do you operate in a highly competitive real estate marketplace? Then your challenge is to stand apart from your competition. This article shows you how to begin the process.

The real estate brokerage business is brutally competitive. According to the Association of Real Estate License Law Officials (ARELLO), about two million active real estate sales professionals in the U.S competed to sell 5.34 million existing and 667,000 newly constructed homes in 2018 ( U.S. Census Bureau).

With so many agents and brokers chasing a limited pool of properties, buyers, and sellers, no wonder agents with advanced marketing skills outpace those with less developed expertise. In fact, the ability to set yourself apart from your competitors, otherwise known as differentiation, is one of the most valuable marketing skills to have in this industry. Marketing experts call this the capacity to execute a differentiation strategy.

According to Hinge, a marketing agency for service providers, a differentiation strategy is “a deliberate plan to make your firm stand out from otherwise similar competitors in the marketplace.” Typically this involves creating and communicating a strong difference between you and those with whom you compete. Most importantly, differentiation must involve features or benefits that prospective clients can see and find meaningful. If you think you’re unique, but your prospects and clients don’t see why, then you’re business is not differentiated.

Why differentiate?

Why bother to differentiate your real estate business? Here, according to Hinge, are some of the main reasons to:

• You can compete on other bases than price. Although in real estate, buyer- and seller-side agents (and brokers) typically share a fixed compensation amount. However, in recent years, new entrants to the business have begun offering lower commission percentages. Still, competing on price alone only takes you so far. There will always be someone willing to undercut your fees. This means if you differentiated on the basis of price, your advantage will likely be ephemeral.
• You become more appealing to your target market. If you succeed at differentiating yourself, you will become more appealing to your prospective and existing customers. This can lower your marketing budget and reduce the amount of time your properties remain on the market before closing.
• Substitutes for you will have less appeal. For example, if you have a strongly differentiated real estate business, then prospects might be less tempted to sell their homes themselves or use a non-traditional real estate agent or web platform.
• You enhance buyer loyalty. By becoming more appealing to your prospects and zeroing out substitutes, having a differentiation strategy means your customers will remain more loyal over time. Greater loyalty produces more closed transactions and profits.

As you can see, differentiating your real estate business has obvious advantages. But how do you actually become differentiated. Hinge says one way not to become different is to brainstorm the question, “How are we (or I) different?” The typical result of this exercise is a list of characteristics that nearly every other agent claims as his or her own:

• My real estate market knowledge is better.
• I provide better customer service.
• I deliver free home evaluations.
• My direct mail marketing is better
• My personal branding is more effective
• My home staging is more impressive.
• I work better with local real estate attorneys.
• I can refer my customers to better mortgage providers.
• I have a stronger social media presence.

A better approach is to focus initially on the market instead of on your own qualities. Ask yourself what real estate best practices aren’t being performed locally and then ask yourself if this is a hole you might be able to fill. Alternatively, dig deep into your own business and marketing practices to uncover differences you didn’t know you had.

In the first approach, you commit to becoming different as a result of seeing an unmet opportunity in the market. In the second, you let your implicit, but vague, differences emerge through reflection and refinement.

Either way, becoming differentiated results from doing the hard work of identifying opportunities in your local marketplace and/or dredging up differences you didn’t know you had.

Another approach to becoming better differentiated is to get serious about doing a comprehensive marketing plan. Since performing a SWOT analysis (strengths, weaknesses, opportunities, and threats) is a key part of marketing planning, the result of this exercise will put you in touch with what you’re doing well and not so well. Your list of strengths and opportunities might generate ideas for future unique capabilities. A strong differentiation strategy may well emerge from the process of contemplating your SWOTs and building a detailed marketing plan (watch for a future article on this topic).

Potential differentiation strategies

For now though, consider the following possible ways to differentiate your business in a crowded real estate marketplace. Not all of these will work for you. But some might and will likely provide great food for thought as you begin the hard work of setting yourself apart from your peers.

• Differentiate yourself on the basis of demographics. The marketing truism that “you can’t be all things to all people” is especially true in real estate sales. People with different demographic characteristics (age, sex, race, occupation, ethnicity, marital status, income, etc.) may have unique needs for real estate services. Or they may have unique preferences in terms of working with a certain type of real estate agent. If you have an established affinity for certain groups of people, born of your own personal background or prior career experience, you may be able to differentiate on the basis of that specific group. For example, you may have an affinity for corporate executives. This means you know what worries them, how they like to communicate, what their real estate preferences might be, where they like to live, etc. Knowing all these things provides a strong basis for building a differentiation strategy based on corporate executives. The same logic will apply to other demographic groups such as professional women or Hispanic families.
• Differentiate on the basis of a specific profession. You may feel comfortable working with small business owners. Being one yourself, you know what keeps them up at night and how they think. So you might consider making one of your specialties helping small business owners sell and/or buy homes or commercial property. But there’s an important caveat: be sure to select a differentiation strategy that taps into large numbers of prospects who share that differentiation basis. If you ignore this rule, you might build a strong connection with a niche market that’s too small to support your business long term.
• Differentiate on the basis of life stage. This isn’t a demographic play per se. It’s based on where people are in their lives, which may create a need to buy or sell their home and a preference for the home they’ll need for the next stage of their personal journey. Empty nesters are the classic example in this regard, as are first-time homebuyers. Committing yourself to a life stage market will help you become extremely versed in those consumers’ needs for real estate sales support, which will allow you to tailor your services to their preferences. What’s more, once you start specializing in a certain life stage, you should have little difficulty getting referrals to the people your customers know, who likely are in the same life stage. As you add more and more clients within the same life stage, your expertise in that specialty will strengthen, which will increase your customer satisfaction. This in turn will help to generate more referrals, creating a virtuous circle of business growth.
• Differentiate on the basis of lifestyle. For example, you might come from a military family and decide to specialize on service members leaving the military and needing to buy homes. Or maybe you want to help young urban professionals find rentals in a bustling city. The opportunities are limitless and highly likely to become successful differentiation strategies as long as you have a strong affinity with the lifestyle in question.
• Differentiate on the basis of property type. Instead of focusing on types of customers, focus instead on types of properties. So you might consider becoming a condo expert or a specialist in large suburban luxury homes. Or maybe beach properties or mountain rentals are your thing. Over time as you sell more of these properties, you will become highly skilled at all issues relating to those transactions: the home inspections, mortgage financing, and other factors that become acutely important in selling a specific type of property. However, because you’ve seen and done everything regarding this property type in the past, you are able to foresee and prevent problems before they occur. This generates more happy customers, more referrals, and again, a virtuous cycle of self-reinforcing success.
• Differentiate on the basis of neighborhood. Maybe you’re less interested in specializing in a certain type of customer or home type and more interested in specializing in a specific neighborhood. If you have strong roots in a local town or section of a big city, then you may want to make that specialized knowledge the basis of your differentiation strategy. Because you know your town (or area) so well, you know its housing options like the back of your hand. Questions about local schools? Not a problem. You know virtually everything about the local school system. Questions about specific neighborhoods? Again, not a problem. You’ve got the answers because not only do you have deep ties to the community, you’ve made it your business to know everything that happens there. Based on this knowledge, you’ll be able to provide excellent support to any client who wants to move into your town, again sparking a virtuous marketing process.

The examples we just provided are just the beginning. There are countless other ways you might differentiate yourself in a highly competitive real estate marketplace. The key is to make sure your differentiation strategy speaks to you, that you’re excited about working with this specific group of clients, and that you share meaningful characteristics with them. It also bears repeating that your differentiation strategy should tap into a large enough prospect pool to make your marketing strategy financially viable.

Finally, don’t just select a basis for differentiation and call it a day. The next step is to create an entire marketing plan to identify and implement the tactics that will transform your differentiation strategy into sales and profits. We will cover that in a future article.