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PRODUCT VS. COMMODITY
The product vs. commodity concept is a paradigm shift and one of the major points of difference between me and my competitors in how real estate is marketed. (paradigm shift = change in one’s basic assumptions about or approach to something)
CONVENTIONAL THINKING
In real estate there are two markets – “good markets” when everything is selling and “bad markets” when nothing sells. The competition markets real estate as if it were a product. With a product the seller establishes the price and there is a direct relationship to advertising and the marketing of that product. The seller or manufacturer establishes the cost of the product, based on packaging, promotion/ advertising costs, etc. and the public either buys the product or it does not. Example: Gardenburger spent 2/3 of its annual advertising budget on one Super Bowl ad in order to reach a wide audience to introduce its new product and that one ad put them on the map!!
Here’s the paradigm shift...
Real Estate is NOT a PRODUCT. It is a COMMODITY.
It is the buyer who establishes value and there is no relationship to advertising. Real estate is like a stock – IBM never stops trading, it’s the buying public who pushes the price of IBM up or down every day of the week. It’s not a question of what the seller wants or has to get, it’s the buyer’s perception of value that determines whether your home sells or it doesn’t.
There is one big difference between real estate and other commodities and that is that real estate is an emotional purchase –buyers fall in love with your home, but they don’t fall in love with IBM. It’s that emotionality that causes people to want what they can’t have, pushing prices up. In summary - with a commodity it’s the price point which creates positive or negative energy – turning the buyers on or off. It is my responsibility to turn buyers ON!
CONVENTIONAL THINKING
There is the “perception” that the Buyer Pool contracts when the market is “bad.” There appear to be fewer buyers out there, inventory builds, and we call this “a buyer’s market.”
Conversely, there is also the perception that the Buyer Pool expands when the market is “good.” So when there appears to be more buyers out there, and inventory is flying off the market, we call this a “seller’s market.”
Here’s the paradigm shift...
The Buyer Pool stays about the SAME size in ALL MARKETS.
It is the buyer’s perception of value that pushes PRICES up or down. It is the supply that controls the demand, not the demand that controls the supply.
MARKETING vs. LISTING
As your marketing consultant, I have the following three responsibilities:
To inform you - and help you make decisions that are comfortable for you. I will start with how the market functions and the current market conditions then I’ll continue to educate you throughout the entire marketing process.
To create a perception of value - By first educating you, we will be able to position your home so that we create the most energy and exposure to the greatest number of buyers.
To negotiate the sale - this is where I earn my fee in my ability to control the negotiation process in order to net you top dollar. Poorly managed, you will lose money.
In summary, if I do not educate you, we cannot create a perception of value, and if we do not create a perception of value, we will not get to the negotiation stage.
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