Kmart's Example Offers Lessons for Brokers

Learn from Kmart's mistakes--poor brand differentiation and techno-phobia contributed to the retail giant's downfall.

February 1, 2002

Attention, Kmart shoppers. Cheap, chic stuff is available at Target, and Wal-Mart has the lock on low prices. Can you name Kmart's differentiator? If you can't, you're not alone.

There are numerous reasons why Kmart failed while its competitors succeeded, including failure to strengthen its own brand recognition, according to an article by Joanna L. Krotz.

These are the top five items that Kmart failed to do, says Ms. Krotz:

  1. Set your brand apart; you can't be all things to all people
  2. Embrace technology, even if employees resist
  3. Keep advertising and meet the expectations you've created
  4. Count the cash; strategy is irrelevant when there's no profit
  5. Beware of culture shock; it can lead to a domino effect

Are you making similar mistakes? A look at Ms. Krotz's ideas from a real estate broker's perspective might be helpful.

Set your brand apart; don't be all things to all people

Kmart was neither chic nor known for the lowest prices, giving it an unclear identity in consumers' minds, sums Ms. Krotz. Does playing it safely in the middle work, or is it a recipe for disaster? It was a disaster in Kmart's case, as consumers gravitated to competitors with stronger differentiators.

A glance through the Sunday homes section of the newspaper will tell you that most brokers don't offer any real points of difference, either. They have a brand, but they aren't doing much to build brand recognition. Is there a reason why a consumer should pick one broker over the over? Not from what's there. Most ads are all about the listings, which are too tiny and too detail-poor to attract real buyers anyway. These ads exist to make the phone ring and nothing more.

It's little wonder that consumers play hard to get, because they don't know the right questions to ask, such as "what services should I be shopping for?" Instead they ask questions about a listing and run, often without leaving their contact information. This wastes their time and the brokers'.

Few ads are designed from the standpoint of what consumers want to know. If you want consumers to choose your brokerage, how about touting your specialties? Do you specialize in first-time buyers? How about catering to seniors--do you offer financial and tax consultations along with homeselling advice? Do you offer consultations at all? How about fee-for-service? Exclusive buyer's representation? What about ancillary services--can a consumer one-stop-shop at your brokerage? Is your agency bilingual?

Use advertising space to emphasize why your brand is different, and move the listings to your Web site where you can showcase them in a feature-rich environment. Complement the listings with information about the way you do business and how that benefits the buyer and/or seller.

Embrace technology even if your salespeople don't want it

According to Ms. Krotz's example, Kmart stopped being competitive when it listened to its managers instead of its competitors about automated inventory control. Kmart's people didn't want to give up local control, but meanwhile, Wal-Mart spent the money to automate, and is now doing five times the business it was.

Smart brokers are enlisting Internet technologies for two reasons: that's where the homebuyers and sellers are going to get information, and they are no longer listening to tech-phobic managers and salespeople anymore.

Buyers and sellers may still look at the Sunday paper for real estate information, but more and more are turning to the Web, over 89 percent according to the latest survey by the California Association of REALTORS.

Improve your Internet, client management, and transaction technologies so that you are in control and not your competitors. Use the Internet to develop a dialog with consumers in the way they are comfortable communicating. If they have questions to ask, you can answer, and you can keep them interested by pointing them to links of interest such as your Web site, newsletter, or market conditions report. (Remember to keep these features updated.) Or, enable your salespeople to do these things.

Train salespeople to use company systems for client management so that they have a means of building and maintaining a clientele base. Make license-holding contingent upon salespeople adding to and building their clientele base and meeting production standards. Other independent contractors have to meet quotas--why not salespeople? But don't ask them to buy all their equipment and then wonder why they're taking part-time jobs at Home Depot instead of selling real estate.

By the same token, salespeople can't expect a free ride. Brokers can't afford to capture leads and turn them over to salespeople who don't know how to properly handle them. Lead retention means a whole new skill set for salespeople. Many brokers are already training their own salespeople to serve consumers who prefer using the Internet for communication and information delivery. They are also passing those leads on to Internet-qualified salespeople only.

Keep advertising, and meet expectations

To keep consumer prices low, Kmart cut back its advertising, as much as 50 percent in some months. What do you suppose its competitors did? They bumped up promotions (like direct mail) just as Kmart curtailed its own, writes Ms. Krotz. Which stores got more business?

Brokers are faced with huge advertising costs, and it is difficult to track advertising results. Floor personnel must be trained to ask what brought the call in so the broker can control advertising dollars better. Results must be entered into a broker management program that helps determine which media is producing the most leads.

Knowing where leads come from is getting more crucial every day. On top of local media, brokers are now paying to be found on the Internet. Search engines are asking to be paid for placement. Web sites and IDX solutions are being implemented at great cost by brokers to capture Internet leads.

But one advantage that the Internet offers that other media doesn't is that Internet-based leads can be tracked. If a lead came from your listing on HomeAdvisor, you know. If it came from your Web site on, you know.

Meeting expectations? On the Internet that is accomplished with quick, ample service. The Internet is all about communication and information delivery. Any personnel who is answering Internet leads should be properly trained to use e-mail, and all MLS and broker-owned technologies that enable them to easily send listing information, virtual tours, and other data.

Build a better reputation for speed and competency while your competitors build theirs for inefficiency.

Count the cash; strategy is irrelevant when there's no profit

Kmart, according to a retail industry expert, made a classic mistake - putting more money into stores that weren't working. Is the brokerage industry doing the same thing? Brokers are at an all-time profitability crisis, according to a report by the NATIONAL ASSOCIATION OF REALTORS, clearing about $150 per side. Salespeople gross an average of $34,000, less tremendous costs in technology, advertising, promotional costs, and other expenses.

What's wrong with this picture? Could it be that some business models don't work anymore? While it is nice to cling to the way things were, things change. Does it make sense to shoulder the costs of technology and advertising and not pass on some costs to salespeople? Neither does it make economic sense for salespeople because they can't bring economy of scale to the equation.

Something's got to give.

If salespeople aren't using similar technologies and standards of practice, the result is widely disparate service levels within the same agency. This confuses customers and diminishes the brand you are trying to build. You're only as strong as your weakest link.

Does it make sense to spend money recruiting new salespeople who can't support themselves through the first year? Are good salespeople so valuable that it's better to lose money placating them than to fire them? Is it time to try a new business model as a differentiator? What would be the costs, the risks, if any?

Brokers must think in terms of what is profitable for them, even if they are forced to make changes. They've got nothing to lose and everything to gain.

Beware of culture shock--it can lead to a domino effect

Kmart suffered through a parade of outsiders in management from different companies, with different company cultures.

Do you have a strong idea of who you want your company to be? A strong company culture is consistent from store to store and employee to employee, or salesperson to salesperson.

With so many changes happening in the industry, from agency relationships to legal definitions of responsibility, it's hard to know what a brokerage should be any longer.

Should you be a fiduciary? If so, what is the best way to achieve that status with your clients? Should you be a transactional broker? Do you want to discount--what services and fees are you willing to negotiate? Should you practice single agency?

Capitalize on what you know to be your company's cultural strength and pick the appropriate business model that suits how you want to work the best.

(c) Copyright 2002 Realty Times. Reprinted with permission.

Blanche Evans is a writer/editor and CEO of evansEmedia. Formerly, she was a senior editor with Realty Times, where she was named by REALTOR® Magazine as one of the most influential people in the real estate industry.

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