There's Gold in Them There Files

December 1, 1997

HFS Inc., owner of Century 21, Coldwell Banker, and ERA, has just completed a two-year effort to compile a monstrous data warehouse for its member companies. Culled from some 60 million annual customer transactions at HFS businesses, such as several hotel chains, Avis rental cars, and the real estate companies, the marketing potential of the data warehouse is staggering.

To get a better idea of how HFS can use it, imagine a perfect world. Instead of blanketing your farm area with information about your latest listing, you're able to narrow the field of potential buyers down to, say, a half dozen. In a letter to one, you confidently mention the property's dog run, because you know she has three dogs; your note to another appeals to his handyman's nature. In fact, for each prospective buyer, you pinpoint the very thing that piques that person's interest--all without the benefit of an acquaintance.

Now stop imagining. “Data mining” (so dubbed because the process turns the information in data warehouses to gold) makes such laser-focused marketing possible. It’s worlds ahead of the contact management many brokers and associates practice now, in several ways:

  • Data mining allows you to farm a much larger geographic area or sphere of influence than you have right now, because it turns shotgun marketing into sniper accuracy.
  • Instead of just providing you with the name-rank-and-serial-number facts of most mailing lists (or even the few juicy details you can get from personal contact), data mining gives you access to spending patterns, product use, demographics, and lifestyle information--more than 3,000 behavioral variables.
  • Want to know the number of times that certain customers purchased from home improvement stores and what they like to drink? No problem. Now you have valuable information for your affinity alliances and coordinators as well as closing gift ideas.
  • You might think Mrs. Smith isn’t ready to list again, since she moved only two years ago. Your data warehouse knows better because it has carefully weighed all its eclectic facts about her and compared the conclusion with that reached about other consumers who've behaved similarly. Better give Mrs. Smith a call.

Competition Breeds Necessity

Don't think for a moment this targeted marketing is theoretical mumbo jumbo.

“The basic driver for data mining is the competition,” says Scott Anderson, vice president and chief marketing officer at HFS. “Our [real estate] brands have about 25 percent of the marketplace. That means 75 percent of sites out there don’t have our flag. That’s the opportunity we want to tap” with this data marketing project.

“It’s not practical for the average company to target market like that,” opines Paul Cornuke, the top producer at RE/MAX-All Stars, Colorado Springs, Colo. “It’s too expensive to purchase a huge database and too time-consuming to crunch so much information into something I can use.”

And building a data warehouse yourself is out of the question. The specialized companies that do this look to bankruptcy rolls, real estate records, divorce filings, credit card transactions--nearly every place we humans leave our mark. It’s hardly a task for even the most ambitious broker.

OK, You're Not HFS but You Can Still Do It

Now wait a minute, says Kurt Ruf, vice president of the database marketing firm Ruf Strategic Solutions, Olathe, Kan. “Outside marketing companies do the work for their clients. Tell us the kind of information you want, and we’ll merge our ‘intelligence’ with your customer files to tell you how to use the information.Given the value received, it’s very affordable.” His company, for instance, has information on 98 million households, and 3,000 bits of information oneach household. Yikes!

Still, plan on ponying up some serious change: A data warehouse for even a relatively small geographic farm area starts at $3,000. And you're charged for each extra bit of data, such as whether a household has dogs or whether it has paid off its credit cards. Then again, what’s a few grand to find out who's been thinking about selling and which buyers are most likely to appreciate your listings? HFS thinks enough of data mining to have spent $5.5 million on its system, according to ComputerWorld magazine.

So hey, perhaps you really can inform all the young newlyweds with gold cards about starter homes your company has listed, and send a flyer to those who frequent hardware stores about that great fixer-upper you have. Maybe it’s a perfect world after all.

Buzzwords: The Vernacular of High-Tech Marketing

Data mining: Analyzing huge amounts of raw data to generate profiles of certain groups, such as those most likely to purchase a vacation home.

Data warehouse: Lots of raw data; the data mountain waiting to be data mined.

Database marketing: Using your data mining results to send promotional material to only those prospects most likely to buy or list.

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