Real Estate Marketing from A to Z: The Buyer Lifecycle
Over the years, I’ve had the good fortune to work in many industries–Custom Software, Online Design / Marketing, Automotive, Travel, Insurance, Venture Capital–each with very unique customers, markets and factors for success. The time and effort to learn each industry is daunting, but I’ve honed a method to maximizing my understanding of how an industry operates in the shortest amount of time, I call it “follow the money”. In the Real Estate business, the money trail has led me to some truly interesting discoveries. There are some obvious observations, like the fact that the unique flow of funds between an agent and a seller is what keeps the commission structure intact. Sellers typically only pay agents when a house is sold, thus the seller has no risk capital ‘on the line’ unless a transaction actually takes place. This leads to agents being very conscious of the marketing dollars they spend, hoping to both keep the seller happy, and sell the home. There are however, much more interesting conclusions you can make if you truly follow the money. Today, I would like to share with you some of my research and observations, and get some feedback.
The Residential Real Estate Industry is fueled by loans taken out by buyers. So, to understand the Industry, we needed to understand the buyer. I was shocked to find how little research the industry has actually done on buyers. Yes, I found a plethora of buyer surveys (NAR’s is particularly good – here), segmentation analysis and Realtor anecdotes, but I wasn’t looking for attitudinal information, I was looking for true behavioral research. What is behavioral information you ask? There is an offshoot of product research often called ‘human factors’ that studies how people interact with products, services or information. Researchers in this field often have advanced degrees in anthropology, sociology and human/computer interface design. This research is usually very specific – make information, products, or services very easy to understand and use. This is one area in which many companies, especially technology startups, often fail. Their product or service holds the potential to change an industry, but if customers can’t figure out how to use it, they will never be successful. Even when most companies commit to doing some research, they will often do ‘attitudinal’ research. Attitudinal research is exactly what it sounds like; you are asking people’s opinions on a product, rather than watching how they behave with the product.
The problem is that what people tell you in a survey, conversation, or usability lab is rarely what they actually do in real life. Many companies have learned the hard way; investing millions of dollars in new concepts based upon numerous surveys on what consumers are willing to do, only to find when they finished, consumers don’t actually use the new product or service because it doesn’t fit into their behavioral pattern. This can be clearly seen online in Real Estate. The so called “search” capabilities of the major online buyer aggregation site are so bad relative to their peers in other industries, I can only assume they either don’t have a budget for human factors, or don’t know what it is. Bottom line, most buyers start the process of looking for homes with Google, as it’s search process is the easiest to understand and use.
Yes, I know…. This graph looks very confusing. Let me try and explain: The horizontal axis is time; the farther out you get on the horizontal axis, the longer a buyer has been looking for a property. The vertical axis is just a numerical number that represents two things.
With the Blue line, the vertical axis represents property attributes – specific physical characteristics unique to a property. So, the earlier in the process a buyer is, the less detail they seem to look at for each property.
With the Gold line, the vertical axis represents the number of properties they browse through. As you can see, buyers seem to scroll through less and less properties as they start to hone in on the right property as they get closer to doing showings and making purchase decisions.
I’ve broken down this behavior into what I think is four logical phases that a buyer seems to go through before finalizing a property purchase:
Browse –I like to call this the discovery phase of the process. A buyer will typically look at hundreds of properties to get a basic understanding of the market, and what is available. I’ve also referred to this part of the cycle as the ‘gathering’ phase. In this phase, as you can see, a buyer limits the number of property attributes they look at; they typically only care about 3 things:
- Location of property
- Price of property
- What it looks like
Buyers are inundating themselves with lots of properties to understand what they can expect given a price and location. One interesting note is how important the photo of the property seems to be in this phase – if a picture isn’t appealing, it will often be dropped out of the buyers list of potential properties to take to the next phase.
Search – Once a buyer gets a basic understanding of the market, they start to hone in on the key attributes of the property they believe are most important to them. They have shifted from gathering to hunting. They now have a basic idea of how much they want to spend, and may have started to focus on a specific geographic area. They are ‘making their list’. There is more detail on what ‘makes the list’, but we’ll get to that later.
Discriminate – This is typically when a buy side agent enters the picture. A customer has some properties they are interested in seeing, they may have even been to an open house or two. The number of property attributes they examine starts to increase geometrically, while the number of properties actually considered drops dramatically.
Buy – A buyer is deciding between 3 or fewer homes, all of which likely have they key property attributes which fit the buyer’s needs, are within the same geographic area, and are priced similarly. The process typically shifts from rational decision criteria, to more amorphous, often emotional feel of one property over another. Again, this is when a great agent, that has high emotional intelligence can connect a property with a family, and turn it into a home.
What does all of this mean? Well, for agents and brokerage firms, if you’re spending ANY money on marketing you should make sure you really understand these behaviors, or you are more than likely just throwing your money into the wind. In the coming weeks, I’ll try and provide more detailed information for each of these lifecycle stages, what buyers seem to be doing, and how a great Realtor or broker can best take advantage. In the meantime, I’d like to get some feedback! I’ve already seen really smart agents tend to ask customers questions to get an understanding of where a buyer is in the process, but is there anyone out there that already incorporates any of this into their business?