Compete on Value Not Price

A Reader Asks:
In a hot sellers market and discount commissions becoming more the norm…how do you maintain value and hold the commission rate where it needs to be (at least 6%). When I shop at any grocery store or department store, those retailers have built in to the pricing the cost of lost goods, theft, etc. The 6% commission covers the lost client, the hours of travel and wasted time with both buyers and sellers. Sure if every transaction was gold, 6% might be high, but how do you hold the line when agents even next to your cubicle will discount to get the sale?

By competing on value, not price.

The way you posed the question suggests that even before you sell, you try to justify your price - as if you assume there will be price objections and you’re somehow ashamed about your price. Do you, personally, believe 6% is a fair price for your services? Not because it’s the industry standard but because you do excellent work for your clients & deserve 6%?

If you don’t believe it, neither will your prospects.

You also list a number of reasons why clients should want to pay you 6%, yet none are benefits to your clients! Instead of focusing on all the negatives out there - lost clients, wasted time, travel, etc - start focusing on what makes you different from other Realtors and justify your price with benefits.

What Makes You Unique?
One of the first questions I ask Realtors is what makes them unique? Or why would someone choose them over a competing Realtor? The number of responses I receive that state something like “I pretty much do the same things as all other Realtors” is astounding! If that’s your answer, it’s time to rethink your business model.

Clients only choose on price when they can’t see a perceived value difference. If they can’t see why you do things better or that you have specialized knowledge or that you offer more than your competition, they’ll hound you about price.

And why shouldn’t they? You are asking for 6%, not a flat rate or hourly fee like most professionals. What you make from a $500,000 deal is significantly higher than what you make from a $150,000 deal ($30,000 vs $9000 at 6%), so what more are you doing for them to earn that kind of pay?

Remember, clients are selfish. They don’t care that your last 2 prospects didn’t close with you. They don’t care how long it’s been since you got paid. What they do care about is how you can help them buy or sell a home - and how you’ll do it better and faster than all their other choices out there (including themselves) and at a competitive price. They want to know why you are different from everyone else and why they should pick you. If you can’t tell them that, you’ll just be lumped back in with everyone else.

Features vs. Benefits
If you were in their shoes, wouldn’t you do the same? Let’s say you were buying a used car and you went to 2 different car lots. You found the exact same car (same color, mileage, condition, etc) in both, but the one in the first lot was $1000 cheaper. Wouldn’t you take that one?

Now, say you visit those same lots, but find the cars are similar, but the cheaper one has more miles on it, the interior upholstery has some cracks, the paint is chipped and it needs some work to pass inspection. Chances are, you’ll give the more expensive car some serious consideration now.

Why? On first glance, you might think because of better features. But sales are emotional - you want your car to be reliable. You want to feel good driving it. You want to show it off with pride. Those are benefits of taking the more expensive car. No one wants to say “Check out this clunker I overpaid for. I hope it won’t break down on me.”

What’s In It For Me
Buying a new home is one of the more emotional experiences people face in their lives. They want it to be perfect - it’s something they consider and plan for quite some time - so of course they have expectations. Yet, when they first start looking at Realtors, all look the same.

Your job is not to move listings or market their home - all Realtors do that. Your job is to differentiate your services from everyone else. To demonstrate how knowledgeable you are about real estate transactions. How often you’ll keep in touch with them. How you’ll walk them through the paperwork. How you’ll educate them and make sure they know everything they should. How you’ll put 110% into it. How with you, there are no surprises. And any other benefits that put them at ease, knowing that they hired a professional that will get the job done.

If you can explain that - or better yet, get testimonials from past clients to demonstrate that you can do what you say - then you justify your price with benefits and speak to what really concerns your prospects.

Then you separate yourself from the pack and look like you’re worth your price.