Why is customer service less than it should be in this industry, and what can we do about it?

by Larry D. Romito   To the average consumer, the details surrounding the real estate transaction are mysterious, invisible–even secretive. The transaction moves, stalls, or falls apart largely unobserved and beyond the control of the principals. This lack of understanding by the consumer in combination with an absence of well-defined responsibilities creates low professional accountability.

Being in the dark is not acceptable to today’s consumer. The need to know is in many cases escalating to the need to participate. And these factors combined with an attitude that the service "costs too much" translates into potential for high levels of consumer frustration and dissatisfaction.

While most organizations talk about it, quality service remains more talk than reality. Quality service has become a cliché–an overused, undefined, unmeasured, and meaningless expression that is void of a process, accountability, and consistency.

Traditionally, real estate has been a parochial business governed by local customs and practices, where closely controlled information has placed the real estate practitioner as the gatekeeper of that information. The Internet and technology have changed reality regarding the aggregation, delivery, and access of housing information. And while many REALTORS^® continue to fight to "guard the gate," consumers are finding an increasing number of other gates open to access the information they seek.

The service value crisis: practicing real estate by convenience
The service delivery process surrounding the real estate transaction does not offer the consumer a consistent, reliable, predictable service outcome and provides low-level professional accountability. This is in marked contrast to other high-fee professional services like accounting, architecture, law, and medicine. Real estate practitioners (700,000 of them) individually determine what, when, how, and if something is to be done.

The real estate industry may be the last on earth where practitioners rather than consumers define and drive service. Individual practitioners may and do provide a very different service process from day to day and even from morning to afternoon. An external event affecting the emotions, psyche, or physiology of the service provider may influence what is done, how it is done, or if something is done at all. Consumers experience a service that is process-less–and outcomes that are closer to random events than managed processes with predictable results.

Customer demand raises the bar
Consumers increasingly recognize this absence of a standard of practice. They are becoming adept at accessing housing information 24 hours a day, seven days a week. This awareness is improving judgment in the selection of service providers, which raises the level of competition and service accountability. Service providers who simply choose to ignore this shift are increasingly at business risk.

Consumers perception of fees and service
When asked about the perceived value of real estate brokerage services relative to the price paid, homebuyers and homesellers almost universally offer that the price is too high. Is that so bad? In the history of the American free- market economy, serious or long-term dissatisfaction with what consumers have paid for the goods or services versus what they have received has always been the precursor to change, destruction, or invention.

Consumers increasingly seeking value through price
With any product or service, value is the relationship between the quality of that product or service and the price. Consumers will always seek to maximize value, and in an industry like ours, where differentiation is unclear, that pursuit is increasingly focusing on price. (See the value/quality/price formula)

Pricing as the primary strategy for success
Pricing (as in a low or the lowest price) is not a sustainable competitive advantage. Anyone can offer an even lower price for service. Indeed, some may be willing to charge nothing at all. There are many reasons low pricing or "free" is adopted as a strategy for customer acquisition or market share. Certainly such a strategy is easy and requires no special commitment, skills, or resources. Price is a consideration rather than the answer. A product or service, regardless of price, must be worth possessing. Even free has a cost of possession. Free can be very expensive. If price is the answer, why didn’t Woolworth’s five-and-dime stores take over the retail business?

Maximizing value by providing quality service
Can a strategy focusing on quality rather than price have a hope of success in today’s business environment? In a world where, for many, time is a more scarce resource than money, there are numerous examples to support such a premise. But such a strategy requires that quality be more than a word–more than a promise. Service quality from professional service providers must be measurable, meaningful, substantive, and definable. Quality professional service must offer consistency, reliability, predictability, and accountability–a defined process–a managed outcome rather than a chance event.

Customers recognize that the current system does not offer value. Brokers and owners can see that measurably better service quality will reap the benefits of customer loyalty, repeat business and referrals, improved risk management, and lower operating costs. Sales professionals, under constant pricing pressure from both competitors and consumers, are looking for a workable alternative to discounting.

Real estate…an industry that is self-focused
Many of the service practices common within the industry reflect the interests of the salesperson or broker rather than the consumer. Take the following example: The phone rings at a typical real estate office. A prospective customer is calling to obtain information about a home advertised in the media. Because the salesperson who "has the listing" is not available, no information is available to the consumer, and the consumer’s contact information is captured so that the "listing agent" can return the call as convenient. Convenient for whom? Certainly not the consumer. Whose interests are primary in this rather common service practice? Only one person can be first in line. Will it be the company, the service provider/sales person, or the consumer? It’s a business decision and it has consequences. Any system or practice that places anyone ahead of the consumer is vulnerable to every competitor that puts the customer first. As a consumer, where would you chose to do business?

The illustration above is the outgrowth of the "salesperson is my customer" philosophy. That kind of thinking has the same relevance today as the abacus and the slide rule. A more enlightened picture presents the salesperson and broker/owner in partnership to serve the real customer–the consumer.

Changes in consumer habits and expectations–such as the desire for information on demand and the realization that time is a more scarce resource than money–create great new opportunities for those organizations that are truly consumer-driven. The consumer-driven organization approaches service from the outside in. It determines what consumers want and need and then organizes its internal business resources, systems, practices, policies, processes, and people to serve the customer.

In contrast, many firms in the real estate industry view the world from the inside out. They offer the outside world services and practices reflective of the needs of the organization and its members. Newer, more nimble organizations with less vested in past practices and less invested in old systems have responded more effectively. And so the question: Is the current pain and cost associated with change greater or less than the ultimate cost and pain of clinging to practices of past success?

Defining professional service
While technology will have an enormous impact in the real estate industry, it is the underlying service process and the fundamentals of consumer-centered practices that will be the key to success and survival. Superior professional service has four key elements impacting quality and value: accountability, consistency, reliability, and responsiveness. The physician, the lawyer, the accountant, the engineer, the entertainer, the commercial airline pilot who offer the highest quality and most valued professional services do so through high levels of accountability, consistency, reliability, and responsiveness. And the glue that holds all this together is process.

Consistency and reliability of service are not the result of random acts or ongoing improvisation but rather are derived from predetermined steps performed in a considered and disciplined manner, such as a surgical procedure, accounting practices, a musical score, takeoff/landing procedures. Highly predictable results and outcomes can only be achieved through consistent input and processes.

Most real estate professionals work hard. Hard work is not the issue. Under the mantle of being an "independent contractor," sales people have enjoyed the freedom of improv service–making it up along the way. Service is not about independence and the service provider–it’s about serving the consumer.

Price and expectations
Nearly everyone agrees that expectations for products and services rise with the price one pays them. In fact, the high expectations created by a high expense are accompanied by a decreasing tolerance for defects, inconsistency, and unreliability. Consumers clearly place the cost of the real estate brokerage service at expensive end of the pricing continuum, which results in high expectations and low tolerance for defects and failure. And it is in this environment that the real estate industry offers service without process, service without standards or mechanisms for measuring and controlling service delivery and customer satisfaction.

Service is our product. The only standards we know are productivity-based without any systems for quality control. What manufacturer of quality goods would operate based upon production without quality control? None of them!

The sales/service conflict
The primary focus and culture of the real estate industry is oriented toward sales (new customers acquisition) rather than service (satisfying existing customers and clients).

Philip Kotler, distinguished marketing professor at North-western University’s Kellogg Graduate School of Management, in his book, Marketing Management Analysis, Planning, Implementation & Control, identifies five key variables in the marketing mix for service: people, price, promotion, place (distribution), and process. Each of these variables except process has been and is being given a considerable amount of attention in the delivery of real estate service. And while technology offers the promise of eventual valuable impact, it is in the relationship between customer and service provider where the greater potential for service value lies. It is the human application of consumer-focused systems, principles, and technology and the human interaction with prospects, customers, and clients that offers the highest potential for greater service value and greater customer satisfaction.

Implementing an effective quality service strategy
Service is serious business. A true commitment to placing the needs and interests of the consumer first–in all that is done, every time–is the essential foundation. To do so, an organization or individual must take the following steps:

• Identify consumer needs–ongoing research

• Define a service process

• Establish service standards

• Implement systems for follow- through

• Measure performance–customer feedback

• Learn, improve, raise the bar

• Recognize, award, and reward service performance

Each of these steps has critical elements and an interdependence with one another, which means that while each part must work, they must also all work together. Delivering truly superior service is both simple and complex. The more we understand about our customers and the more we focus on satisfying their needs first, the simpler service becomes. But great service just doesn’t happen–it is a considered and managed process.

Larry D. Romito is founder and CEO of Quality Service Certification, Inc. (www.QualityCertified.org), a company dedicated to helping organizations discover resources and an extraordinary system for delivering exceptional service. He holds an undergraduate degree from the University of Illinois (Urbana) and an MBA from the University of Chicago, Graduate School of Business. His nearly thirty years of business experience in sales, marketing, service, and general management includes a remarkable progression of responsibilities and experiences with large and small organizations, as well as independent companies and national franchise organizations. E-mail him at Larry@QualityCertified.org.

Artwork by Peter Hoey.

Buyers & sellers, visit www.texasrealestate.com.
REALTORS®, visit www.tar.org.