It's no news that the real estate market is in the tank. So why write about it here? For starters, one of my past clients is in the real estate business. And while I haven't published the fact in my technology consulting practice, I'm a licensed real estate broker in the Commonwealth of Massachusetts. So even though I'm no longer actively in the business, I have a certain interest.

A colleague and former client, Robert Hahn of Onboard Informatics, has been blogging about CRM being the killer app of the real estate business in the future. He's asked me to comment, since I've written about CRM (see library).

Rob mentions a couple of definitions of CRM, both of which seem a bit philosophical about establishing touchpoints, balancing profits and service, and so forth. Lots has been published about customer experience management, customer centricity, etc., all valuable but, in my opinion, missing the point.

The objective of customer relationship management is to maximize the lifetime value of the customer. All else is commentary and mechanics.

Rob's blog actually mentions this point in passing. He also anthopomorphizes perfect CRM as his neighborhood dry cleaner who knows every customer, their needs, and their quirks. Exactly. Perfect CRM is, in my mind, "institutional memory" of customers, prospects, lost customers, and everything having to do with how the company found them, got them, sold to them, satisfied them, and maybe lost them.

What's different is that, while the corner dry cleaners may know in her gut what works, CRM systems do it on a grand scale and with some science. With the systems, we can segment, we can use business intelligence to study the customers and prospects, and we can "remember" sales and service events and marketing and sales successes and failures "in the large".

One example that comes to mind is a past client, a small privately held company that served a demanding clientele. If they had a motto, it was "flawless execution". If one of their team members talked to a client in the morning, another employee talking to that client in the afternoon absolutely had to know about the morning's conversation or it was considered a mortal sin, regardless of who made the call. They get relationship management. I only helped with the tool to help them execute.

Back to real estate....

What is the nature of the relationship between a real estate agent and a customer or client? (In real estate, they're different. A client is someone with whom the agent has fiduciary obligations, because of a listing agreement, a buyer agency contract, or a transactional agency (facilitator) agreement. Others are just customers.) Regardless, the nature of the relationship is typically "transactional", i.e., short term. Only a small percentage of real estate agents market themselves as "your real estate agent for life". Third party lettershops sell agents programs that periodically send out newsletters, postcards, calendars, and such to continue the relationship beyond the sale, but the percentage of agents who use these (and who actually pick up the phone and call or send a written note long after the sale) can be measured in single digit percentages. Only the best do it. One might think that's a lot of energy to invest in a seven year sales cycle (the average home ownership period). However, that approach also leads to referrals, the lifeblood of successful real estate agents. Stay "top of mind".

And what of the "broker"? If you're not familiar with the industry, the distinction may not be obvious. The broker is the owner or manager of the office, the single individual who is responsible. Only the broker can handle money. They take it, and they write checks. All other agents in the office merely act on their behalf, but they can't be paid by anyone other then the broker, and they can't make any payments. Many brokers manage, and they don't deal directly with clients and customers.

So who "owns" the client after the sale? In practice, nobody. The smart agent will keep a list and will take it with them when they move on. The smart broker may have a list in their office management system, but most don't do anything with it.

Real estate sales is increasingly a commodity service. 78% of home purchases start on the Internet, after which agents become involved. Many are seen as useless, a vestige of past practice. In fact, agents can keep individuals from making some serious mistakes. They also serve the high-end market (individuals who don't have the time or inclination to search on the Internet) and the low-capability market (individuals who have no clue about buying and selling real estate). But sites like ISoldMyHouse.com (to mention only one) threaten to take brokers and agents out of the market. Service is the only way to survive.

If there's a recipe for survival based on service, it's the following:

• Brokers have to treat clients and prospects as brokerage assets, not sales agent assets.
• Brokers have to think about the lifetime value of the clients (and prospects), including referrals.
• To act on that, brokers have to service the clients right in the first place, and they have to continue to cultivate the relationship long after the sale through good service.
• Brokers have to market to those who are not yet customers, and they have to learn what works and what doesn't, just like one markets soap.

So how does one continue to provide service?

• Record the mortgage rate of the sales transaction. Send a note when the rates drop and it's profitable to refinance.
• If the market drops, send a note when it's time to apply for an abatement (a reduction in the assessed value of the home). In Massachusetts, you can only apply in January.
• Keep track of heating oil deals, and pass that along to clients who bought oil-heated homes.
• Cultivate a team of vendors for everything from window shades to roofers and enter into collaborate discounts that you can pass along to the homeowner.
• Stay in touch, and when the family starts growing, be ready for the up-sizing. When the kids go off to college, be ready for the down-sizing.
• Establish relationships with developers in other states that focus on retirement communities, and get referral fees as you introduce prospects, past clients who you know are about to retire.
• If the tax laws change to encourage solar heaters, for example, pass the news to your clients, much like accountants often do. Ditto for other kinds of state and federal laws or local ordinances.

All of this takes deep knowledge of clients, ongoing contact, and a long-term relationship that may go beyond the employment of a single agent. It's unlikely a broker can do this without a CRM system.

And for those brands and offices that now allow and encourage "teams", how else can a team work together efficiently and effectively unless they have a tool for their collective knowledge of client activity?

All this is about residential real estate, by the way. Commercial is whole other story, no less compelling, no doubt.

Rob's right. CRM may be the killer app for successful real estate brokers.

Steve