One of the most important things for any real estate business and, indeed, any business is a successful marketing program. Of course in our hearts we want to believe that if we just do something great then everyone will figure it out and be impressed. But alas, that is just not true. Indeed, Einstein flunked physics and couldn’t land a job. And everyone has an example of a super-talented person that ends up just toiling in the trenches for someone else. Like it or not, the world belongs to the marketers. And I believe that this will increase more and more over time. Someone – but I cannot find the exact quote – said something like this:
“The world will increasingly belong to those who create the ideas rather than those who execute them.”
In the real estate world it is no different. If you have a great “brand” (which of course is built by a successful marketing program) you typically succeed — and the converse. This is the basic reason why Warren Buffet – arguably the world’s most successful investor – focuses on brands; namely, for their long-term premium pricing power.
So how do you create a strong brand in the real estate world? The simple answer is that you do this by creative and intelligent marketing.
I have become a student of marketing over the past ten years, including both reading everything I can lay my hands on and at the same time analyzing what works and what doesn’t work and delineating the reasons for success and failure. After thousands of hours of study, I have come to the conclusion that the secret of a successful marketing campaign and, concomitantly, the essence of building a successful brand (almost) always centers around what I call:
a “Power Niche”
This is a concept and phrase I have invented and coined; however, for any intellectuals reading my writings, you will quickly realize I am building on the works of Peter Drucker and Michael Porter and other great intellectual giants in the business world.
As an aside, I note that there are certainly other ways to be successful, such a being the low-cost-producer; however, generally the other angles (including being the low cost producer) are typically much more difficult to effectuate and maintain; however, just about anyone can build a Power Niche.
So what do I mean by a Power Niche? Here is my definition:
In brief, a Power Niche is a small-sized niche within a bigger industry that no one else yet dominates or owns. The niche isn’t obvious so you have to figure it out and “create” it. You step in and learn everything about it and everyone in it. You tell everyone about what you are doing – incessantly — and become the real “owner” of the niche merely by staking out your homestead in virgin territory. This then becomes a virtuous cycle as the more you know, the more you do, and the more you do, the more you know. Before long you are the world’s unquestioned expert in this (smaller) niche. All of this enhances your bargaining power within that niche. Instead of begging for business in the bigger industry, you now have eager clients paying you top dollar within this smaller Power Niche.
A Power Niche is often difficult to identify and at the same time counterintuitive, and indeed kind of scary, but once figured out is very easy to accomplish and can be crazy-lucrative. Indeed, just about anyone can create a Power Niche successfully.
Indeed, for my law firm, I am a lot better off as The Pure Play in Real Estate Law than I am trying to be all things to all people. It was surely an unsettling decision, to become the Pure Play in Real Estate Law as when we enacted this we were theoretically scaring off the 99% of clients in the world who are not in real estate.
But consider that in the (smaller) real estate world my firm is a major player. We are able to know everyone and everything. This makes my partners and me very useful to our clients in ways that are in addition to “just doing great legal work”. This of course includes effectuating our mission of “helping our clients build their business” due to our connectively, contacts and industry knowledge. If I tried to make my firm full service, I would be competing with multi-thousand-lawyer global behemoths and I have no idea how I could convince a client we were the optimal, or even a useful, choice.
In the business side of the real estate world, it is the same thing. Let me give you an easy example, which is deliberately quite simplistic. Let’s say you are in the multi-family business. You do what is called “build-to-core.” This means that you find locations for multifamily buildings, you get a construction loan and you build a high-quality building. Then you rent it out. Simple, right?
However, if your building looks like other buildings, how are you going to make a profit that on a long-term basis will be greater than just average? You could convince yourself that your building is “better”, but what does that really mean? Does it mean you paid more for a better location? If so, your costs are higher and hopefully your rent is higher to make up for it. Or did you do a better job of building it with higher quality contractors? Same thing – you paid more and hope to get more rent. I wonder whether that is really much different from making it cheaper and charging less? It is two sides of the same coin. In the short term you are making bets that may or may not pay off. In the long term, what you are doing is making a product better and hoping to charge more for it because of that. Indeed, Michael Porter says that the biggest mistake people make in the business world is making things “better” when they really should be concentrating on making things “different.” And of course that is what I mean by the Power Niche.
So instead of the usual plan (outlined above), what if, for example, you modified the marketing and business plan for your residential real estate company to more narrowly concentrate on the LGBTQ community? I picked this concept at random but please follow my point through. What would now happen? A bunch of things:
You would learn everything about the LGBTQ community
You would learn what they like and dislike
You would target your building towards LGBTQ people (and figure out if in fact they wanted to live with other LGBTQ residents)
You would develop intellectual capital at your company around this
And you would build your building to make it one where LGBTQ people would want to go.
You would be building a Power Niche.
Your market would be smaller – much smaller – but if you did it right you would do what Dale Carnegie says in his famous book, How to Win Friends and Influence People, namely, to “arouse an eager want” in the customer.
Would LGBTQ people pay more rent to live in a building that was really about the LGBTQ community in New York City? Honestly, of course I don’t know that and there is always risk in any new idea.
But this is just the beginning of the Power Niche. Once it became clear to the market that this was your business’s focus, LGBTQ people would want to work for you. LGBTQ businesses would want to do business with you. Advertisers would want to advertise with and through you. You would find all sorts of opportunities you wouldn’t otherwise see because you would be the “only one” focusing on this. You would learn more and more and become a font of intellectual capital on the LGBTQ community’s interaction with the residential real estate world. People would want you to speak at conferences. You would be the expert’s expert in residential real estate for the LGBTQ community.
If the idea worked for a first building, your next building would be a no-brainer to get investors and lenders and other parties. And after a while, everyone would be chasing you to invest with you and do business with you.
Instead of trying to be “better” and playing the odds on paying more for a better location, you would be a “brand” that had a small but targeted customer base.
You would have established a Power Niche in the real estate world and as Warren Buffet would presumably like, you would be able to sell your product (i.e., brand) at an above market price for a long-term period of time.
Guaranteed success? Of course not. Obviously there are social issues at play here as well (for this particular Power Niche), but I still like it a lot better than the other game plan in “build-to-core”, in which you are a lot more at the mercy of the market. Indeed, when the market falls apart for multifamily, which place do you think will hold its rental value better? All the buildings that look pretty much like each other, or the “one” building where LGBTQ people really want to be.