Alex Perreillo, president and CEO of Coldwell Banker Real Estate Corporation, one of the residential real estate brands owned by Cendant Corporation, presented an update on the Blue Edge Realty "concept" they are currently testing in Illinois and Pennsylvania at the recent Real Estate Connect conference in San Francisco.
The limited service business model is targeted to the self-directed, price-conscious consumer - the 'For Sale By Owner' home seller.
Perreillo posed the question members of the audience might have been asking themselves - "Why would a 95-year-old real estate company, with 74,000 agents entrenched in full service do such a thing?"
He used a favorite Gary Larson cartoon to explain his answer. The cartoon depicted two settlers from 150 years ago who had circled their wagons and were being attacked by Indians using arrows on fire. One settler says to the other, "Hey! They're lighting their arrows! Can they DO that?"
Perreillo said the competitors can 'do that' and they are. The $64,000 question, he said, is, "Will it work in the real estate industry?" Coldwell Banker needed to find out.
He explained their strategic viewpoint by asking the audience to think of themselves as hospitality consumers, something Cendant knows well. "Imagine yourself driving into town and seeing a Marriott hotel with a doorman, a valet to park car, a bellman for the bags, check-in with a person in business suit who would perhaps upgrade the room, and a concierge for tickets and dinner reservations. And, of course, there would be room service and a full service restaurant in the hotel and perhaps gourmet coffee and bathrobes in the room, " he told the audience.
"Now," he said, "consider another choice in town - a Marriott Courtyard -- out a little from the center of town, near the airport. It is very functional with self-parking. You take your own bag in; you get a list of restaurants and a map. The check-in clerk tells you the best place to park your car and instead of room service there is a tent card with pizza delivery and vending machine for snacks."
These are two totally different experiences targeted to two totally different customers. Two choices.
Coldwell Banker runs their full service franchise-based business separately and distinctly from the Blue Edge Realty business model. The details of the Blue Edge Realty business model are:
- it is not a discount company -- it is a limited-service business model
- it is targeted to for sale by owner market (which is 16 percent of the total market)
- they only work with sellers (all buyers are promptly referred to full-service CB offices)
- real estate agents are licensed, salaried employees
- the outside staff are Property Market Consultants (listing presentation, virtual tour photos)
- the inside staff are back office people who support the outside staff
- sellers may talk to two or three people during the listing process
- there are two plans - the 2% plan and the 2% plus plan
- the 2% plan provides no MLS placement but offers marketing materials, sign, listing on web
site, scheduling of appointments, and help with paperwork
- the 2% plus plan provides MLS placement; requires sellers to cooperate with buyer brokers
Their presence in the marketplace is from mobile offices, 4x4 Ford Escorts painted to be very noticeable and driven by the Property Market Consultants. They plan to conduct business from centralized offices with just one office in a town. Most of the work is done from the mobile offices.
What they have learned in the three months of operation in Illinois - Bloomington, Springfield, Champaign, and Peoria-and in two months in Pittsburgh is that this service really does appeal to the segment they are going after, the person inclined to be a 'For Sale By Owner' seller.
They feel that that they have not cannibalized their own business by offering this service; it is business that they would not otherwise have. The thoughts of wreaking havoc in the industry are not true. In both markets they have been able to grow market share of traditional business.
Perreillo noted that the most exciting development is that full service agents "got it" - and they are seeing things that they didn't expect - for example, the referral volume back and forth between full service and limited service.
In one case, full service and Blue Edge Realty agents both made their pitch in a joint presentation - the home seller chose full service. He also said that he found the attitude of franchise brokers very encouraging. They have stated that they are glad that Coldwell Banker is testing this limited service business model.
Pat Rioux
