Have you ever stood at Starbucks and asked yourself how they managed to take a 60-cent cup of flavored water and sell it for four dollars?

I have. Usually after I ask myself how real estate decided to devalue itself during the greatest economic upswing in American history.

Tall drip to go

The coffee-shop business is worth dissecting. Like real estate, its core ingredient, coffee, comes from outside sources.

Have you ever stood at Starbucks and asked yourself how they managed to take a 60-cent cup of flavored water and sell it for four dollars?

I have. Usually after I ask myself how real estate decided to devalue itself during the greatest economic upswing in American history.

Tall drip to go

The coffee-shop business is worth dissecting. Like real estate, its core ingredient, coffee, comes from outside sources. Like the real estate agent, the counterperson who transacts the coffee deals enters the profession with no skill, tools or technologies of his own. The employees are completely reliant on the coffee-shop owner to provide everything from training, customers and the provision of accessories.

Venti Macchiato, skim, no foam

When Starbucks came to New York City, the average price for a cup of coffee was 60 cents. Starbucks charged $1.25. Fancy drinks were upwards of $2.50-$3.50. Lines formed instantaneously. Greek diners and greasy-spoon owners stood in amazement. They couldn’t grasp the concept.

Starbucks employed a simple rule of thumb. If you offer an improved product, address a core need and serve it up in a pleasing customer experience, cost won’t be a factor.

This eludes most “full-service” real estate practitioners and companies in a profound way. They see Redfin as this industry’s Starbucks. Wrong. The full-service companies are — or rather, could be. Starbucks didn’t differentiate by selling the same crappy coffee for less money. They redefined what coffee means by delivering a better product and a great experience.

The problem the real estate industry faces is its failure to improve its product or reinvent the experience of buying or selling real estate. The industry hasn’t articulated a value proposition that the customer understands. You think you have. You haven’t. If you had, “60 Minutes” would be reporting on you, not Redfin.

Want to protect commissions? Model Starbucks.

Double Chocolate Chip Frappuccino Crème, Whip

They ditched Alice, replaced Mel. They built new facilities. Dimmed the lighting. Decked it out. Piped jazz through the sound system. They upgraded coffee technology. Modernized the transaction process. Cleaned up the dirty, greasy, shirt-stained counterperson and turned him into a highly trained, smock-outfitted barista.

Starbucks succeeded in delivering something the consumer could count on: consistency. What they promise the consumer, they deliver. Anytime, anywhere, by any employee.

They succeeded in making us believe $4 was 60 cents. It’s not genius. It’s just smart.

Real Estate Americano

Can real estate make those claims? Baristas have more training before they make their first latte than a new agent has cutting his first 6 percent deal. The American consumer knows that.

Eighty percent of today’s agents are Alice. Most brokers are Mel. If they want to keep earning Starbucks’ prices, they need to change. Fast.

Want to protect commissions? Model the very line millions of Americans stand in day after day. Create that Venti service where every agent lists every home with 20 pictures, a video, a sellers’ blog, a mortgage calculator, a home-value estimator, a map, integrated school data, past home sales, user-generated environments and all the caramel, foam and powdered chocolate you can.

Serve something freshly brewed, and don’t leave any room for milk.

Marc Davison is a founding partner of 1000watt Consulting. He can be reached at marc@1000wattconsulting.com.

***

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