01/17/2012

8% Commissions - Impossible?



There's no such thing as a commodity. Only commoditized thinking done by commoditized thinkers. While reading Gene Simmons' latest book SEX, MONEY, KISS this past week, I was reminded of this.

Surprisingly, Simmons' book is a brilliant business book. This is a man who is all about the endless pursuit of money, and if you watch his hit reality show, Gene Simmons' Family Jewels, you know this is true to a fault. Along this same topic - concerning the pursuit of money - one of the most popular topics I discuss with agents is "How do I get bigger fees?" - as in "What's the secret to getting 7%, 8% commissions, upfront fees, retainers, etc?" I'd like to shed some light on this subject, then, briefly, share some strategic examples with you.

This one article could substantially change how you "package" yourself - as an agent.

Most people don't realize, but KISS is one of the most licensed brands in the world; a juggernaut, with over 2,500 licenses issued. Simmons, like Oprah, publishes his own magazine, Gene Simmons' Tongue. He owns a record label, a production company, and is co-owner of Simmons Abramson Marketing. Like Trump, he is a consummate promoter. There is a lesson there, but not my point here, not yet. Back in the mid 1990's, Simmons decided to publish the bands' first official book; it was called Kisstory. He settled on a price tag of $158.95. Publishers disagreed, saying "The market would never bear such a price for a book." He met with Penguin Putnam, among others. He stuck to his guns. And since no publisher would touch it at that sticker price, Simmons decided to self-publish the book. He would keep everything, and best of all, have total control over how it was marketed. The book was not sold in bookstores or through any distributor; instead, Simmons and band-mate Paul Stanley did interviews with a few fan writers who received a one-time fee of a few thousand dollars for their work. With more than 90,000 copies sold to date, Kisstory has made almost 12 million dollars - for a book, which at a price ($158.95) popular wisdom and all the experts (i.e. book publishers), said the marketplace would never bear. Fools!

Here's the lesson: YOU MUST BREAK ALL THE RULES. THERE ARE NO RULES.

As I said, there's no such thing as a commodity. Only commoditized thinking! Book publishers think in terms of "industry standards" or "norms" - this, by definition, if you look up "normal" in the dictionary, is commoditized thinking. Commoditized thinking only takes into account price: eggs, milk, cheese, steak, or even books...there is, within a small range, a pre-determined price for each. This is how commoditized thinkers think. They have a belief system that says a book is only worth $20.00...or that a steak can only range from $3.99 to $9.99/lb. depending on cut (rump vs. flank) and store (Safeway vs. Whole Foods for example).

MY ADVICE: Let those sheep think that way. As Simmons' proved it is flawed thinking. And everyday, somehow, someway - it's a mystery, right? - Allen Brothers, a mail-order business like Omaha Steaks, sells a 3 lb. pot roast for $199.95. Well...do the math. If you don't have a calculator, that's $67 per pound. And I assure you, if a visit was paid to my local meat market, run by 'mom and pop' and I told 'mom and pop' they could get those kinds of fees for their steaks too - I might as well be speaking Martian. They'd think I was insane, right? But see, that's the point...

Commoditized thinkers only think in terms of price, typically in accordance with 'industry norms' - not value - and that is their flaw. You can buy a giant bag of coffee at Costco for about 10 bucks, but Kopi Luwak - that's a fancy name for cat-poo coffee - runs $85 for a 4 oz. bag. The Asian Civit Cat, which is really more like a weasel than a cat, has a fondness 'for coffee beans. They're said to eat only the finest berries from the coffee plant. These beans then pass through the cat-s digestive tract mostly undigested. Workers then scavenge the jungle collecting these beans to be made in the world's most expensive coffee. So please, don't tell me you can't alter the perception of any commodity, and therefore, its value. I've just demonstrated it with a book, steaks and coffee.

Three of the most commoditized products on Earth.

What Simmons, Allen Brothers, and Kopi Luwak understand, as well as other smart marketers and agents getting 8% fees - is that to be paid premium fees, you must package yourself (and your services) differently than competitors. For example, if you don't want for your fees to be clubbed-down like a baby seal, don't make yourself (or services) look like a baby seal. This falls under the category of self-sabotage. I'm going to give you some things to think about. #1: how the brain processes information. According to Dr. Robert Cialdini, our brains have been hardwired to handle the massive volumes of information we're exposed to daily - we classify and stereotype and make snap judgments. The entire premise of never judge a book by its cover is delusional. It happens subconsciously. You can't control it. Studies show that within four seconds of seeing something new, the human brain has already made a "judgment" and "stereotype" - it's that gut feeling. We stereotype everything. If asked how much a book costs...you don't have to think about it, you already know how much it costs. It costs between $10 and $20.

If I say this book costs $200...you say "Bull***t, I'm not paying $200 for a book" Why? Because we've already stereotyped the value of what a book should cost. It costs $20, not $200. However, take that same book, pull the information out of it, convert some its information to exercises, homework assignments, a few tools and resources, repackage it into a manual, read the information word for word, and record it on ten CDs - well, now, even though it's the exact same information as the book, $200 doesn't seem so expensive, does it?

What about $500 or $1,000?

Maybe. Why? Because we stereotype the value of different things, differently. A manual, a course, a system are all perceived to be more valuable than a book. Worth more. We expect to pay more. It's just how the brain works. Same information. Different format = More expensive. If you've ever attended a Jay Abraham seminar - $5,000...$10,000...$25,000 bucks - you know the majority of the strategies he teaches come right out of his $12 book - you can get it at Amazon.

This very same principle of "re-packaging" applies to real estate. Do you think of all your competitors as "books", stereotyped by prospects to be worth $10 to $20 bucks? Do you have the ambition to give yourself a pay raise, to be the most expensive, highest paid, at least per transaction agent in your marketplace? Step one: You must not allow yourself and/or services to be stereotyped as a book. It is a death sentence. You must create a new perception of value, a new stereotype for what you do and are worth. This is how you keep your commissions from getting clubbed-down like a baby seal. Hint: You do not make yourself look like a baby seal.

Incidentally, Simmons' book didn't really look like a book at all. He super-sized it. It measured over a foot and a half in length, and over a foot wide, with more than 450 pages. And packaged in a hardcover case, like a collectible box set - after all - it was Memorabilia. Not a book.

One of the most valuable exercises you can do in business, since the majority is always wrong: Make a list of all the "industry norms". Make a long list of everything the average agent is doing - how they "package" themselves - then vow to do NONE of those things. Re-package yourself and your services. Break all the rules. For example, since everybody does a listing presentation - a form of direct-competition that facilitates apples-to-apples comparison, precisely how people "price-shop" for commodities (eggs, milk, cheese on grocery store shelves), well, then...DON'T DO THAT.

You will not find Allen Brothers steaks on grocery store shelves. You will not find Kopi Luwak on grocery store shelves. You will not find Simmons' book on bookstore shelves. Why? Because if you give prospects a chance to "price-shop" you, they will. Most agents - if you look closely at how they package themselves, i.e zero differentiation - sadly, unfortunately, actually strive to emulate other agents. They package themselves exactly the same. (Are you?)

My only thought: If they only knew the damage.

You Must Package Yourself (and Services) Differently! It is CRITICAL.

Do not forget to use us for your Maryland, Virginia and Washington D.C. Real Estate Continuing education classes. You can sign up easily at www.rempower.com/classes

Copyright Ryan Fletcher, 2011. All rights reserved.