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How to find your niche and market the hell out of it

By September 14, 2017 No Comments
How to find your niche and market the hell out of it
REPOSTED DIRECTLY FROM INMAN NEWS. THIS CONTENT HAS NOT BEEN MODERATED BY WFG NATIONAL TITLE.

Do you feel like you chase deals all over your town? Are you tired of wasting money on lead generation that doesn’t seem to work? Or do you feel like your business lacks focus?

If any of these sound familiar, you’re not alone. I hear comments like these from real estate agents every day.

Now, imagine having a market where you could focus your efforts, and your marketing budget, knowing that it held the potential to support your business for many years.

In this article, you will learn why having a niche market focus is essential to your success as an agent. You’ll also learn how to identify and analyze a profitable niche, how to position your services to stand out from the competition and how to generate leads from your niche.

Why have a niche market focus?

As an agent, you have a limited amount of time — and money.

You simply can’t be all things to all people. And those who try usually burn out, run out of money — or both.

Many of the causes of business failure for any small business, including real estate agents, can be traced to a lack of focus.

Think about other small businesses that sell their time and knowledge. A single attorney would have a difficult time trying to cover all aspects of the law, from securities law to environmental law, criminal defense to corporate mergers and acquisitions.

And who would really believe that a single attorney could be an expert in each of those diverse areas of the law?

Yet, I meet agents who, when asked if they serve a particular niche, begin listing community after community, often totaling hundreds of thousands of homeowners.

When I ask how often they advertise for leads to every homeowner in those communities, I’m typically met with a deer-in-headlights stare.

Or I ask how the results they achieve for their clients in those communities compare to the market averages in those communities — you could hear a pin drop.

What they’re essentially saying is that they’ll take listings in any of those areas, but they don’t market to the homeowners there. Nor do they have a track record of results that helps them stand apart from the hordes of competing agents.

If that sounds like you, how do you expect those homeowners to find you? To know why they should hire you over your competition?

You need to find a niche market where you can focus your efforts.

Selecting a niche market

Your business strategy and goals should define your niche market focus.

Let’s suppose you want to earn $150,000 per year before taxes, work as an independent agent — with no team — and have a balanced life.

These goals are certainly attainable so long as you choose your niche market carefully.

If your average sales price is $200,000, however, and your split with your broker is 70 percent, you’d have to complete about 35 transactions per year to reach your income target, not including a few sales to cover your business expenses.

That’s averaging just under three sales per month.

Depending on many other factors, such as the number of listings or buyer clients you have to maintain to close three sales per month, those numbers may be inconsistent with your overall strategy of working independently and having a balanced life.

On the other hand, suppose your average sales price is $400,000. You’d need to close about 17 transactions per year to achieve your income goal, or less than 1.5 closed sales per month.

That also aligns with your overall strategy of working independently and having time to spend with family and friends.

In selecting a niche market, there are several things you need to consider, including:

Income and production

How much do you want to earn, and how does that translate into your required number of closed transactions each year?

The niche you select should have enough sales activity for you to achieve your goals by capturing a reasonable share of the market.

Average sales price

As we saw in the example above, the average sales price of your closed transactions can have a significant impact on your required production levels.

Previous sales activity

If you are an experienced agent, consider your track record.

Do you have a history of closing sales at the average price you want to pursue in your chosen niche? If so, you can leverage your prior experience to gain new listings at, or above, your average price.

Does your track record include closed transactions within the specific niche market you are considering? If you have an existing track record and name recognition in a given area, it could be easier for you to build market share than if you are starting with no prior experience.

Required size of the niche market

There’s a lot of misinformation floating around the real estate industry regarding the appropriate size for a niche market.

Ask a group of agents, and you’re likely to hear 500, 1,000, 2,000 or more.

The truth is, it depends.

To find the optimum size of a niche market, you must know your own unique production requirements, the turnover rate for housing in the niche and your estimated market share.

In a moment, I’ll explain how to determine the appropriate size for your niche.

Location of your niche

The proximity of your chosen niche market to your home or office is also important.

To be effective, you should be active in the market as a real estate agent and an active participant in the community.

If your chosen niche is convenient to your home or office, it is much easier to become involved in local community organizations and events where you can expand your contacts and build awareness.

It is also much easier to stay on top of opportunities when you are in the market on a daily basis.

Your fit

When selecting a niche market, you need to be totally honest with yourself regarding your skill set, resources, personality and more.

If you are not an analytical person, working with investors may not be a good fit for you as they will require that you provide detailed analysis of the investment potential of the properties you bring them.

I have to admit, I am not the most empathetic person. As such, I enjoyed working with luxury homebuilders as one of my niches because there was very little drama involved. It was a business transaction for both them and me.

A more empathetic agent would have run circles around me — especially working with buyers!

You must also consider your budget to market your services and the listings within your chosen niche.

If you have a limited budget, targeting a high-end niche market wouldn’t make sense. Your marketing pieces would need to be higher-end to reflect your target audience and your costs would increase compared to serving a more moderately priced niche.

Nor would it make sense to choose a niche that required you to market to a large number of people versus a smaller niche where you could maintain a consistent marketing campaign without blowing your budget.

I hear of agents who used postcard campaigns for lead generation, mailing to thousands of homes only to run out of money after two or three mailings — and before their campaign gained traction.

Mailing to a smaller market would have been more appropriate given their limited funds.

Your company’s fit

Last, you should consider your company’s fit within the niche market you wish to pursue.

If your strategy is to serve a high-end clientele by assembling a team to provide “white glove” service, yet your broker isn’t supportive of teams or the company doesn’t have the right image with your target audience, you could struggle to make your vision a reality.

There are times when changing brokers, or firms, may be the only way to implement your strategy.

All of these factors must be balanced against one another to determine which niche market aligns best with your overall strategy and enables you to achieve your production and income goals.

Identifying your niche market 

For the purpose of this article, we are going to focus on two types of niche markets: geographic and demographic. By combining elements from each of these types, there are countless combinations you can choose to serve as you build your business.

Geographic niches are those that are defined by boundaries, such as:

  • ZIP codes
  • School districts
  • Neighborhoods
  • Communities
  • Waterfront property
  • Mountain property
  • Specific buildings

As you know, people’s housing needs change according to their age, income and the size of their household, which creates numerous niche market opportunities.

Demographic profiles of buyers and sellers can reflect age, income, net worth, marital status, presence and age of children in the home, ethnicity and much more.

Some of the demographic-based niche opportunities include:

  • Young single professionals
  • Young married couples — perhaps buying their first home
  • Growing families
  • High-income professionals
  • Empty nesters
  • Elderly homeowners
  • Ethnic groups, such as people in the Asian or Hispanic communities

You can mix and match any combination of these niche markets to find one that suits your interests and aptitudes.

For example, you may want to focus on working with sellers in specific elementary school district as your primary niche focus.

A secondary niche, and one that is a natural extension of working with sellers, is to represent buyers who are looking to purchase in the same elementary school district.

Your next step is to identify where your best potential clients are located. It’s easy to assume that one area “looks good,” but I wouldn’t encourage you to build your business on assumptions.

You simply don’t know until you analyze the market.

Geographic niche search

To begin a geographic search, first identify the following:

  • The level of geography you would like to consider, such as ZIP codes, school districts, communities or even counties.
  • The price range you are considering. If your average sale is $400,000, you will want to expand your search to include homes from $300,000 to $500,000 or possibly an even wider range.
  • The type of housing you are considering, whether single family, condominium, town house, co-op or apartment.

Search your MLS using these criteria for sales activity over the past three to five years.

The reason I recommend searching over the past few years is that it will enable you to see if the area is trending upward or downward with regards to sales activity.

Focus on the areas with the greatest level of sales activity first.

In the image below, we see that one particular area has considerably more sales (155) than any surrounding area. This is where you would want to focus your attention.

As we zoom in on the area, we can see exactly where the sales have occurred.

You are then able to identify the specific neighborhoods with the highest level of sales activity and delineate them as a potential niche market for your business.

Your next step is to determine how many homes are located within the area you have identified.

I recommend creating a spreadsheet in Excel or Google where you list the name of every street in the first column.

Then, using your tax records database, identify the number of homes on each street as shown below, adding them together to determine the total number of homes in the niche market.

In a moment, we’ll discuss how to use this information to analyze your niche market.

Demographic niche search

If you have chosen to work with a certain demographic profile of buyer or seller, finding the greatest concentration of your target audience can be a little more challenging.

Fortunately there are tools such as Social Explorer, as shown in the image below, and SimplyMap.

These online mapping tools enable you to search various levels of geography for hundreds of demographic variables.

The smallest level of geography you can search, and get the full range of census demographic information, is a block group. A block group represents, on average, 700 households, so it provides you with the ability to drill down to specific neighborhoods.

Here’s how it works:

Let’s say you want to work with couples between the ages of 25 and 35, with young children.

You include those variables in your search, specifying the block group level of geography.

The mapping tool will create a thematic map displaying the results.

A thematic map uses a variety of colors, or shades of a single color, to display the areas with the greatest concentration of your chosen demographic profile.

In the example below, the areas that are very dark orange, almost brown, represent the areas of the greatest value for the search term — in this case, population density. The areas shaded in the lightest orange represent areas with low numbers of your desired target audience.

If this map reflected the population of married couples age 25 to 35 with young children, these brown areas would represent the prime areas to start your search.

You could also add new layers to your map, such as the best public or private schools to see where your target audience is concentrated relative to specific school districts.

Once you have zeroed in on an area with a high concentration of your desired demographic profile, use the same approach as I’ve outlined for the geographic search to identify where the most sales activity is occurring and determine the size of the potential market.

Analyzing your niche market

Once you have identified an area that you are interested in, you need to quantify the potential for sales to support your business.

The key metrics we will use are:

Turnover rate

The turnover rate reveals the percentage of homes in the niche market area that sell every year. A good turnover rate to shoot for is 6 percent to 8 percent.

As with everything, that depends on a lot of factors, including your average sales price and the level of competition.

If your average sales price is very high, over $2 million, you can get away with a lower turnover rate. You can also get away with a low turnover rate if there is little competition in your chosen niche.

If your average sales price is low, perhaps in the range of $200,000, you may need a higher turnover rate, or a larger niche market — or both — to reach your production and income goals.

To calculate the turnover rate, use this simple formula:

 

 Market share

The amount, and strength, of the competition you face in your chosen niche will influence your ability to capture market share.

Rarely does any one agent control 100 percent of a market.

You can use your MLS to search for sold homes over the past three to five years and sort the results by the listing agent.

Look for those agents who consistently sell a large number of homes in the area, and add all of the sales from these “dominant” agents to determine their total market share using the formula below:

If the dominant agents control 30 percent of the market, do not focus on them. Instead, focus your efforts on capturing some portion of the 70 percent that is being served by agents who may sell one or two homes per year in the niche.

Conversely, if the dominant agents control 70 percent of the market, and you determine that you need 20 percent market share to achieve your income and production goals, you will have to present a very compelling case for homeowners to choose you over these established agents.

Required niche market size

Focusing your efforts on the wrong-sized niche market could result in you missing your production and income goals or spending more money than necessary on marketing and lead generation.

To calculate the appropriate niche market size for your specific needs, use the formula below:

Once you have found a niche market that will support your business goals, the next step is to determine how you will position your services to compete effectively.

Positioning your services

It’s easy, as an agent, to assume that all homeowners want the same thing from their agent. But that would be a mistake.

Have you ever had a homeowner ask you to lower your commission?

Sure, we all have.

And why do they do that?

Because they don’t perceive there to be any difference between you and the next agent. They assume your services are easily replaced with those of your competitors.

The most effective way to demonstrate your value is to offer only those services, or results, that your target audience values.

Take a look at the graphic below.

 

The blue circle represents what sellers want from an agent.

The yellow circle represents what your competition provides. Only where the yellow circle overlaps the blue circle is there a match between sellers’ desires and the services being provided.

The green circle represents everything you provide. Where the green circle overlaps the blue and yellow circles, there is parity — you are providing the same services, or results, that your competition provides so there’s nothing unique about your service offering.

The green area that falls outside of the blue circle represents what you provide that your target audience doesn’t want. You could be spending money on services that don’t appeal to your audience.

The only area that matters is where your green circle overlaps the sellers’ blue circle and falls outside of the yellow circle of your competitors.

This is your value proposition.

Why you need a value proposition

Your value proposition is what separates you from the competition and enables your target audience to see how you are uniquely positioned to help them achieve their goals.

A value proposition is simply your promise of future benefits.

It says, “Hire me today and get _______ in the future.”

It’s also the primary reason why a buyer or seller should hire you over your competition. And if you don’t have one, I can assure you, you’re giving money away in the form of lost commissions and ineffective marketing.

Over the years, I’ve presented to groups totaling hundreds, if not thousands of agents. And I always ask the same question: “If I had a home to sell in your area, why would I use you over any other agent?”

And to date, not a single agent has ever been able to answer that question.

They say things like, “I’ll work hard” or “I know the market,” but every agent says that. And those answers don’t help me see how I benefit from hiring that agent over their competition.

So before you worry about running ads on Facebook or mailing postcards to “get your message out there,” be sure your message is the right one — that it reflects what homeowners in your niche want from an agent.

 Creating your value proposition

The first step to creating a value proposition is to identify what your target audience wants from an agent.

And the best way to do that is to simply ask them.

As Michael Dell, the founder of Dell Computers, once said, “It has always made sense to me to build a business based on what people really wanted, rather than guess what we thought they might want.”

The easiest way to identify what’s on the minds of your target audience is to create a brief survey, using tools such as Google Forms and Survey Monkey.

Ask them what they’d like to know more about. Ask about their pain points and what services, or results, they value most.

And then analyze the results.

Look for commonalities in their answers. What stands out?

Do they wish they knew more about what it takes to get their home ready to sell? Are they first-time homebuyers who are anxious about their lack of knowledge regarding the entire homebuying process?

Start with your headline

To create your value proposition, start with the end in mind. What is the end benefit you are offering to your target audience?

Write this in a single, attention-grabbing sentence.

For example, let’s suppose you are targeting a community named Shady Grove and your survey indicated that your target audience values results over anything else, so you might start with:

“You’ll achieve market-beating results when selling your Shady Grove home, or I’ll sell it for free.”

Provide more details

Next, you will want to provide a sub-head, or a two- or three-sentence paragraph that offers a specific explanation of what you do, for whom and why it is helpful.

Continuing with our previous example, you might use “My services are designed to help Shady Grove homeowners sell quickly and for the highest possible price. If you don’t achieve market-beating results when you list with me, I’ll sell your home for free.”

List the key benefits

After you’ve provided the details, use two to three bullet points to summarize the key benefits that your target audience would receive by using you and your services.

For example, in keeping with our previous example, you could use, “Proven results, guaranteed sale.”

Elevate your value proposition

Next, you’ll want to elevate your value proposition by offering services or terms your competition does not offer but that your survey revealed your target audience would value.

These can include a pre-listing appraisal or inspection, assistance obtaining bids and scheduling repairs, a home warranty, professional staging, a guaranteed sale and more.

Putting it all together

Now let’s take the components of our value proposition and piece them together.

You’ll achieve market-beating results when selling your Shady Grove home, or I’ll sell it for free.

My services are designed to help Shady Grove homeowners sell quickly and for the highest possible price. If you don’t achieve market-beating results when you list with me, I’ll sell your home for free.

Proven results, guaranteed sale

Offering Shady Grove’s only guaranteed home sale program.

Now it is easy for people in your target audience to see whom you serve, what you offer that makes you unique from the other agents and how they stand to benefit from working with you.

Marketing to your niche

If you’ve gotten to this point in your business, you’re ahead of probably 90 percent of real estate agents.

You have identified a market with the proven potential to support your business for years to come.

You know what the homeowners in your chosen niche want from an agent and have positioned your services in a meaningful way to compete effectively for listings.

There’s just one more step before you start marketing your services.

Creating a pre-listing presentation

Before I got into the real estate business, I had spent several years running a very successful business advisory firm serving Fortune 500 clients.

We helped our clients find broken business processes and identified ways to make those processes more effective so they could be more profitable.

After selling the company, I was intrigued with the real estate brokerage industry and applied the same approach to planning my business, breaking down every aspect of the process agents go through and looking for ways to improve.

I noticed that most agents advertise so they can get leads. The agent then hopes to get that homeowner on the phone and convince him or her to set up an appointment where the agent will give his or her full listing presentation.

That seemed backward to me, especially given that the National Association of Realtor’s Annual Profile of Buyers and Sellers reported that 72 percent of homeowners would interview only one agent.

So, in effect, if you’re not that one agent, you might as well be out of business.

It made more sense to me to create a pre-listing presentation, get it into the hands of as many homeowners in my market as possible and do so as often as possible; that way, when they were ready to sell, they would have seen my proven approach to selling homes as well as my track record of results and my testimonials.

If you would like to learn more about how to create and use a pre-listing presentation, I’ve included a comprehensive step-by-step guide with this article.

The agents who have adopted this presentation have reported much faster appointments and better conversion rates of appointments to signed listings.

Building a lead generation funnel

Most real estate agents are taught how to sell.

They are taught to get on the phone and look for a homeowner who wants to list his or her home today.

The likelihood of finding that needle in the haystack is rare, and it’s one reason many agents who subscribe to this technique are always riding the income roller coaster.

Homeowners have their own agenda and time frame.

To become an effective marketer, however, you must learn how people buy and how to influence their buying behavior by providing the right information at the right time.

When you know how people buy, you can create sales funnels that address every stage of their buying, or hiring, decision.

In it’s simplest form there are three parts to the homeowners’ decision-making process, as shown below:

 

 

 

Top of funnel activities

In the first stage of the decision-making process, or the top of the funnel, the homeowners first become aware of their need for an agent’s services.

Consistent, repetitive advertising that places your value proposition in front of homeowners in your niche market will enable them to become aware of you and your services.

Direct mail is an excellent way to build awareness among your target audience. By offering content that homeowners would find beneficial, you can also build an email list that enables you to nurture the leads you collect.

This can also be accomplished by writing blog posts that target the homeowners’ desire to learn more about the selling process as identified in your earlier research.

Those blog posts can be promoted on Facebook or any other platform where your target audience can be found.

Your opportunity to move these homeowners through to the next stage of your sales funnel will depend on their need, whether immediate or future, for a real estate agent’s services.

Just because they are now aware of you doesn’t mean they need your services — yet.

And this is where many agents drop the ball.

They lack a strategy for keeping these early stage leads engaged until they are ready to talk with an agent and list their home.

If the homeowners do have an immediate need for the services of an agent, they move to the next stage of the funnel: consideration.

At this point, they are gathering the information they will use to determine who they should call.

What the homeowner is looking for at this stage is how you are able to help them achieve their goals.

Some of the factors they will consider are your reputation, track record, testimonials and experience.

Middle of funnel activities

The middle part of the funnel should focus on providing homeowners with the information they need to see how the process works and why you are the best agent to help them navigate the process successfully.

This is where your pre-listing presentation comes into play.

Most agents advertise so they can get a call. They hope to convince the homeowner to meet with them so they can give their dog-and-pony show presentation.

But that’s a lot of hurdles to cross.

As we discussed earlier, why not put your presentation into the hands of homeowners at this mid-stage of the sales funnel when they are looking for information that will determine who they’ll call?

You have the opportunity to put your proven approach to selling homes, your track record and your testimonials in front of hundreds, if not thousands, of homeowners knowing that, according to the turnover rate in your niche, some percentage of them will sell their home in the months to come.

Once the homeowner is convinced that you are the best-qualified agent to help them, they enter the last stage of the funnel: conversion.

Bottom of funnel activities

At the bottom of the funnel, your ads should be designed to get the homeowners to take action — to either call or email you to schedule an appointment.

This doesn’t mean you should let up on the gas.

You still need to provide compelling evidence that you are the right agent to help them achieve their goals.

This can be done with ads that feature client testimonials stating how you helped other homeowners achieve their goals despite certain challenges. Video ads work extremely well for bottom of the funnel activities where you need to encourage prospects to take action.

If you are using Facebook to run these ads, you can retarget people who have downloaded your pre-listing presentation by creating a custom audience of the people who visited the thank you, or confirmation, page after providing their name and email address.

As a part of the ad, consider using a call to action that has little perceived risk, such as a free, no-obligation assessment of what it will take to get the home ready to sell.

You can offer to provide a complete checklist of items that the seller can do to get their home prepared for the market.

Another option could be to provide a price estimate and a market overview, including how many homes are currently on the market within a similar price range, the average days on market, the average discount from the original list price that homes are selling for and more.

If the homeowner provided an email to be able to download your presentation, or other lead magnet, you can create an automated follow-up campaign that continues to nurture the lead by providing relevant content that establishes your expertise and helps to keep you top-of-mind with the homeowner.

Conclusion

I get it. Most agents are afraid of limiting their focus to a single area for fear of “losing out” on potential opportunities.

But the opposite is where the real opportunity is. By focusing your efforts on a market that is sized appropriately and has the proven potential to support your long-term business goals, you will achieve success much faster.

Greg Lyles is a real estate coach and trainer in Atlanta with 30 years of experience in real estate. He is the owner of a regional development company and a boutique brokerage, where he sold over $440 million on his own by focusing on two niche markets.

Connect with him on Facebook and LinkedIn.

The views and opinions of authors expressed in this publication do not necessarily state or reflect those of WFG National Title, its affiliated companies, or their respective management or personnel.

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