Tim Bauer’s Running Thoughts

Semi-daily webcast summaries/insights

RedFin: Making “More With Less” Possible?

“More with less” … who isn’t tired of that term. But what if it meant something? Would you listen then? I think RedFin is one such company. If they are successful, it implies a notable shift in the way customers will expect to be served (and billed) by service partners.

As usual my raw notes are below, but here are a few key themes that jumped out me as I ran (i.e. jogged) along to this webcast.

Webcast Details Notable Points

Duration:

  • ~40m

Speakers:

    • CEO, Redfin. Prior life Co-Founder of PlumTree.
    • CTO, Redfin. Prior life lead of BizTalk @ MSFT and lead architect for Plumtree.

Recommend to Watch? Yes.

  • While a bit informal (side conversations) at times the discussion between Scoble and the RedFin team was not slow in notable points. RedFin is a good example of a new approach to structuring a business. If you are curious its worth a watch.
 1. The Paradox of More with Less

  • So many businesses today try to charge more by doing more. Is that healthy? Looking at the restaurant industry in the U.S. I would say no. But isn’t that our style in the US? Value = More … right? Surely you can’t give a customer more by doing less. Looking at the RedFin model you would think again.

2. One Example - If Your Customer Can Do It Cheaper/Better … Let Them

  • So you could guess the “Less” is cost related. The tricky part is how value goes up as spend goes down. How do we stop trying to sell additional services and focus on the real value adds for our customers. In the case of Redfin, they pondered what a notable segment of customers in the real estate industry really wanted (assistance with the close) and what they could do themselves (picking a property). Sounds simple right. Do this when you know you are walking away from revenue … ah … more difficult no?

3. Another Example - Setting Aside Your Ego

  • In addition, Glenn mentioned at a Keynote he did at BloggersConnect how RedFin studied what information the customers were ACTUALLY using from them. The found that raw, unbiased data was king not their agent’s editorials on a home. Given that data, they checked their egos (i.e. not focus on sizzling descriptions of each property) and instead focusing on gathering raw facts. Again sounds simple, but consider that the facts the consumer value are the ones not easy acquired and you see the value opportunity.

4. Their Best Angle - Flat Fee … Not a %

  • Everyone has sold a home and thought why is the cost to sell my home a percentage? Isn’t the effort approximately the same regardless of home size? Shouldn’t the cost be based on the effort to serve not the value of my home? Seems simple enough but almost all businesses in the US are based on a GM % model. They are built from the ground up to increase the margins on the products they sell. But should all businesses, especially service businesses, charge based on effort not a % of asset value they are moving? Shouldn’t they be more of the two tier utility model (flat fee, usage fee) as described by Nicholas Caar in his recent book “The Big Switch”. RedFin thinks so.

In summary, RedFin seems to be a good representation of a rethinking that is going on in industry segments around two key questions if you are a services provider:

1. Should you try to define value in the form of a SuperSize meal?

2. Should you charge on a % of the value of the product you facilitate moving … OR … on the effort it takes to help you move it?

I suspect the answers to these questions will have implications for all industries … not just real estate.

sidenote: A great 60 second overview of RedFin in the style of those UPS commercials (whiteboard and all) as of late can be found here

** START OF RAW SCRIBBLE TAKEN WHILE RUNNING **

• Research Links
……………http://www.wellcomemat.com/home/channels/inmantv/18EAB4B3E1#wrapper
……………slides on starting business from him http://btc.montana.edu/meu/glennkelman/GlennKelman_files/v3_document.htm
……………scoble covered him in 03/07 http://scobleizer.com/2007/03/19/real-estates-worst-nightmare-redfin/
……………his post on what makes an entrepreuner http://www.techcrunch.com/2007/11/14/entrepreneur-20/
……………overview of redfin http://www.commoncraft.com/redfin
• 08/07 - KELMAN KEYNOTE AT BLOGGERS CONNECT
• http://www.inmantv.com/?p=52
03/07 - SCOBLE COVERAGE FROM PODTECH
• 4/16/2008, 6:12 AM
……………○ Glenn Kelman
……………○ CEO of RedFin
……………○ Micheal Young Head Tech
……………○ Trying to enable buying homes online
• 4/16/2008, 6:13 AM
• Fees
……………○ Refund 2/3 of commission
……………○ Check @ closing
……………○ Paid on customer satisfaction
…………………………§ Gives confidence on advice not selling pressure
• Locations
……………○ East and West coast
• 4/16/2008, 6:14 AM
……………○ Girlfriend talk (tangent)
• 4/16/2008, 6:15 AM
• How engage w/ Redfin
……………○ 75% of people engage
……………○ Listing from MLS
……………○ Estimate from Zilla
……………○ Past Sales from County
……………○ Lot outline
……………○ Information on schools / crime
• 4/16/2008, 6:16 AM
• Personal business
……………○ Still have to handle emotional payload
……………○ But limited sales function
……………○ Customer relationship management is guiding a confirmed buyer … not convincing them
• 4/16/2008, 6:18 AM
• Tangent
……………○ Scoble talks on value of agent
• 4/16/2008, 6:18 AM
• Problems / Push Back From Industry
……………○ There is a large place that remains for classical
……………○ There is a large segment that want to do more of the classical tasks and pay less
• 4/16/2008, 6:19 AM
• Survey on Performance
……………○ Savings on 2/3 from refund
……………○ Savings on negotiation … since agents are fighting for satisfaction … not higher fees
……………○ So they negotiate 1% better
• 4/16/2008, 6:20 AM
• Watching backs by realtors for you conversation
……………○ Inspectors … biased by who engages
……………○ Per redfin … don’t use inspector of realtor … they are not incented to find stuff
……………○ He isn’t here to disparage the industry
……………○ However industry has messed up dynamics … pay models focus on closing deal … which is bad for the customer
……………○ Selling side … agent is aligned with your interests … more sell … more you make and agent
……………○ Buyer side … more you pay the more agent makes … so agent model on buyer side is least effective in current
• 4/16/2008, 6:23 AM
• Separations
……………○ Separate on business model … 1/2 the separation for redfin is the biz
…………………………§ No spamming, no required registration to search, no telemarketing
…………………………§ Come to people on their terms
…………………………§ Pay on customer satisfaction
…………………………§ People that work with them ARE NOT salesmen … due to cust sat fee structure
…………………………§ Agents think people need help finding
…………………………§ Customers think they can find people just want help closing the deal
• 4/16/2008, 6:26 AM
……………○ Tangent scoble on personal experience w/ home buy .. How friend realtors guided him to do things that he would have done wrong (like overpaying). Non friends wouldn’t do that
……………○ This is an emotional business … you lock into one candidate … get someone on your side who isn’t emotionally involved in this
• 4/16/2008, 6:27 AM
• 2 challenges
……………○ Built great search site
……………○ Make process automated
…………………………§ What is demand etc
• 4/16/2008, 6:28 AM
• RS - What is difference between Redfin and classical
……………○ Classical will drive you around and find your home when in twon for a job
……………○ If you search well on your own. Redfin is a good match
…………………………§ Add film tours
…………………………§ Sent someone to let them in for a home tour
…………………………§ Working w/ seller to get details (close target, bids, pricing guidance for offer, etc)
…………………………§ Regular signature for offer
…………………………§ Present in person the offer
• 4/16/2008, 6:31 AM
• Measure customer sat
……………○ All parties … close or don’t close
……………○ If you are unsatisfied they don’t get paid at all
• 4/16/2008, 6:32 AM
• Technology review
……………○ Open source - linux, mysql, apache
……………○ Expanding the site is an interesting problem … replicate regional then globally
……………○ Personal service is hard to scale
• 4/16/2008, 6:34 AM
……………○ Use MSFT platform w/ virtual earth … property and school data
……………○ Blogging about houses
……………○ Crime stats
• 4/16/2008, 6:35 AM
……………○ Come to redfin
……………○ All data here or link to
……………○ Traffic / Commute data … not there
• 4/16/2008, 6:36 AM
• Emotional decisions
……………○ Want to read and research a lot
……………○ There might be some gaming on forums … so they monitor … balance points
……………○ They are dealing with the fine line of two parties opinions
• 4/16/2008, 6:38 AM
• Local services like vendors / retail outlets
……………○ Not there
……………○ RS - Hdtv available? For example
• 40 visits to see a house
……………○ Little pictures are not enough ..
……………○ So need more virtualization
……………○ Google deals w/ massive data
……………○ Redfin is a niche set of data
• Listing Alerts
……………○ By zip, geo space on map
• 4/16/2008, 6:41 AM
• Most fun and challenging thing
……………○ Fun - Knowing you are doing the right thing for customers
…………………………§ Worked @ Plumtree w/ Glenn
…………………………§ Amount of $ they save people is awesome
……………○ Challenge - Get over buying something online
…………………………§ Worry about charge card
…………………………§ Eventually it takes off. Get comfortable.
…………………………§ Not for everyone.
…………………………§ Make site clearly showing that its PEOPLE and SYSTEMS
…………………………§ Google is just systems
…………………………§ Brick and Mortar is systems
• 4/16/2008, 6:43 AM
• Demo
……………○ Home page. Search by region or neighborhood.
……………○ Comes to map w/ listings and icons
……………○ As zoom in see lot outlines
……………○ Get everyting that has sold in last few years … color coded on mod.
……………○ Mouse over with photos on it (can scroll in mouse over)
……………○ Info from county on prior sales
……………○ Estimates from zilla
……………○ Some is controversial
…………………………§ How accurate is zilla … not really
……………○ Don’t go buy houses just on zilla … it’s a guideline
……………○ Zilla was trying to provide fascinating information … they succeeded
• Tax record shows … flip for 50% profit … problem
……………○ Sellers want to hide that profit level
……………○ They stand firm.
……………○ They are honest w/ sellers if list with them or other sites …provide data that buyers want but you don’t want them to have
• Show on listings saving amount on average
• 4/16/2008, 6:48 AM
• End of demo
• 4/16/2008, 6:48 AM - excited to be on scoble
• Challenge for him
……………○ Trying catch things they missed on first rollout … adding features
……………○ While growing
……………○ He is used to world of small information … move to world of tons of information and people can screen down. Not a 3rd party.
• When spending $500k … make your best choice
• 4/16/2008, 6:51 AM - still talking in general … closing comments
• 4/16/2008, 6:52 AM
• Tidbit at end - Local agents, Bloggers
……………○ Tried to do it w/ low cost remote .. Didn’t work
……………○ Pricing information and knows the areas
……………○ Get more local everyday
……………○ Bloggers that talk about properties
…………………………§ Food fights start due to blunt comments by bloggers
• 4/16/2008, 6:53 AM - Close
……………

** END RAW SCRIBBLE TAKEN WHILE RUNNING **

April 18, 2008 Posted by bauertim | 1-Definitely Watch This | , , , , , | 3 Comments