Successful marketing for appraisers: a four-question approach.
Those who rush out to find current texts on the library or bookstore shelves will find no shortage of "how-to" literature. But after studying the theory, brainstorming with colleagues, and even seeking professional advice, most find themselves confused. Which aspects of marketing will effectively produce measurable new business, and how can they justify focusing scarce resources on business development that may or may not produce results?
Appraisers agonize about why they need to turn their attention to marketing, who they should target, what services they should offer, and how they should conduct themselves. By seeking answers to these four seemingly simple questions, some clarity can be brought to this elusive topic, and tenets can be established for successful marketing.
The United States may be the only country in the world where a significant segment of the market for appraisal services is directly mandated by federal legislation. While this may initially have been a great shot in the arm, the appraisal profession has realized retrospectively that the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) is a double-edged sword. Not only did it spawn the classic economic scenario of excess profits breeding ruinous competition, but it lulled appraisers into believing that because appraisal services were mandated, there was little need to market them. We based our existence as a profession on the fact that the client had to have an appraisal; it was written into law.
Under competitive pressure to prune their appraisal budgets and streamline their loan processing, lenders have successfully lobbied for regulatory relief. As a result, many in the appraisal profession feel that their "right" to work has suddenly been compromised. Appraisers wring their hands in despair at the elevated de minimis levels and direct their energies toward fighting for these "rights."
In reality, the days of the mandate appear for the moment to be over. Today, appraisers operate in a competitive environment where market forces rather than federal and state legislators establish the supply and demand (and therefore the price) for appraisal services. If appraisers meet this challenge only by hoping that another financial downturn will bring tightened regulation, they are doomed.
Need to demonstrate the benefits of appraisal services
Under these circumstances, the need to market "quality" appraisal services to price-sensitive clients by demonstrating the cost benefit of appraiser skills is obvious. (The nature of these services is examined later in this article under the what heading.) Appraisers must dispel the notion that an appraisal is a mandated evil for which the client grudgingly pays as little as possible. Appraisal must be portrayed as a service that, if competent and timely, brings a benefit to a client that far outweighs the fee. With the help of a good appraisal, a banker is able to make a sound loan. An investor uses the advice to quantify risk and project yield, a developer has the tools to measure the feasibility of a project, an asset manager gets advice that makes him or her a wise decision maker, and an attorney is able to rely on expert testimony. It is these direct benefits and indirect repercussions that determine, from a client's viewpoint, whether appraisal service is cost effective. If these benefits are successfully communicated, clients feel good about us and we generate repeat business.
Compare this scenario with the long-term financial implications of a "poor" appraisal or one that is not cost effective in which, for example, an appraiser has missed some current comparable evidence, is weak in the technical analysis, errs in the interpretation of data, or simply misses a crucial delivery deadline. As in the financial crises of the late 1980s, aggregate loss exposure for a client can be in the range of millions of dollars. In this context, in light of the relatively minimal differentials between high and low appraisal fee quotes, the long-term financial implications of poor work (frequently characteristic of a low-fee appraisal) may be catastrophic. Expressed more graphically, I overheard an appraiser advising a major portfolio investor on the need for a good appraisal with the words, "Don't put your Rolls Royce through the automatic carwash."
The key to communicating this message is effective individual and collective marketing. The marketing effort must be focused and sustained, and if necessary, supplemented by orchestration from a larger professional organization. It is not something that fills slow work periods, either in the appraisal office or at an organizational level. Even during peak production periods, marketing duties must take priority, for to neglect them is to almost guarantee a prolonged slow period while gearing up again after delivering the last assignment.
If appraisers understand this why, they will realize that regular marketing is an absolutely essential facet of doing business in today's economy.
Targeting client groups
Most firms maintain or can quickly assemble a list of major clients. While this represents a primary source of marketing information, it is not in itself enough to form the foundation of a successful marketing program. For effective client-specific communication, the list must be arrayed into two target groups: existing clients and prospective clients.
One school of marketing thought(1) claims that as much as 90% of all new business will come from existing clients. If these are sustained, maintained, and expanded, an appraiser might have more new business than he or she can possibly handle.
The great advantage of existing clients is that, even though they may have been dormant over the preceding months or even years, resurrecting their business will not require a prolonged courtship and honeymoon. This can be very cost effective for all concerned. Time needed for "ice-breaking" introductory meetings, "power" lunches, and the exchange of company literature is minimized.
With an existing client, this energy can be channeled toward a more direct approach. Instead of suggesting a purely social lunch meeting you might, for example, offer some helpful insight into a property type or a market in which you know the client has an interest. You might even respond to specific questions about a potential assignment you know your existing client is considering. Research such topics and fax some insight or data with the comment, "Thought you may not have seen this information, which may be helpful in your deliberations." Later, when ordering an appraisal on this or another project, the client will remember your gesture.
One of the most encouraging aspects of existing clients is that colleagues can support you in your efforts, not by new marketing but merely by doing old business "better." The shift to total quality management (TQM)(2) of the late 1980s epitomized this strategy. The new acronym only emphasized what we already knew - delight the clients with your quality and timeliness, and they will be beating down your door for your services.
But beware of treating these existing relationships as easy pickings. Serving existing clients entails ongoing regular communication. By all means dust off lists of existing clients to whom a call is overdue, go back through your billings to see who last year's big spenders with your company were, make "after sales service" calls on recent jobs, and make "informational" calls to advise your clients of any innovative changes in your service. But above all, constantly please existing clients by a sustained high quality of work. Do no more than you do already - but do it better.
There will never be any lack of prospective clients. Half an hour's brainstorming will reveal that the real problem is not insufficient quantity but insufficient quality. By quality clients, I mean the effective decision makers who actually have a willingness and capacity to decide to use your services.
In seeking quality, beware if your first call to a new client gets an overenthusiastic response. Chances are that the client is either a gatekeeper trying to divert you from the real decision maker, or someone trying to sell to you. An example of this phenomenon is the local "after-hours business" meeting, where not a soul may be interested in purchasing your services, but all are intent on selling you theirs.
Identify your true prospects - the effective latent demand for your services. A myriad of preprinted lists, directories, online data, and more recently, compact disks (CDs) are available to speed you in this task. But be conscious of the need to be selective and flexible in revising these lists to reflect constant changes in business. Today's prospective client may disappear tomorrow; tomorrow's may not yet be in existence.
The difficulty of marketing professional services to new clients is the time needed to establish a relationship. A single telephone call is not enough. There is very little impulse buying among professionals. Building a business relationship requires mutual trust built up over time, and the only way to create such trust is outside of the business environment, away from any hint of sales talk.
By all means go to lunch or to the gym, meet for coffee, or suggest a round of golf. But for long-lasting results try working together on the PTA, planning the neighborhood bake sale, or ringing the Salvation Army kettle bell in freezing rain. These are the real relationship builders.
The more deeply rooted the relationship the more able it will be to withstand the ever more frequent business revolutions that hit us like Kansas twisters. They will certainly survive the "Ms. Smith no longer works here" let-down call. For if she doesn't work "here" she does work "there" and will be transferring your relationship to the new company. "Oh yes, we worked together at the neighborhood bake sale last summer," she will be telling her new boss.
You, meanwhile, are forming new relationships at her former company. "Well, if Ms. Smith is no longer there, perhaps her successor, Mr. Jones, would like to attend our free seminar." You have turned the potential single client loss into a double hit.
This only scratches the surface of who. Once you understand the scope of the question, answers will come readily to mind. Today, for instance, one CD may list over 11 million businesses across the country. Someone on that list is awaiting your call to start a long-standing business relationship. The real issue is finding the needle in the CD haystack.
Defining the service
What are the services you provide? The response, "appraising," is one-dimensional in a three-dimensional market. The single dimension of merely concluding a value at the end of a three-week research and writing period will serve appraisers poorly in a market that demands more.
Create a demand for your whole repertoire of appraisal and analytical skills by presenting them in the context of their invaluable contribution to solving the issues of today's changing real estate markets. Identify a diverse list of appraisal-based services you can provide to today's lenders, investors, developers, attorneys, and owners. Once you strip the question down to what formats and services a client really wants (and FIRREA and Uniform Standards of Professional Appraisal Practice [USPAP] permit), you discover that there is life after federally mandated narrative appraisals.
In any format, today's appraisal should be marketed as a living document forming the very foundation for decision making. Where else is a client going to get such a detailed investigation of his or her property and its market? It does not have to be a document that the lender throws into a file and the client never sees.
In my own firm's menu of services, the detailed description of what the client can expect from the full commercial narrative, for example, is supplemented by the advice that "It is a comprehensive document providing the level of detail necessary for processing the initial lending or investment in the property and describing all aspects of the land and improvements as well as clearly defining the interests appraised and concluding their market value." I stop short of telling my clients not to lend without it but that is my message.
Similar "window-dressing" can supplement descriptions of all services offered. In other words, the what is amplified in your marketing literature by a clear statement of an appraisal's purpose, uses, and advantages.
Other examples of diversifying your services within the appraisal process include bringing a client's attention to such findings as discrepancies in the title documents or leases, observed deterioration in major structural components, or a physical boundary encroachment of which the client was unaware. While you will not be able, under the Competency Provision of the USPAP, to take a detailed position on these issues, you are providing a valuable service by alerting the client to them.
You may be asked to make different assumptions and conclude alternative "investment" values based on a variety of assumed parameters. Assuming compliance with the USPAP, all of the finely honed skills that go into an appraisal - the research, the analysis, the documentary support, the market knowledge, and the technical expertise - may deserve a more expansive and flexible marketing label than mere "appraising." Be creative in defining and communicating your skills.
The importance of communicating skills cannot be overemphasized. Effective communication is still an elusive goal for most of us. Good letter writers will tell you that, as they write, they carry a mental picture of the recipient's reaction to each word or phrase. Their words can elicit the whole gamut of emotions - joy, anger, sorrow, or envy. Similarly, a good conversationalist will convey emotions in words, expressions, and body or hand language. A good phone manner will plant emotions in the listener from afar. Just as an artist or musician emotes through his or her medium, so there is a basic art to presenting yourself through the medium of your craft; in this case, appraising and related services. But above all, be a good listener. Only by first listening to and understanding the real issues will your marketing response be relevant, articulate, and successful.
Listen to each client individually. It has been said that it does not matter so much what your services actually are as what a client perceives them to be.(3) Each client will have different needs and expectations. Each will react differently to your initial presentation. Therefore, with a one-dimensional or "catch-all" approach you will miss the boat. But one word of caution in your search for a creative approach to each client. While it is up to you, as the communicator, to influence perceptions, beware of making promises you can't keep. Your final work product must not disappoint.
In all of your communications, present a positive demeanor. In talking with other appraisers about business development, I am often overwhelmed by their negativity. What should be a positive outlook is engulfed by the negative. I hear professionals begging for business on the pretext that "appraisers are down on their luck." Vocalized this translates into two currently endemic complaints: "The bankers don't like us" or, increasingly more common, "FIRREA has killed the profession." My response is: Don't wait for this "luck" to change. It is unrealistic, and somewhat churlish, to pin your professional hopes on a tightening of federal regulations in response to another financial downturn. Instead, seek new horizons, talk up your skills, and above all be responsive to change.
In addition to the basic range of appraisal services, appraisers can make available to clients a wide diversity of adjunct services using not only basic appraisal knowledge, but also ancillary skills. While appraisers must remind clients that in any discussion involving an opinion of value, the USPAP(4) requires appraisers to avoid misunderstandings caused by misleading or confusing information, there are as many permutations of adjunct services as there are prospective clients.
For example, what if your bank client asks how he or she can teach loan officers to understand an appraisal? Your initial reluctance to teach loan processors to prepare their own internal evaluations will be far outweighed by the opportunity for educational outsourcing. While an appraiser may lose some work opportunities in the short term, the relationships established by such an assignment can pay off handsomely in the long term.
Another way of presenting the same services but with added appeal is to offer an expedited service. I remember when the concept of "express" service entered my world. I was working a vacation job in a photo processing lab, when someone rushed in with a competitor's ad, crying, "Look, Joe's Photo down the street is offering 48-hour film developing." The boss was skeptical. "No one can beat our one-week mail-in service or our five-day pickup and delivery," he retorted complacently. Just one year later I learned that the business had closed and my former boss was checking fast-photo orders in a parking lot kiosk. One-hour photo developing had come along and stabbed him in the back - and all because he had ignored the first signs of a rapid industry change.
As you research other possibilities of the what, a word of caution. Don't try too many innovative services; you will quickly become overextended. There is not enough time in the day to effectively offer everything to everybody. Be selective and do what you do best. There is nothing worse than a diluted or "restricted" service for an overly broad range of offerings. We have all at one time or another arrived at the railroad station to find the "restricted service" sign up, and known we would be spending the best part of the morning in a railroad tunnel.
I remember one winter's day regretting not heeding a "restricted service" notice when catching a train from New York to Buffalo. When I realized I had to disembark at Rochester and be bussed the last fifty miles, I vowed never again to travel by train. Your appraisal services may suffer a similar fate if you fail to provide the "full" service.
At the other extreme, the most focused appraisal services are the specialties. Many, but not all, have become specialists by accident. They do one or two assignments on a single property type, get interested, become experts, and the result is a specialty.
Specialties do not have to be all-consuming. There is room to be a specialist in one area and still have skills left to be a generalist in others. This is as true for an individual as for a large practice, where different individuals can shoulder different specialties to create a viable team of experts.
The list of the what is elastic. It is not my intention to spell out all of the answers; merely to invite earnest consideration of the question. Consulting, financial valuations, property acquisition advice, investment analysis, tax advisory work, public sector assignments, litigation support, electronic data services, and relocation work are just a few services an appraiser can offer. The possibilities are endless. Divide the question into property types, client groupings, and even time periods. Be mindful too that services in demand today are subject to change; even as you are preparing today's marketing plan, acknowledge the need for regular revision and possibly major changes.
Overcoming the fear
Professionals generally dislike marketing their services. The traditional "salesman" image is a bad fit. It somehow evokes a "peddler" image - loud clothes, a slick demeanor, and pushy pressure tactics. Such car lot tactics, we tell ourselves, are obviously an instant "turn-off" to a professional's clients. Why would we lower ourselves to this?
But are we using this as an excuse to "lie low?" This distaste for aggressive marketing is bred, in most of us, by fear - the fear of the 90% rejection ratio that is the bedfellow of cold calling. Not having a workable way of deciding who to target and who to avoid, we retreat behind our telephones and make calls only to those we already know will respect us and not reject us.
If instead of retreating, appraisers overcome these fears and enter the "big bad" world of marketing, they will find that professional services can be as legitimately, yet subtly, marketed as any traditional product. Any concerns should be dispelled by the successes achieved in this field by such professionals as attorneys, doctors, architects, and engineers. Once he or she sees that successful marketing does not tarnish a professional demeanor, marketing (or more accurately, establishing business relationships) can be the most enjoyable part of any appraiser's working day.
The how is perhaps the steepest obstacle for most of us. This is the question that never goes away but to which we never find the one solution we can implement and evaluate. There is no one proven solution; it is a moving target. If there were an easy answer, the "how-to" authors would be out of business.
Two pivotal frustrations are how to get through to the right people, and how to measure whether the marketing dollar has been effectively used to achieve measurable results. Results may seem impossible to quantify.
I have just completed, for example, a year-long "courtship" with a local bank. This has involved lunches, golf games, and even a chance to serve on a Boy Scout committee with the CEO. I have made some good friendships but no appraisal business has been forthcoming. My accountant questions the return on this particular marketing expense. But I am persevering into year two with the understanding that some portion of every marketing budget, even those of the corporate giants, must be allowed to take a scattershot approach and that eventually my patience will be repaid.
Assemble the "team"
The first step to answering the how dilemma is usually a controlled brainstorm. Get your appraisal colleagues together. Expand the search to your social groups, your Sunday school class, and your Rotary club. Even the most unlikely sources can offer an opinion or uncover a source of new business; your team can be "everyman." Even nonbusiness groups understand marketing, simply from being personally bombarded by sales talk every minute of the day. All of us can distinguish successful marketing concepts simply from being exposed to them.
Divide the discussion into concepts and actual ideas. By a concept I mean the marketing vehicle - usually a group of related ideas such as media marketing, a letter campaign, brochure materials, newsletters, a planned program of meetings, in-house seminars and presentations, an orchestrated follow-up to past services, a "how am I doing" questionnaire, company-sponsored events, or free ancillary services to regular clients (e.g., online data, hotline access, promotional materials).
Each of these concepts may provide enough material to be delegated to separate individuals or work groups within your organization. Even if you are a small group or a sole practitioner you can still activate a variety of marketing ideas; the pace of progress will just seem slower. Establish priorities on a time line and make sure colleagues share successes and failures on a regular basis.
Remember the need for focus and the danger of trying to be all things to all people. Within each concept, assemble specific ideas. Each idea is a miniproject. Put a budget against each project; see it through. It is so easy to spend valuable time on an idea only to have it languish, partially completed, because of lack of time or, more commonly, waning interest. If an idea dissipates before completion, debrief as to why and try to avoid further unconsummated follies.
Once you get the ideas flowing, you will understand the huge scope of this how topic. One appraisal group with which I worked accumulated over 100 workable concepts and found that the only way to effectively array them was an alphabetical list (I still keep my own version of this list as a reference for fresh ideas). From this they were able to prioritize concepts worth pursuing to meet their current goals and pinpoint concepts to be abandoned.
If you feel confused by the myriad of topics touched on in the answers to my four questions, let me conclude with a number of essential reminders - the primary "do's and don'ts" for successful marketing.
Beware of gatekeepers. There is a legion of nondecision makers out there, whose common denominator is a voracious appetite for your time. They will eat your lunches, take your data, get mileage from your reputation, and you will never get an assignment from them because it is not in their power to engage you.
Maintain your focus and be wise in the use of your scarce resources. The scarcest resource is your time. Divide it equitably between marketing and production. You can't have one without the other.
After considering the whole gamut of ideas and gimmicks, your best marketing tool is your own good work. It will have a shelf life far longer than your marketing literature. Therefore, present it well, with equal parts of form and substance. Then deliver within your promise - in the format and time frame expected by the client. Exceed expectations by all means but don't give away the store with your excesses. Finally, follow up to ensure you are in line for the next assignment. Mileage gained from a quality assignment is worth ten times the mileage from all of your marketing.
If you are amenable to change, hold regular but brief "SWOT" (i.e., strengths, weaknesses, opportunities, and threats) meetings, no matter how large or small your business. In addition to your own knowledge and client relationships, your appraisal colleagues are your front-line troops and are a valuable source of new ideas. Acknowledge that they may be closer to clients with whom they are working than you currently are. For example, don't take the bank CEO to lunch and ignore the loan officer who, through your colleagues, is a prolific source of business. Keep the positive concepts and discard the negative and the obsolete concepts. Finally, your road map for finding the answers in this four-question marketing approach is goal setting. Relate all of your marketing decisions to a primary mission, broken down, preferably against a time line, into goals. Constantly and honestly reevaluate your results in the context of change. If you think you have achieved excellence, it will elude you. You will be defeated by that mortal enemy of success - complacency.
1. Advantage Training, Inc., Orlando, Florida, Workshop, March 1993.
2. Edward W. Deming, Out of Crisis (Cambridge, Mass.: MIT Press, 1982).
3. Charles S. Stewart, Orlando, Florida: "Marketing Training," Lecture Series, Orlando, Florida, January 1992.
4.The Appraisal Foundation, The Uniform Standards of Professional Appraisal Practice (Washington, D.C.: The Appraisal Foundation, 1995).
Stephen G. Williams, MAI, is a partner in the Raleigh, North Carolina, appraisal firm, Foster Williams. A Fellow of the Royal Institution of Chartered Surveyors (FRICS) in the United Kingdom, he has been appraising in Europe and the United States for almost 30 years. He is vice chair of the Appraiser Qualifications Board (AQB) of The Appraisal Foundation.
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|Author:||Williams, Stephen G.|
|Date:||Oct 1, 1995|
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