How the sales incentives in real estate take the wind away from marketing

It was nearly an year since we started our portal, which away from the humdrum of classifieds focused on real estate brand building and marketing, that we got a call from a reader interested in a property at Hyderabad. He was influenced by one of the very informative posts we had prepared on an upcoming project. We were very clear in our communication to him that we weren’t brokers. He had a long conversation with us and that whole day he went scouting for properties and kept calling us. We decided to try out something new. We called up the sales head of the property firm and discussed the case with him. He immediately extended a reasonably good discount to the customer.

We informed this reader about our interaction with the company. What happened next? None of us knew for weeks. I called up the reader and asked him about the decision he took. He told me that he bought the flat the very next day and was highly grateful for our help. I called up the sales head and he was surprised too, since he wasn’t aware of the closure. He later checked his own MIS and found the client sale was recorded under a leading Online Broker’s name. Now started an investigation into what really transpired here. It was very evident to us. The sales incentives are too misaligned in this sector. Most of the times what really happens at the project sales offices isn’t what we hear at head office. It all starts from the intense sales focus in real estate. In today’s bad market this sales driven industry is facing an even bigger question. “Is poor marketing resulting in poor sales?”. Ask a marketing head of any firm and he/ she has a different story to tell. Marketing departments are found complaining that there is intense pressure to achieve sales numbers because construction till the advent of RERA regime was seen secondary by many players. RERA now puts a bigger onus on project construction and timely delivery, thus the incumbents can not wait for high sales number to commence execution.

Chicken and Egg problem? Marketing vs Sales in real estate
Chicken and Egg problem? Marketing vs Sales in real estate

The above trend reminds me of my first employment ie private banking/wealth management in leading international banks. Banks were so enamored with third party fee income that they pushed all those supposedly managing wealth of clients to just keep selling investments like soaps. And the wealth managers would have a new suggestion every other month. A serious back lash hit the industry when clients were found on wrong footing during the 2008 crisis. Some foreign banks put in place sales process audits etc to check malpractice but to little avail. Mis-selling continues unabated in wealth management.

Are real estate companies creating In House Brokers?

How is it that two critical functions ie real estate sales and marketing aren’t working together. The latter department is doing its bit through out of home media, prints and on-line activities. This leads to generation of inquiries. Based on brand popularity and market conditions the amount of leads can vary tremendously. Once an inquiry enters the lead management system, the pre-sales follows up with the client to judge his interest in the property. If the LEAD is qualified ie the person who expressed interest is genuine the LEAD enters the sales channel. Many firms are still to create effective pre-sales process or instead pass the lead directly in the sales channel. The latter processes lead to poorer follow ups and leads going stale most of the times.

Sales-Vs-marketeers in real estate

Now let’s understand what is happening at the project sales office. Suppose the QUALIFIED LEAD walks in for a site visit and shows further interest in the property to an extent he/ she wants to buy it off, this is where the conflicts begin. Most real estate companies link incentives of sales professionals to closures, a closure can be a direct or indirect ie through involvement of an intermediary (or BROKER). The incentive for closing a sale directly for firm’s employee may be higher, however the commensurate effort required is also more. The above doesn’t play out as simply.

Firstly in markets such as NCR, brokers have started a practice of pass back of commissions. Let’s say a broker gets a commission of 4 percent on a sale, he would incentivise the buyer through say half of this. Customers also act smart and use this route more often after having done their own diligence. Brokers and sales professionals of developers end up creating a good camaraderie over time. Now consider a scenario – a direct walk-in is referred to a broker by the sales professional, possible? Very much. This is exactly where the sales and marketing goals start to diverge in Indian real estate enviroment.

Will Sales and Marketing in Real Estate ever be on same page
Will Sales and Marketing in Real Estate ever be on same page

The real estate company is looking at most sales by spending the least, this is what marketing departments are trying to achieve. Burden of paying a brokerage is an additional cost to the company. However, developers would typically not want to annoy the broker lobby and would honor a sale any which ways. This practice or the inability to control it makes life tough for us and for the in house marketing teams. We along with them toil hard to generate good inquiries.

So what will it take to change the above practice and align everyone’s interest.

The first and foremost requirement is that of real estate firms to change the mindset from sales to customer service. To an extent, advent of RERA will help achieve this. Companies will be investing more resources in correct and adequate marketing.

Secondly, the realty firms need to align the incentive structure better. For that they need to start treating sales professionals like they would treat any other employee in the firm. Pay him well, link his performance to that of company and his own, train him well and groom him well. Why must they be treated like brokers? By linking sales recorded under his code to his bonus. Instead look at how much did he save for you by making a direct sale and acknowledge better. I have often heard from leading realty firms that they don’t have good staff. The harsher truth is that this industry doesn’t attract good talent for multiple reasons – not so lucrative salaries, too much control and intervention by the owners (As most firms are privately held), poorer organisation structures and too much orientation to sales.

Stay away from differently pricing the same product. Like they say in NCR the brokers are at times given special “deals” to offload inventory. So a client hears different prices depending on who he interacts with. Broker may have a favorably sounding deal for the customer. This results in customer transacting through the broker instead of the company. Such practice will demotivate the company’s own sales professional and he would willingly let that opportunity go to the broker.

We recently received feedback from a client of ours. We were quite happy with the response to the campaign we ran for them. We also heard of massive turn up of walk ins and few closures. However the numbers didn’t sound that encouraging when it came to closures. Needless to say that the client was still comfortable with our work, but we weren’t. So we decided to conduct a short survey on leads generated through us. We called up about 100 or so of 1000 enquiries and found at least three cases of people having already bought the apartment. Several more told us they are still waiting for the developers to call them up. Our hunch was proven right, yet for a sales focused promoter our hunch wasn’t enough to make him believe otherwise. It has been an uphill task for us to convince the company’s management, but gradually the tide is turning.

The sales vs marketing conundrum, Source –

The sales funnel gets sharply narrow as we move along. It is the job of marketing to one enhance the size of the funnel and make it more useful by right targeting. But the marketing alone can not decipher the impact, it is the sales that need to provide correct and timely feedback. However that is not happening in our sector. The cost of service/ product is so high that incentives around a good sale are very lucrative.

This pushes the poorly paid and less trained sales professional to get into some sort of arrangement either with a broker or to find other ways to enhance his own payout. In all this marketing departments do not get the credit they deserve. This can not continue in the post demonetisation and RERA times. To get the best ROI, companies will have to control the sales and marketing well. Margins are getting squeezed which means the less you pay as referral fee the better you are. For this we all need to go back to the drawing board, before even sales and marketing it is the brand and its recall that will count. To get to that stage is a long and painful process, only the far sighted serious real estate firms will understand that others may continue to create an army of in house BROKERS.

The information has been curated from various sources and may not be verified as per RERA guidelines *
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