Value Creation in Real Estate
Caroline Tynan, PhD, Sally McKechnie, PhD, and Stephanie Hartley, MSc
Making the final decision on a large purchase or investment comes down to one thing – What value will this have in my life? The concept of value is an important concept in any high-involvement purchase. For real estate professionals, the word value comes up in professional conversations everyday. However, value can oftentimes be very narrowly defined from the firm’s perspective, prompting the agent to miss opportunities to connect the broad definition of value to the real estate purchase experience. In this article, we draw from our research on customer value, which we conducted in the context of what are considered extreme experiences. Our goal through this research is to explore how our understanding of the many types of value the client can enjoy is expanded when a broader, customer-dominant logic view is adopted.
Customer-Dominant Logic
Current research in value creation suggests that a new perspective or theory, one based on the logic and perspective of what the client brings to the experience is important. Formally, customer-dominant logic (CDL) focuses our attention and broadens our understanding of value by acknowledging that the client purchase and whole service experience is a complex and dynamic process. In the midst of this process, the value of a home to the client resides in more than just the physical house itself. Value is not just what the client receives at the point of purchase but can be created “in use” as the client selects the property, lives in the house, makes it a home, adapts and updates it over time.
Lifeworld Experiences
Value creation is directly connected to the lifeworld of the client. Lifeworld experiences can be lived as well as imaginary events. Value creation and how the home fits the needs of the client are determined by their lifeworld experiences, which can include “real” past, present and future experiences, vicarious experiences and even virtual reality. Imagine a client, who lives in a traditional apartment, adding “pins” of décor and design ideas to her “Dream Home” board on Pinterest. These “pins” are a part of the client’s virtual experiences that help to form her lifeworld.
Real Estate Implications
For agencies, creating a client experience based on customer-dominant logic and lifeworld experiences can be tricky! The trick is to incorporate the sales process with an understanding of CDL to improve closing success. There is no right or wrong way or a list of steps you must follow to use the CDL framework. CDL helps us understand how the client creates and enjoys many types of value from the home. As an agent, you must pinpoint the source of insight or influence to have a better understanding of what each particular client values. In return, the agent unlocks the thinking of her client, which guarantees a positive home-buying experience.
The source of insight will not always be your client’s dream home board on Pinterest. A client’s value creation oftentimes can come from intimate conversations or something of sentimental value unable to be captured using words. There are countless sources of insights that will create value in the home-buying experience. How will you uncover them?
The Client Value Framework for Real Estate summarizes the different types of value and provides questions that real estate professionals might consider to create client experiences that maximize the value of a home.
Customer Value Framework for Real Estate
Experiential & Hedonic
Experiential and hedonic value comprise the extent to which the home-buying experience creates appropriate feelings and emotions for the homebuyer. Components of experiential and hedonic value include sensory, emotional, social and epistemic, the last component reflects a level of newness or novelty.
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Types of Value |
Value Description |
“Value” Questions to consider in |
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Sensory |
Value created from sound, sight, taste, smell, and touch connected to the service experience |
What are your client’s desired sensory cues? |
|
Emotional |
Value created from emotions and feelings activated by the real estate experience |
What emotions or feelings does your client wish to have or be reminded of as s/he experiences a home? |
|
Social/ |
Value created from relational aspects of the real estate experience, including client relationships with companions, agents, and computer-mediated exchanges |
What is the client’s relationship with the agency? The agent? |
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Epistemic |
Value created from an experience that arouses curiosity, offers novelty, or satisfies a desire for knowledge |
What features of the home are new, fashionable or innovative for this homeowner and can create value? |
Symbolic & Expressive
Symbolic and expressive values capture the homebuyer’s psychological meaning ascribed to a potential home. Such meanings may be directed toward one’s self or may be directed toward others.
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Types of Value |
Value Description |
“Value” Questions to consider in Residential Real Estate |
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Outer-directed |
Value created from engaging in a home buying or selling experience to project a public image created through impression management or status |
Does your client plan on hosting parties and entertaining guests? If so, what kind of parties? |
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Self-directed |
Value created from engaging in a real estate experience to enhance self-concept through possessions, reputation, and materialism |
Can the home’s features satisfy your client? |
Functional & Utilitarian
Functional and utilitarian values provide the home-buyer with useful and preferred functionality. These values come to life through quality and efficiency dimensions.
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Types of Value |
Value Description |
“Value” Questions to consider in Residential Real Estate |
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Quality |
Value created from utilitarian, physical or functional attributes of the real estate experience such as expected performance and customer quality |
What services are your clients expecting you to provide? Knowing the client’s service expectations is required if you expect to deliver what the client perceives as a quality experience. |
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Efficiency |
Value created from benefits versus cost of engaging in the real estate experience in terms of customer's monetary cost and time |
What can you offer your client that the internet and web searches can not? |
There are many ways to ensure an enjoyable client experience using the CDL framework and the client’s lifeworld experiences. Understanding how clients create value helps in the processes of finding the right home and maximizing the value they create for themselves when living in that home afterwards. We believe that the value-creating questions listed in the Client Value Framework for Real Estate summary are a great start for agents to improve the client experience.
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Recommended Reading
Tynan, Caroline, Sally McKechnie, and Stephanie Hartley (2014), “Interpreting Value in the Customer Service Experience Using Customer-Dominant Logic,” Journal of Marketing Management, 30(9-10), 1058-1081.
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About the Authors
Caroline Tynan, PhD
Professor of Marketing, Nottingham University Business School
Caroline Tynan (PhD in Marketing from the University of Strathclyde, Glasgow) is Professor of Marketing, Nottingham University Business School in the UK. She conducts research on consumption meanings, experience marketing, luxury goods marketing and managerial marketing practice. She is President of UK’s learned society, the Academy of Marketing, a Fellow of the Chartered Institute of Marketing and a professionally qualified Chartered Marketer who has worked in the food and utilities’ industries.
Sally McKechnie, PhD
Associate Professor of Marketing, Nottingham University Business School
Sally McKechnie (PhD from the University of Nottingham) is Associate Professor in Marketing at Nottingham University Business School. She has published in a number of leading marketing journals. She conducts research in the areas of experience marketing, understanding customer experiences, luxury goods marketing and services marketing. She is a member of the Academy of Marketing Science, the Academy of Marketing and the Chartered Institute of Marketing. Prior to working in academia, she held marketing positions in the exhibitions and direct marketing industries.
Stephanie Hartley, MSc
Capita Talent Partnerships
Stephanie Hartley is currently leading the marketing for Capita Talent Partnerships (part of Capita plc) which focuses on helping organizations grow by unlocking talent through school engagement, graduate schemes and nationally recognized programs, such as traineeships and apprenticeships. At the University of Nottingham, Stephanie read History before completing an International Business Masters, in which she spent a semester studying in Ningbo, China. Her primary research interests include experience marketing and marketing in the luxury automotive sector.
