trends

Moving Past Legacy Systems

A well known marketing strategy is the first-mover advantage. An advantage is gained by the initial significant occupant of a market segment. For a period of time this may allow for technological leadership within an industry. However, its not uncommon over for technology to continue to develop over time while an industry and/or its occupants are stuck with legacy systems. This often means that the cost of implementing new technology becomes much greater and takes much more time. I believe that this has occurred in the real estate industry were legacy systems have resulted in a dysfunctional market, unnecessary costs for technology upgrades, and barriers to entry. The status quo becomes the enemy of innovation.

Eight years ago I had the intention of deploying a portfolio of real estate websites with a customer-centric model. Unfortunately, legacy systems and fragmented MLS offerings prevented cost-effective development. What should have cost $30,000 or less, based on the technology of the day, would have actually cost a minimum of $300,000 to implement for one MLS system. The cost of integration and adaptation to the legacy systems would have required an extra $270,000 just to overcome the short comings of the status quo. This economic reality would be repeated in hundreds of MLS systems across the United States. To grow beyond California would require a multi-million dollar budget with a majority of it wasted on adapters and patches to overcome outdated technology. Therefore, the project was delayed. Even today, there are over 700 different listing services in the United States alone making it very difficult, if not impossible, to aggregate and build a 21st century brokerage lead by technology and customer empowerment.

RPR is one group within the National Association of Realtors that is attempting to overcome the past with investments in new systems. They are trying to move past legacy systems and outdated business models. It's a real life case study in big data and disruptive technology vs the status quo.

Here is a presentation by the CEO of RPR that is worth watching.

Even if you're not in the real estate industry there is a lot to be learned from challenges of Brokers/Agents, Associations/MLSs, and Service Providers. Without competition and opportunities for innovation the tenancy is to resist change and protect the status quo. They will protect the good or mediocre from the possibility of great.

Is it possible to move past legacy systems in real estate technology from within? Maybe. If not, one day we might find Zillow or another outsider taking control of the customer experience changing the bargaining power of suppliers and buyers of real estate services.

Death of the dot com

For several decades the .com gTLD was the dominant domain extension for business and most brands were successful in obtaining theirs. However, for many companies, large and small, there has frustration in not being able to obtain their preferred name. This resulted in a secondary market and the use of top level domains like .tv, .co, and .me. Yet, many people don't realize that these are the Internet country code top-level domains for Tuvalu, Colombia, and Montenegro respectively.

In 1998, ICANN was created and they started the process to expand the offerings beyond the eight original gTLDs (the originals were: .com, .edu, .gov, .int, .mil, .net, .org, and .arpa.). In 2000, the first round included a handful of domains including .aero, .biz, .coop, .info, .museum, .name, and .pro. In 2004, the second round of expansion occurred with .asia, .cat, .jobs, .mobi, .post, .tel, .xxx, and .travel. Between 2004 and 2012 ICANN was working on policies and guidelines for a much larger expansion. Now in 2016, hundreds of new gTLDs are available and the implications are significant. Here is a video from ICANN promoting their new "friends". (Note: As of July 16, 2016 this video had only received 20,509 views. That seems very low considering the significance of this change.)

This summer 374 new top level domains became available to register at GoDaddy and other registrars. Additionally, one started pre-registration (.games) and 292 are "coming soon". Beyond hundreds of new generic domains for common words in English nearly three dozen languages will have their own domain extensions including Arabic, Chinese, and languages based on the Cyrillic alphabet. According to GoDaddy, "This will be a huge boon for companies that promote their products in countries where these languages are spoken."

So what does this mean for you as a brand manager? This is both a huge opportunity and a huge threat.

A FEW OF THE THREATS

The death of the dot com means that you must protect your brands vertically against competitors and defend your trademark rights. It will be so much easier for a competitor or a customer to register your brand with hundreds of different extensions. This is going to impact brands both large and small.

The registrars, like GoDaddy, just won the lottery. They've been able to break free from the status quo and apply tiered pricing to domain extensions and to premium domains within these new gTLDs. Whereas, in the past, a company with bulk purchasing power could acquire a .com in the range of $8 per domain...this new world includes domains that will cost hundreds of dollars to thousands of dollars per year just to register.

A FEW OF THE OPPORTUNITIES

This is going to give brands alternatives to a dot com and allow for shorter more relevant URLs. For example, as many of you know Google recently changed the name of it's company to Alphabet and launched the website https://abc.xyz. This was only possible by the expansion of the gTLDs.

You have the opportunity today to fence in your brands and even utilize these new URLs for micro sites or web applications that you do not want on your main company website. Below are some examples (note: "brand" in these examples should be replaced with your brand).

  • "brand.press" could be used for all of your press releases, media kit, and media contact information.
  • "brand.careers" or "brand.jobs" could be the job board and applications portal for your company.
  • "brand.pics" could have all of the approved images for your brand.
  • "brand.store" could become your e-commerce site allowing you to have your main website using a better CMS system than what is provided by your e-commerce platform.
  • "brand.deals" or "brand.cheap" could be used for flash sales that you may chose to target to specific audiences. However, if your value proposition is not based on having the lowest price, then you might not want utilize this domain but you would still want to control it.

TIME TO RETHINK STRATEGY

As Michael Porter teaches, "The real point of competition is not to beat your rivals. It's to earn profits." Therefore, you need to determine the risk/reward for your brand and how these new domains can enhance your positioning and your ability to earn profits. These new domains may be meaningful to you or they may be an expensive distraction.

In the past, the internet has had an impact on industry structure and I believe that this milestone has the potential to change the playbook for many players. Keep in mind Porter's five forces as they relate to this opportunity/threat and your strategy to earn profit. As a reminder, the five forces are:

  1. Rivalry among existing competitors
  2. The threat of new entrants
  3. The threat of substitute products or services
  4. The bargaining power of suppliers
  5. The bargaining power of buyers

As Joan Magretta summarized, "From advertising to zipper manufacturing (and every industry in between), the same five forces apply, although their relative strength and importance may differ."

I believe that the death of the dot com will have an impact on business and consumer behavior in the years to come. The smart players will see if these new offerings can improve their strategic position and increase their profits. There will also be many threats of higher costs in blocking competitors, legal battles over CyberSquatting, and adapting to the greater bargaining power of the domain registrars.

Will these new gTLDs be your friend or your foe?

Are Credit Card Surcharges Bad for Business?

Recently I went to an independent coffee shop and purchased a vanilla latte and a scone for breakfast. They told me a price, which I accepted, but as I was using the terminal to pay with my credit card I noticed an extra $0.19 fee. I asked about it and he quickly proceeded to give me a quarter as a refund. Why should you care? Because this is actually an issue of consumer protection, freedom of speech, and small business competition!

California has a law, California Civil Code section 1748.1, that prohibits retailers from adding a surcharge when a consumer chooses to use a credit card instead of paying by cash. It says, "No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means." It also says, "It is the intent of the Legislature to promote the effective operation of the free market and protect consumers from deceptive price increases for goods and services". As a Californian, I've become used to this law (personally and in business). I believe that we should all play by the same rules and I've accepted credit card fees as a "cost of business".

As I was waiting for my coffee several other patrons bought coffee, paid with their credit cards, and incurred the fees. There was no signage to disclose the fee and they never mentioned it unless you noticed it on the receipt. This bothered me. So after the line died down I said something to the person behind the counter who happened to be the owner. I told him that this practice was illegal and his response was basically 'I know and I don't care'. He gave the common reasons about being a small business owner, the expense of the fees, and that customers appreciate that they accept credit cards, etc. Then he surprised me by trying to compare it to speeding on the freeway and that is wasn't a big deal. However, speeding is dangerous and if you get caught or have an accident there will be consequences. I told him that the consequence was that he just lost a customer (and I have not been back since).

What neither the coffee shop owner or I knew was that in March 2015, U.S. District Court Judge Morrison England ruled that this California law “is an unconstitutional restriction on plaintiffs’ freedom of speech and is void for vagueness.” California's Attorney General believes that "...this decision is incorrect and has appealed that order." However, as of now, the Attorney General cannot enforce the statute. This combined with the change in credit card merchant agreements in 2013 has lead to confusion on this issue. The coffee shop owner and I both thought he was violating the law but what he did not know was that he technically could impose the fee legally if he gave full disclosure prior to purchase.

The State of California Department of Justice Office of the Attorney General said on this matter, "Although the Attorney General is enjoined from enforcing this specific statute, California law does prohibit a merchant from engaging in activity that is unfair or deceptive. So, for example, if a merchant charges a credit or debit card surcharge or offers a cash discount, but does not fully disclose this to customers prior to their committing themselves to the goods or services, or if the merchant does not clearly explain its policies regarding debit and credit cards, the merchant may be violating California law."

This will likely be a topic of interest for many California small business owners in the years to come. Personally, I don't think it is wise to add additional fees to the customer that they may not understand or agree with. Major merchants are not imposing these surcharges and if small businesses adopt the practice they'll be putting themselves at a competitive disadvantage. In e-Commerce the popularity of 'fast and free shipping' has shown that customers like knowing what they'll pay without being surprised by extra costs at checkout.

If you do decide to impose the surcharge then don't do it in a way that is unfair or deceptive. Fully disclose the fee and educate the customer about the policy and the change in the law (and be prepared to discontinue the practice if the appeal is successful). I would also encourage you to watch and listen to see if you're losing customers by the policy. You might lose business to competitors who do not impose surcharges and there might be hidden costs for encouraging customers to use less secure payment means (such as cash or checks).

[Disclosure: I am not an attorney and this post does not represent a legal opinion on this matter.]