Probability of Sale

by Chris Matcek,M.B.A./Masters of Engineering Candidate

Is there a way to tell ahead of time how likely a listing is to sell? In The Probability of Sale for Residential Real Estate (Journal of Housing Research) Ken H. Johnson, Justin D. Benefield, and Jonathan A. Wiley examine a set of 2,249 sold and unsold properties from a medium sized East Coast MLS. Their findings show that the commonly known positive relationship between property price and selling time has some inconsistencies and may require other variables to better understand the probability of a home selling. The probability of a home selling is most affected by factors like marketing time, seller motivation, certain property attributes, and location. The researchers compiled these variables to determine which ones most affected the probability of sale. The results of this research should not be applied blindly, but with serious thought as to how they might be relevant in your particular market.

1. "There is a third metric [other than property price and property marketing time] that has at least as much impact on sellers and real estate brokers. Specifically, the probability of successfully selling the property is of considerable importance to both parties."
THINK: Costs begin to rack up on both sides of the transaction if a house is not sold. The seller has the costs involved with keeping a house on the market and possible financial strain, while the broker will go uncompensated for their time. The probability of a home selling is an important metric to monitor.

2. "If sellers attempt to maximize their selling price by exploiting the positive relationship between property price and marketing time, as suggested by the majority of the modern pricing and time-on-market literature, there is a real cost to be borne: a reduced probability of selling the property."
THINK: The commonly known fact that as the price of the property increases the time on the market increases may be incorrect according to recent studies. If you try to find a maximized value for property price, it may not sell if the other factors, discussed below, are not properly considered.

3. "A higher degree of property overpricing (DOP), indicating a lower seller motivation, also reduces the probability of a successful marketing effort."
THINK: If the seller makes it appear that they have low motivation to sell by pricing the property over its market value, even if they change the price later, this may reduce the probability of selling within the listing time.

4. "Turning to the specified proxies for quality, the results generally behave as expected, with SSHOWER, DOVEN, and NC all significantly increasing the likelihood of selling a property."
THINK: The probability of selling a home greatly increases with features like a separate shower, double oven, and a newly constructed home. By knowing these qualities, the agent and the seller can agree on a degree of overpricing and time on the market that maximizes the likelihood of selling.

5. "The results for property size and age are less intuitive. The model results indicate that larger properties have a lower probability of sale, while older properties actually enjoy a higher probability of sale."
THINK: While this may just be a pattern in this sampled market, or the current market conditions, pay attention to which homes are selling since the results may not necessarily be intuitive.

6. "Both parties need to be cognizant that overpricing and extending marketing time, perhaps by rejecting a viable offer, are costly strategies that can contribute to marketing failure."
THINK: When the seller sets a price or receives an offer, careful thought needs to be placed in whether the probability of sale is greatly affected.

The Effects of Friendship on Business Relationships

by Bryan Gregory, M.B.A. Candidate December 2008

How do you manage friendship in your business? If the answer is "I don't," then this study may change how you do business. The effects of friendship on business and how best to manage it are studied in detail by Kent Grayson in Friendship Versus Business in Marketing Relationships (Journal of Marketing, 2007). Grayson analyzed survey data from 685 direct-selling agents, and discovered some surprising results regarding role conflict and friendship in the work place. Please note, the industry studied here was not real estate, though the core findings will still be relevant to your field. The results of this research should not be applied blindly, but with serious thought as to how they might be relevant in your particular market. Specific types of marketing media, measures of time, and percentages should be altered to fit your industry.

1. "Friendships...have a positive effect on business outcomes, but only for friendships with relatively low instrumentality."
THINK: Are your friendships at work genuine? This study continues to support the theory that friendship has positive effects on the business environment, however it emphasizes that this effect only occurs in friendships which exist for the sake of friendship and not for the sake of making use of another. Therefore if you wish to make your business more successful, you should seek out honest and true friendships with your clients. It also needs to be clearly communicated to them that you value the friendship for reasons other than the commissions or referrals that they can bring.

2. "The conflict between friendship and instrumentality is more influential for relationships that began as friendships than for those that began as business relationships."
THINK: Relationships which began as friendships first are "more sensitive to conflict." In the real estate industry, where friends and family networks often generate business leads, this is particularly relevant. One should closely monitor and take extra care with those relationships which were friendships first in order to avoid potential conflict which could result in the loss of both a friend and a client.

3. "Incentivizing customers to refer their friends may attract new business but may also dampen future customer commitment and negatively affect customers' relationships with members of their social network."
THINK: Offering incentives to clients for referrals is common practice in the real estate industry, however this is the first time its potentially negative effects have been identified. While this practice may have short-term benefits for your business by increasing leads, it may create conflict over the long term. By offering incentives for referrals, you are introducing instrumentality into that clients' relationships with the friends they refer to you, creating potential for conflict between them and a lack of commitment to you. Care should be taken when offering incentives for referral of friends, and creating non-monetary incentives may be a way to avoid these negative consequences.

4. "The role of friendship appears to be more complex than merely helping or hurting business. Depending on how it is managed, it may simultaneously facilitate and hinder exchange."
THINK: Do you currently manage friendship in your business? Careful management is key in harnessing the power of friendship for your business. There are two effective friendship management tactics. The first is explicitly separating business and friendship by "fostering some, but not all, of the relational attributes that define friendship." The second is "drawing attention away from the extrinsic benefits that exchange partners are getting" by "reframing instrumental activities as being primarily intrinsically motivated." For example, "[Companies] frequently reframe selling as ‘sharing' good products and ideas with friends."

5. "Ultimately, whether friendship and business conflict in a relationship depends in great part on how the individual exchange partners decide to define the terms of exchange."
THINK: The way in which you communicate is also key. Care must be taken to word certain aspects of the business relationships in such a way as to reduce the emphasis on instrumentality. For example, asking for leads from a friend or family member can be communicated as the desire to help and offer a solution to their problem. Removing the "what do I get out of it" from the communication process is crucial in avoiding conflict between friendship and business.

Stress: It is Your Business!

by Chris Pullig, Ph.D.

Are you stressed? Are the people you work with stressed? Undoubtedly, we all feel somewhat stressed these days. However, stress is not universally bad. In some cases it pushes us to achieve, but there are sources of stress that are counterproductive. One source of stress that isn't positive is stress that arises from the conflict between work and family roles. A question that arises and has not before been clearly answered is how this type of stress impacts your business. More specifically, when customers interact with your company's service providers and they encounter stress, does this have a negative effect on your business? In a series of studies, some published in a recent Journal of Marketing article and others still not yet published, my colleagues and I addressed this basic question.

We All Suffer from Stress
Stress is a part of our everyday lives. We feel stress with our investments, our businesses, the demands of our work, and balancing this with our responsibilities at home. In recent years, with an increase in the number of dual-career couples, family roles have changed. This has given rise to even higher levels of stress related to balancing work and family responsibilities. This conflict between work roles and family roles is even more pronounced in industries such as residential real estate sales where much of the work involves evening and weekend hours, hours when family-time is most demanded. We need to work at times when our children are busy with important activities. We need to simply be at home when our spouses have time off from their own busy schedules.

Not surprisingly, studies show that work-family conflict is a significant source of stress in many Americans' lives. For many of us, this conflict creates excessive levels of stress which can be harmful to our health, both physically and mentally. Conceptually, it is thought that stress operates as a type of resource drain. Stress makes it difficult to concentrate on our work or our family limiting our capacity to perform either task to the best of our abilities. Stress drains our emotional and physical energy, and as a result the enthusiasm we display as we do our job, attend our child's concert or soccer game, or simply take care of important family issues. The impact of stress may have serious implications in both our personal and professional lives.

But, Does this Conflict Really Impact Your Business?
Our research is the first to look at the impact of stress in a customer-relationship setting. In a series of studies, my colleagues and I examined the impact of stress due to work-family conflict on individual job performance, customer satisfaction, and customer's intention to patronize the service provider in the future. We conducted our studies across multiple industries with a focus on examining these effects for personnel in a sales or customer-interfacing role.

We first measured each individual's level of work and family role conflict and their felt stress. We then separately asked supervisors to rate each individual's job performance on three dimensions – 1) how the individual performed their prescribed roles in their interaction with the customer, 2) with others in the organization, and 3) how they performed in terms of extra efforts to provide customer service. Since stress from work-family conflict is conceptualized as a "resource drain" we expected that it should have a negative impact on performance of these work-related roles, especially the extra effort put into satisfying customers. Customer-level data was then used to determine the extent to which individual stress impacted not only job performance but also customer-level outcomes – satisfaction with the service provided and intention to patronize the company again in the future.

Using these measures we estimated a nested hierarchical linear model (HLM). This statistical method allows us to estimate regression paths for variables that exist at differing levels (i.e., individual personnel, supervisor, and customer level). Given that we are using measures from three independent sources enhances our ability to show causal relationships between our variables.

Our Results
As expected, individuals who reported higher levels of work-family conflict felt higher levels of stress. In turn, individuals with higher levels of stress were rated as lower in their job performance with the greatest impact on extra efforts to provide customer service. More importantly, customers served by higher stressed and lower performing personnel reported lower levels of satisfaction and intent to use the service again. In an interesting and somewhat unexpected effect, individual stress had a significant direct effect on customer impressions. It seems that customers can sense stress when interacting with service providers and that this has a significant direct impact on customer satisfaction and future intentions.

What Does this Mean for Your Business?
Our results have several implications. First, it is important to know that stress is not only harmful to the individuals who work at your agency, including yourself, but stress also has negative effects that can hurt your customer service personnel's performance and, in turn, customer satisfaction. In knowing these effects are likely to exist, you are in a position to do something about this type of stress. Second, if you sense that work-family conflict is a significant source of stress for your organization, then you have options to address this stress.

The following is a four-step process to use in addressing stress and, in particular, work-family conflict stress:

Step One: Educate Everyone on How Stress Can Impact Your Business
Educate everyone in your organization, employees and supervisors, about the detrimental effects of stress and especially the effects of work-family conflict in generating stress. In knowing and understanding more about the importance of this issue, you and all your personnel can begin to address ways to minimize its impact on your business.

Step Two: Assess How Stress Occurs Within Your Organization
Ask your personnel, and take time yourself to reflect on how work - family and other types of stress occur for your organization. Identify sources of stress for your personnel, especially those who interact with your customers the most. In knowing how work-family conflict and stress arises, then you can begin to address specific sources of stress. It is important that you identify sources of stress within your organization so that you can address specifically these issues.

Step Three: Create a Stress-Sensitive Culture
In creating a culture where everyone knows that stress is something that is taken seriously and its impact understood, you have a better chance of finding ways to alleviate the negative effects. A culture that appreciates work-family conflict will be one in which conflict can be effectively reduced and coped with more readily. Empathy and a supportive climate will allow you to institute programs and methods that will encourage active and meaningful participation in work-life programs and other steps you might take as an organization to address stress.

Step Four: Develop a Program to Address Sources of Stress and Coping with Stress
A good program will address stress in two ways. First, the program will attempt to reduce the sources of stress. This can be accomplished in a variety of ways and should be examined within the context of what creates stress for the organization (Step Two above). One method addressing the source of stress created by work-family conflict is to create a work-life program for your organization. The second manner of addressing stress is to assist personnel with methods to deal with stress.

• Work-life programs are commonly used options in addressing work-family conflict by lowering the barrier between work and family roles. The specifics of these programs should be designed to address your personnel's needs. Each organization will have unique needs. Be creative. Some work-life programs, in addition to serving to reduce work-family conflict, operate as perks generating additional HR advantages. Common examples from industry include on-site daycare, flextime, and telecommuting. But, more creative solutions might include concierge services (i.e., dry cleaning pickup and delivery) to deal with life's minor details that take so much time during critical times of the day. The idea is to create solutions that address your people's needs that also are cost effective for your organization.

• Work-family conflict and related stress will occur, so it is important to teach personnel how to reduce and cope with stress. Stress reduction techniques can be taught and encouraged. Nearly one-half of large companies in the United States provide some type of stress management training. Stress management programs teach personnel about the nature and sources of stress, the effects of stress on health, and encourage personal skills to reduce stress. For example, time management or relaxation exercises can be taught. Also, one of the best methods known to reduce stress is regular exercise. Exercise can be integrated into a culture at work. Exercise also can be encouraged through on-site facilities or in financial support for off-site facilities. Exercise can be a part of the social interaction within an organization.

In general, stress is a given in our lives. It is not always bad. Certain sources of stress can have negative effects on our personal and professional lives. The conflict we feel between family and work roles is one such area. This type of negative stress can have significant effects on your organization's ability to provide the kind of customer service you seek to deliver. While it may not be possible to eliminate stress, it is something we can address through a reduction in its sources and by facilitating individual coping and reduction strategies.