As MLS regionalization and consolidation has taken place, one of the popular models has been the “wholesale-retail” model, where a central MLS organization provides wholesale pricing for a technology and service bundle to local MLS organizations or directly to REALTOR associations that provide MLS services including billing and collection. In another model, neighboring MLSs share data, such that data access is not the differentiator between the MLSs. In both cases, this has resulted in organizations competing for subscribers.
Theoretically, this competition could be a good thing – brokers and agents can choose the organization that provides the best balance of cost, products and services. Hooray for the free market, right? But what I see happening in several markets is more like a one-dimensional price war. These organizations are chasing a fixed number of subscribers with a single incentive – lower cost. What it amounts to is a “price war”, and what it means is that there is less money in the system to provide service. I’ve seen great staff that don’t have the resources they need to do their job well resign, or be eliminated. And, as one might expect, member/subscriber satisfaction has been trending downward. How can it not? We all know that you get what you pay for. As one industry colleague told me, “This should be a case study on how not to do it – the anti-regionalization manual.”
Where does the price war lead? To adapt the Wikipedia “Price War” article: “In the medium to long term, price wars can be good for the dominant [Associations / MLSs] in the industry. Typically, the smaller, more marginal, [Associations / MLSs] cannot compete and must close. The remaining [Associations / MLSs] absorb the market share of those that have closed. The real losers then, are the marginal [Associations / MLSs] and their [stakeholders]. In the long term, the [real estate professionals] may lose too. With fewer [Associations / MLSs] in the industry, prices tend to increase, sometimes higher than before the price war started.”
Of course, if you ask an agent today, “Would you like to save a hundred bucks or more on MLS service this year?” of course they will say yes. But once they aren’t receiving the products and services they are used to, satisfaction decreases, and if they don’t trust the capability of the organization and the people running it, it’s hard to go back and raise prices and fix things. We talk a lot about “professional standards” and “quality of service” for agents – well, for MLSs and associations, quality begins at home. Short-term price reductions can be attractive for end-users, but not at the cost of long-term strategic capability and organizational health. Associations and MLSs have challenges to address over the next few years – transitioning to new models of service delivery, consolidation and other approaches to quality improvement, ongoing legal challenges, and more – it is definitely not a good time to reduce both means and capacity.
Those who attended Clareity’s MLS Executive Workshop know that we’ve done the research – and there are some cost savings possible via MLS cooperation and regionalization – and while some competition is good, I urge our industry leaders not to engage in a price war. There’s a line between healthy competition and price war, and if you’re paying attention, you’ll know when you’ve crossed that line. Just remember, once the price war starts it can be hard to stop and no one wins in the end.
Share this post: