What is an Experience Economy and Why is it Relevant to Single Family Rental Property Management?
There are 3 questions driving the future of value creation in professional property management.
- How do we create an experience so good, residents never want to leave?
- How do we create an experience so good, investors never want to sell?
- How do we create an experience so good, talent wants to be in this business forever?
The word experience is key. Whoever creates the best experiences will create the most economic value as the service side of property management becomes commoditized. In Joe Pine’s book, The Experience Economy, he reveals a critical insight that transcends real estate to other industries. It’s about the staging of value creation through the lens of commoditization and customization. How do we create an experience so good, residents never want to leave? How do we create an experience so good, investors never want to sell? How do we create an experience so good, talent wants to be in this business forever?
In today’s highly competitive world, companies often focus solely on process improvement,
optimization, cost-cutting, and driving efficiencies. While these are critical to remain competitive and improve margins, they are the playbook of a game that ends with operating a low-margin, commoditized business. Some business leaders even talk about their industries being commoditized as a badge of honor.
Interestingly enough, that thinking is self- fulfilling; by not focusing on creating higher-value offerings, they are riding the train to commoditization.
History contains many examples of innovations so groundbreaking they captivated people and led the way for economic prosperity. Artificial light, telecommunications, automobiles, to name a few. While these were all once higher-margin innovative offerings and the most attractive businesses to be in, they have grown to be stale and competitive industries, forced to compete on price, leading to lower profits and company value relative to size.
For example, Ford and GM, once praised as innovators in manufacturing goods, are now in a sea of competition and worth less than 0.4x revenu
Co-Founder of Second Nature