Being Mission-Driven Sometimes Means Being Irrational | Summary and Q&A

TL;DR

Redfin analyzed their commission refund model and decided to eliminate it, despite the initial fear of impacting profits. They prioritized the consumer and redefined the real estate industry through convenience and customer service.

Key Insights

• 🛀 Redfin's analysis showed that customers value convenience and service over a commission refund.
• 🏂 Boards of directors may initially prioritize profits, but when presented with compelling data, they can support mission-driven decisions.
• 🐕‍🦺 Redfin aims to redefine the real estate industry by combining personalized service with on-demand convenience.
• 🗯️ In an industry driven by business-oriented decisions, there is value in following one's instincts to do the right thing.
• 🙈 Redfin acknowledges the vast potential for growth in the real estate market and sees it as an exciting challenge.
• 🥺 Taking a customer-centric approach can lead to business success, even if it means giving up significant profits initially.
• 🥺 Redfin believes that innovation and offering something unique in the market can lead to sustainable profitability.

Transcript

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Questions & Answers

Q: What made Redfin decide to eliminate the commission refund, despite the potential impact on profits?

Redfin's analysis showed that even when prices were raised, customers continued to choose their services, indicating that the commission refund was not the driving factor behind their success. They prioritized their mission to put the consumer first, even if it meant giving up a significant amount of revenue.

Q: How did Redfin overcome the challenges of offering convenience and personalized service in the real estate industry?

Redfin worked backwards from the customer's perspective, asking themselves what services they would want. By prioritizing on-demand convenience, prompt customer support, and easy access to house viewings, Redfin aims to redefine the traditional, relationship-driven real estate experience.

Q: How does Redfin plan to expand and capture a larger share of the US housing market?

Despite already generating significant revenue, Redfin acknowledges that they currently only have a small share (1-2%) of the US housing market. However, they view this as an exciting opportunity rather than a daunting task, as they aim to continuously grow and capture more market share by offering a unique and valuable service.

Q: How does Redfin balance profitability with their mission-driven approach to business?

Redfin believes that when a company offers something no one else can, customers will be willing to pay for it. By prioritizing the consumer and providing an exceptional experience, Redfin believes they can maintain profitability while staying true to their mission.

Summary

In this video, the speaker shares a strange experience during a board meeting at Redfin where they discussed eliminating the Commission refund offered to consumers. Despite expecting rational analysis to support their decision, the numbers showed that giving consumers a refund actually drove more demand. The speaker initially felt hesitant to present this information to the board, but ultimately learned the importance of following one's heart and doing the right thing. Redfin's challenge is to offer real estate services with on-demand convenience, financing it by working backwards from the customer's needs. The speaker emphasizes that Redfin is still at the beginning and aims to gain a larger share of the US housing market.

Questions & Answers

Q: What was the speaker's strangest experience in a board meeting at Redfin?

The speaker recalls a board meeting where they discussed eliminating the Commission refund offered to consumers. Despite anticipating a rational analysis supporting this decision, one of the board members raised a thought-provoking question.

Q: What was the question asked by the board member in the meeting?

The board member asked the speaker to name a great brand that was built by someone who was entirely rational. This question challenged their decision to eliminate the Commission refund and prompted deeper analysis.

Q: Is the Commission refund a significant amount of money?

Yes, the Commission refund at Redfin amounts to hundreds of millions of dollars. Despite this large sum, the analysis showed that providing consumers with a refund actually drove more demand.

Q: Why was the speaker reluctant to present the analysis to the board?

As a mission-driven company focused on putting the consumer first, the speaker anticipated that the board would prioritize squeezing profits once they saw the numbers. This was in contrast to the speaker's inclination to prioritize doing the right thing for the consumer.

Q: Why do people sometimes hesitate to do the right thing in business?

Often, individuals feel that they do not have permission to do the right thing in a business-oriented world. They may feel compelled to act solely as a pure businessman, even if they have the desire to follow their heart and prioritize the consumer.

Q: What does the speaker believe is necessary to do the right thing in business?

According to the speaker, one doesn't need much; they just need one person at the right moment to say, "Why don't you follow your heart?" This small gesture can provide the permission and support needed to prioritize doing the right thing.

Q: How does the speaker believe businesses can pay for doing something unique?

Throughout the history of business, whenever a company does something that no one else can, they will always find a way to pay for it. As long as the customer truly values the unique offering, there will be a means to finance it.

Q: What has been Redfin's challenge in the real estate industry?

Redfin's challenge has been to transform the traditionally personal and relationship-driven real estate business into one that offers on-demand convenience. They aim to provide accessibility, such as the ability to access a house instantly and have questions answered online or over the phone.

Q: How did Redfin approach the challenge of offering on-demand convenience?

Redfin decided to work backward from the customer's needs and desires. They asked themselves what kind of service they would want and then figured out how to finance it. This approach allowed Redfin to overcome the challenges they faced.

Q: What is Redfin's current market share in the US housing market?

Redfin currently holds only one or two percent share of the US housing market. While this may seem daunting, it also presents an exciting opportunity to expand and gain a larger market share in the future.

Takeaways

The speaker highlights the importance of following one's heart and doing the right thing in business, even if it challenges rational analysis. Redfin's journey involves offering on-demand convenience in the real estate industry by prioritizing customer needs. Despite currently having a small market share, Redfin sees tremendous potential for growth in the US housing market.

Summary & Key Takeaways

• Redfin analyzed the commission refund model and concluded that eliminating it was the rational decision, even though it involved giving back hundreds of millions of dollars to consumers.

• The board of directors initially questioned the rationale behind the business's mission-driven decision, but ultimately supported Redfin's dedication to putting the consumer first.

• Redfin aims to revolutionize the real estate industry by combining convenience and personalized service, offering on-demand house viewings and prompt customer support.