What Real Estate Investors Can Learn From MINI Cooper's Competitive Advantage

It may seem to most of us that we live in a world with an overwhelmingly daunting number of choices. However, scratch the surface, and something seems amiss. Many of these choices amount to little more to different varieties of what is pretty much indistinguishable. Youngme Moon offers an elucidating thought experiment to highlight this fact:

“Imagine that you are standing in the middle of the cereal section of your local supermarket. Your job is to select a cereal you’ve never tried before, ideally one you’ll end up enjoying. How would you go about doing it?

“If you happen to be someone who has eaten cereal on a fairly regular basis throughout your life, the task is actually not that hard. In all likelihood, you’d simply walk down the aisle, mentally eliminating entire batches of cereals at once — say, all of the children’s cereals… or anything that looked to sugary. You’d then winnow your selections further by applying a secondary set of filters — for example, anything with granola… or anything high fiber. After you’d narrowed the aisle down to a small subset of cereals — maybe six or seven brands — you’d layer on a few additional criteria — perhaps dismissing anything containing raisins or anything in an ugly box — until, boom, you’d made your selection.

“The whole exercise would probably be over in a matter of minutes, unless of course you happen to be the type of person who is really persnickety about your breakfast fare, in which case it might take a bit longer. Regardless, what would be impressive about your performance, irrespective of the outcome, would be the intelligence of your approach. Somehow, you have learned to deconstruct the product category the way a product marketer would: as a cascading set of subcategories and mini-subcategories. Somehow, you have learned to segment the product array across a range of dimensions, and somehow, you have learned to make distinctions between brands that come down to the most minute of details. In other words, you may not have realized it, but somewhere along the way, you became a category expert, a cereal connoisseur” (Different, 2-3).

But what about the non-connoisseur?

“Now imagine a martian standing in the same aisle, faced with the same task. What was easy for you would be completely daunting for him. Even assuming his superior intelligence, parsing the variation among products would take hour upon hour. For this poor creature, all of those cereal boxes would look bewilderingly the same.

“…You could repeat this same exercise again and again, across product after product, with similar results. Try explaining to a foreigner the difference between Crest and Colgate. Try explaining the difference between Honda and Toyota. When I visit a Foot Locker with my husband, he will cruise the store like an oenophile seeking a rare varietal. I, on the other hand, am a category outsider. So while he roams, I will park myself in a corner of the store and feel overwhelmed by the sameness” (3-4).

She notes elsewhere that “…PowerBar alone produces more than forty different varieties of energy bar, and the energy bar category has grown to include more than sixty assorted brands” (7). She concludes that “…in category after category, it has become apparent that competitive differentiation is a myth” (11).

Thinking Outside of Sameness

Youngme Moon implores her readers to step out of the competitive herd of sameness and offers a variety of examples of companies that have done just that and seen a marked competitive advantage because of it.

One such example is MINI Cooper. MINI Coopers had been successful in Europe, but had very little brand awareness in the United States. Penetrating a new market is always difficult, especially given the fact that Americans tend to love big cars. Indeed, the bigger the better. And as the name should make painfully obvious, the MINI Cooper is, well, rather small. Moon sums up the typical marketing options as follows:

“The first would be to develop a campaign that does some myth busting, that counters the perception that the car is too small for comfort… A second option might be to ignore the size issue altogether, to sweep it under the, er, pavement. The vehicle has a number of other delightful features — excellent handling, an affordable price. It is also a genuine exotic, boasting, in addition its European breeding, a unique ‘bulldog’ design” (161).

MINI Cooper went in the completely opposite direction, however. Instead of just trying to compete as another low cost car or whatever, they actually went so far as to emphasize how small the car was. One of their first billboard advertisements read simply:

XXL XL L M S MINI

Another ad read, “Makes everything else seem a little too big.” My personal favorite showed the MINI Cooper literally on top of an SUV as if it was the kayak some family was taking on a camping trip. (You can scroll through some of their ads here.)

All in all, the campaign made sure to differentiate MINI Cooper from the rest of the field. The campaign began in 2002, and at least partially as a result, sales had more than doubled by 2008.

How Does This Apply to Real Estate Investors?

What this example and many others that Moon gives in her eye-opening book teach is that standing out from the crowd is essential in any business. When applying this concept to real estate, part of it rather simple. For example:

Houses (for either sale or rent) should be cleaned before pictures are taken, and a high quality camera should be used. For sales, consider hiring a photographer.
Minor updates such as window shutters, window boxes, bark mulch or just general landscaping make a notable difference in setting your property apart from others.
Advertising campaigns to motivated sellers with handwritten letters (or at least letters that look handwritten) are more effective than simple form letters.

And on and on. These small things do help set you apart. Although even still, they may just make you the fanciest cereal box on the shelf, but not altogether differentiated from the others.

So add to this niches. And this isn’t just in terms of flipping versus wholesaling versus buy and hold, or even student rentals versus working class rentals versus offices, etc. (although those things are important). But some of the best niches may really set you apart and make you altogether different from the majority of your competition even within your given niche.

Real Life Examples

For example, I heard of one investor who tries to purchase only one-bedroom homes with the intention of providing housing to elderly folks (of course, he accepts anyone who applies and passes through screening). Most investors and virtually all homeowners steer clear of one-bedroom homes so he has a much easier time buying them and there isn’t much else on the market as far as rentals other than apartments (where people looking for a one-bedroom unit would normally turn). But apartments don’t offer the seclusion, backyard, or same general feel that houses do. And this is especially true since he accepts pets and most apartments usually do not. He also makes sure there are no or at least few stairs one would have to climb.

Another investor I know focuses on buying high-end condo units near the Plaza (a highly desirable area in Kansas City) and then uses Airbnb to get a much higher rental rate for them.

Another investor purchases student rentals around the University of Oregon — but on the absolute outskirt of where students would be willing to live so he can buy these houses at a cheaper price. Then he rehabs it to make the house absolutely stunning. He doesn’t put the address on the ad, just the pictures. When students call on the house, he gives them the address. And while it’s further than most would prefer, they usually still go because the pictures looked great. When they actually get to the house they are awestruck and are more than willing to put up with it being a bit further away than they would have preferred. Thus, this investor can rent properties at campus prices without paying campus prices for them.

There are certainly many other ways to set yourself apart from the herd. But remember, it’s not just that the riches are in the niches. Often, it’s being different than even your competitors in your niche that provides the greatest advantage.

Investors: Do you embrace your real estate niche?

Let me know with a comment!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.