Determining what marketing works, and what doesn't, in your real estate practice
Jan. 3, 2008
 There's an old adage that proclaims "Fifty percent of all advertising works. The trick is to figure out, which 50
percent."
Do you know which activities provide the best return on the marketing investment you make in your real estate practice?
A strategic, focused and well-executed marketing plan can carry an enterprising real estate licensee through any market. In a down market, a tuned marketing plan can spell the difference between
agents who have and have-not. To learn your marketing return-on-investment, cast a keen eye on what you've been doing to promote your practice during the past 12 months.
1. Evaluate your activities. List all of your marketing and lead generation activities in the past 12-month period on a sheet of paper or in a computer spreadsheet. The list should include all types of marketing, including cold calling, contacting past clients, print ads, direct mailings, purchasing leads, targeting FSBOs, walking neighborhoods, spending time with office call-ins and walk-ins, and anything else you do to generate business.
Next to each activity, indicate the following:
- The target audience (your town or niche)
- Size of target market (number of consumers)
- Money spent
- Time spent
- Leads generated
- Relationships established (consumers you are regularly in touch with)
- Clients obtained (someone under contract)
- Deals closed
2. Determine your ROI. The next step is to determine which activities provided the best return. First, place a value on your time by setting an hourly rate for yourself; some experts in the industry suggest about $40 an hour. For each activity, multiply the time spent by your hourly rate. Then add the total to all other costs associated with the
activity. Finally, divide the dollar amount by each of the following outcomes: leads, relationships, clients and deals. This gives you a cost for each outcome. Rank the activities in order, with the lowest cost-per-outcome at top.
Here's an example. Assume you spent 200 hours writing and creating, and $20,000 on buying space for, print ads in the local newspaper during the past 12 months. The total cost for these ads is $28,000 (200 hours x $40 hourly = $8,000, + $20,000 ad cost = $28,000). Assume, too, that those ads resulted in 5,000 leads, 500 relationships, and 20 transactions. Your cost per outcome therefore is:
- $5.60 per lead ($28,000 ÷ 5,000 leads = $5.60)
- $56 per relationship ($28,000 ÷ 500 relationships = $56)
- $1,400 per transaction ($28,000 ÷ 20 transactions = $1,400)
Hard work's over! The rest is easy.
3. Analyze the results. Consider each activity in light of its outcomes and what it costs to generate them. Was it wise to spend $28,000 to generate 20 transactions? How valuable will the 500 relationships be to you over the next three to five years? When compared, which activities were most successful? Were there other reasons you chose a specific activity? If you change how you execute on a given activity, will it produce a better ROI?
The real challenge is learning the lesson of the adage. If you can spot the 50 percent of your marketing that's working, the only remaining task is to
eliminate the bottom half. Cut the 50 percent that's not getting
results; no sacred cows, no emotional attachments. Pledge to never repeat those activities that
bear too high
a cost for the results they delivered.
This article, which has been edited for use here, was initially published by RE Careers in its November 2007 newsletter.
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