Most brokers get a sick feeling in the pit of their stomach when they think about all the money they are blowing on marketing. The nausea is a symptom of disease that pervades real estate, but has largely been cured in other segments of the economy: Failure to Measure Results Disorder.
The good news is that it’s largely a disease of the mind, and as such, can be cured with a shift in thinking.
Mentally, marketing should be thought of like an investment, not an expense (or worse, a necessary evil). However, in order to think of, and thus treat marketing like an investment, you have to have solid numbers as a diagnostic tool to differentiate which marketing avenues make you healthy from those that cause you ill.
Having cold, hard facts that tell you the status of your investment is what it’s going to take to settle your tummy.
Think about your marketing as an investment in the stock of your own company. You should expect (nay, demand) a positive return on that investment. The healthy feedback cycle: Invest, track, and make changes based based on performance.
More on tracking when we get to the 7 steps, but first, let’s define marketing in a useful way. Successful marketing has 2 key components:
- Have a great product
- Tell people about it
Simple, huh? Let’s dig deeper.
Your Web Presence is Your Product
“But I thought I was in the real estate business?” you say. You are. Sort of. See, for those folks who don’t yet have a personal relationship with an agent, there is about a 90% chance their first encounter with you, your product (real estate services), and your company, will be via the web.
And for those that do have a relationship with one of your agents, they are still highly likely to spend more total time with your website than any other aspect your brand (newspaper ad, office lobby, phone, face-to-face with an agent, etc.). That puts you in the Product business. Which means first and foremost you must design a great user experience on the web.
More on this in future posts. For now, let’s assume your web presence is adequate to the task and get back to marketing.
Marketing Makes it Scale
Once you know you have a great product / service, the role of marketing is to make it scale simply by telling lots of people. The goal then, is to find the most cost effective ways to tell lots of people.
Knowing we can measure the effectiveness of every available marketing opportunity allows us to scale with the confidence that every $1 invested in X-marketing effort will result in more than $1 in return. Once you know this, the limit to how much you invest is a function of cash-flow and the size of the market.
The two sides of marketing create a positive feedback loop. If you put the proper tools in place to measure effectiveness, you’ll also get the feedback you need to make the product better (your website as well as your quality of service). The really interesting thing about measuring effectiveness is that when you measure something, you can’t help but make it better. And making the product better is the best possible form of marketing.
So, how do know with absolute certainty that every penny you’ve invested in your marketing efforts to both drive and keep traffic on your website is working as hard as it can for you? Measure it. Convinced? Here are the steps:
The 7 Steps to Measuring Marketing Return on Investment
- Have an office website with listing search
- Install Google Analytics (GA) on your website
- Setup GA to track leads from your site
- Track of leads and their results
- Track income (closings) from those leads
- Track your marketing expenses
- Calculate your Return on Investment
I know what you are thinking: “Blech! That sounds like Accounting. I specifically went into real estate because I abhor accounting.”
It’s not as tough as it seems. First, you probably are already doing steps 1, 2 and 6.
The final ROI summary analyis might look something like this:
Figure 1. Example of an ROI Analysis
Note: In this case we have 2 distict ROI numbers. One for total revenue and one for broker revenue. Depending on how you handle leads from your website, it’s important to distinguish between the two. You may, for example, be making the investment as a broker, whereas the return goes to agents (your return is indirect).
You can use the detailed analysis to make shifts in how you market your website, to do relative comparisons between ad opportunities (for example, REALTOR.com vs. Trulia) or to share with your agents as evidence when your print contracts come up for renewal.
In future posts, I’ll break each of these steps down in minute detail and show you step-by-step how to setup a system that will make this super easy to manage over time.
We’ll also get into how to use the above data to make relative comparisons between advertisers as well as how to use the knowledge to improve your website in a way that increases the effectiveness of every dollar you are already spending.
When we do that, we’ll go beyond simply healing the disease and move into Optimal Health.