The biggest challenge for most real estate agents is generating leads. They can be elusive, hard to come by, and downright fickle. Add in the fact that there are 20, 30, 40 other agents in the area that are also looking for those leads and it would seem a very daunting task to get even one. This is why many real estate agents will try almost anything, and then end up spending too much, for leads. Real estate is a tough business and every dollar and minute spent needs to be as productive as possible. Without knowing whether or not your advertising campaigns are generating leads within your budget, you will be throwing your time and money right down the drain.
When evaluating ad campaigns agents may determine what their cost per lead is but not what that cost should be. You need to know what your budget per lead is before you can determine if an ad campaign is successful. In order to figure out what your budget per lead should be you will need to know two things - your advertising budget per closed deal and the number of leads it takes you to get that deal.
Industry experts say that an agent's marketing budget should be 20% of your Gross Commission Income. In order to figure out what that 20% translates into for your business first take the average selling cost of the homes that you are working with and multiply it by what your average commission side is for each sale. To keep things simple let's say the average sale price is $200,000 and the commission is 2%. Multiplying those together will get you $4000 of Gross Commission Income. Now to find your marketing budget multiply that $4000 by 20%. In our scenario that equals $800. This means that your marketing budget for that home should be $800. So now you know what your budget per closed deal should be but not yet your budget per lead.
Your budget per lead will be determined by how many leads you need in order to get that closed deal. The national average is 24 leads before a sale. That being the case we can divide our budget per closed deal of $800 by 24 and get our budget per lead - $33. So in our scenario, if this agent is spending more than $33 per lead, their advertising campaign is not working for them. The leads it is producing are coming in at too high of a cost to make it a good ROI.
The number of leads produced will obviously increase or decrease the cost per lead. So it is very important to really know how many leads are being produced by each advertising effort. For each ad you should be able to track the leads so that you can have a clear picture of what your cost per lead truly is. With most mail or print advertising it can be difficult to determine how many leads are being generated. If you get a lead, that person may not remember where they saw the listing they are calling about or how they came to find you. If they drive by the house and simply grab a flier or keep the house in mind for a later look you will never even know they were there. Many buyers are researching homes on the Internet these days and the majority of agents have no way to capture those leads and in turn calculate the effectiveness of their sites.
One way an agent can track their advertising is by using a call capture hotline. A call capture hotline will allow agents to track their leads, measure their ad effectiveness, calculate their cost per lead and make sure they are staying within their budget for the leads coming in. A call capture hotline uses a toll free number with extensions that allow agents to offer different kinds of information that would be of interest to buyers and/or sellers in their market - free reports, property information, special offers, etc.
When a call is placed into the call capture hotline extension the details of the call are captured. This includes the extension dialed that will correspond to a particular ad, the date and time of the call as well as the caller's phone number. A name and address capture feature is usually available as well. At the end of the week, month or whatever interval an agent chooses, reports can be run to see how the ads performed. An agent can easily run those reports and see exactly how many leads were generated. Agents can get reports and see every action taken by the caller - what extension they entered, what they listened to, if they left a message or requested a fax document. This will also help determine the quality of the leads.
Once an agent knows what their budget per lead is they need to be able to track their advertising so they can determine what they are spending per lead for any given ad campaign. When using the call capture toll free number on every piece of advertising they have - fliers, postcards, home magazine ads, sign riders, online listings - an agent can collect the data they need to make sure they are running advertising campaigns that will generate leads within their budget.
Brandi Cummings is a leading telecommunications consultant specializing in call capture hotlines for real estate agents. Visit RealtyOne800.com to learn more about using call capture to track your real estate marketing.