Why This Matters Now
For agents that want growth, advertising provides an alternative to traditional industry prospecting techniques when used appropriately. For brokers that want to control some portion of the business, and potentially shore up their value proposition, advertising can fill the gap. These business gains come at a cost, and knowing the costs and risks is part of strategically advertising.
Consumer attention, delivered by advertising, is a commodity that has become more and more valued in the market. In a 2014 Harvard Business Review working paper, The Rising Cost of Consumer Attention: Why You Should Care, and What You Can Do About It by Thales S. Teixeira, long-term trends were examined for the cost of attention.
“Attention is a necessary ingredient for effective advertising. The market for consumer attention (or “eyeballs”) has become so competitive that attention can be regarded as a currency. The rising cost of this ingredient in the marketplace is causing marketers to waste money on costly attention sources or reduce their investment in promoting their brands.” “CPMs (cost per mille – one thousand advertising views) have been rising for decades and, since the mid‐1990s, faster than inflation.”
Inside the industry, the consensus of client brokers at T3 is that the cost of advertising is rising, whether it is portals, Google PPC, or Facebook.
As more real estate advertisers enter the market, advertising prices will rise, making it more difficult to play and receive a return. Google’s PPC engine, and the interests of large public companies (Zillow, Move, and others) are all pointed in the same direction: more expensive advertising.
A Strategic Approach to Advertising
T3’s approach to advertising is counter-intuitive. While many preach the virtues of chasing cheap traffic, the difference for strategic advertising lies less with the advertising platform du jour and more with the confidence of the advertising broker or agent.
Tracking and knowing your conversion rates, and return on advertising numbers allows an agent or broker to invest in advertising more confidently, and to drop programs that don’t work more readily. This confidence allows for appropriate risk taking, and for long term strategic advantages in exploring, and yes, chasing less expensive but potentially riskier traffic.
Assuming that any specific agent or broker intends to grow via advertising, the first step is to assess the situation. Generally, brokers and agents will fall into a few specific categories, and depending on which category they are in will determine whether they should spend the time and money to investigate new advertising platforms.
Stage I: No Formal Advertising Programs in Place
Agents or brokers that are in Stage I have no formal advertising programs in place. In this situation, the agent or broker generally can’t afford to make mistakes with advertising dollars, and should focus on utilizing well understood, mature advertising programs that are strongly oriented towards lead generation.
The objective for Stage I, brokers and agents should be establishing a set of known-good advertising programs that produce a predictable return. These programs may not be the cheapest traffic available, and in Stage I it is more important to establish a predictable advertising result vs. chasing the latest-and-greatest advertising hack. Safer options for brokers and agents include listing advertising via portals, Google Pay-Per-Click packaged with lead generation IDX websites, and consistent direct mail.
One risk at this Stage is utilizing an unproven advertising platform based on vendor promises. The reason this is a bigger risk for Stage I brokers and agents is the lack of experience with advertising, so all risks appear the same. This is not the case. It’s far more important to establish a pattern of reliable lead generation via proven advertising platforms than it is to trust a vendor that has a smile and an order form. When in doubt look for results, and when possible ask for guarantees.
Another risk is spending money on “brand marketing” instead of hard working lead generation advertising. Brokers and agents in Stage I should avoid vendors that can’t or won’t give an approximate cost-per-lead, that do not track their lead generation results, or that talk principally about “exposure” and “marketing your brand”. They are either selling hype or should be selling to companies that are more concerned with brand awareness than leads.
For new advertisers a third risk is to decide to do it yourself. Current online advertising platforms are sophisticated, and require both knowledge and diligence to operate. Broker staff that is untrained or less experienced with managing online ad campaigns can quickly create expensive problems. Experienced advertising managers often have hundreds of clients, and can avoid freshman mistakes, as well as, use comparative numbers across clients for better performance benchmarking.
Once a broker or agent has started advertising, they will not have a consistent cost-per- lead or return on investment for some time. Generally it will take 90-180 days to establish a consistent cost-per-lead with a minimum of $1,000/month in advertising spent. More money spent on advertising can generate proof more quickly at least for cost-per-lead measurements. To measure return on investment (ROI) takes longer.
In all cases, brokers and agents in Stage I should seek platforms with well-established costs and returns, and look for mature vendors with proven advertising programs.
Stage II: Cost-Per-Lead Established
Brokers and agents in Stage II have established some initial cost-per-lead based on their advertising.
Retail real estate leads usually cost between $20 – $100/lead, largely depending on market territory and the competitive nature of the platform utilized to generate the lead. Portals and direct mail tend to be more expensive, while PPC and Facebook campaigns utilizing a lead generation website with IDX and lead capture can often beat the low end of this pricing curve. This does not mean that portals or direct mail should be ignored, since not all leads are equal and there are tangible limits to the volume of leads available on any particular channel.
The first objective for brokers in Stage II is developing comparative information on cost-per-lead from different advertising platforms. This is necessary in order to make better-informed investments in advertising. A second objective is to collect return-on-investment data so that they can judge the differences in quality and close rates of different lead sources.
Brokers and agents will know they are complete with this Stage when they have well organized spreadsheets showing cost-per-lead broken down by source, and dollar return on investments with some initial entries.
The biggest risk at this Stage is that brokers or agents don’t get enough data to determine if a program is viable or not. The quality of leads on the first day doesn’t necessarily reflect the overall program, and the only way to get the data, in most cases, is to spend the time and money collecting it. That having been said, if a program isn’t doing anything in the first 30 days it may be acceptable to terminate it, especially if the advertising provider does not have a reasonable explanation and an action plan to improve the results.
At Stage II, brokers and agents learn how to distinguish costs and quality between different advertising channels. This knowledge is used to exploit more opportunities in advertising.
Stage III: Return on Investment Established
Brokers and agents that have run advertising programs for six months or longer, and have been diligent about tracking their numbers, will be able to establish return-on-investment for their programs.
Objectives for Stage III brokers and agents are to fully maximize the return on investment by optimizing their conversion, and by reallocating advertising spend across channels strategically.
A primary risk at Stage III is to not have the numbers tracked well enough to act with confidence when adding new channels. If a broker or agent knows how well they can convert leads from a variety of sources, and how that creates a return, it may make it difficult to utilize new sources effectively and with confidence.
Another risk at Stage III is to neglect the optimization of lead conversion. Once you have proven you can generate leads in a cost effective manner, the gains are almost all in how you follow up and incubate leads. This may mean significantly changing how you handle leads, including performance management of agents, use of tracking tools like a lead management CRM, or utilization of managed call center services to improve response time.
In Stage III, brokers and agents can utilize their knowledge to develop new channels with confidence of comparative measurement and conversion rates, and to experiment in the “lab” of new media and advertising platforms. Before Stage III brokers and agents cannot project the impact of a new advertising platform well enough to take risks effectively, since there are simply too many internal variables, like conversion rates, that are unknown.
Brokers and agents in Stage III may also develop new goals for their advertising besides better performing cost-per-lead and maximum return on investment, that may include branding and exposure to new markets.
We advocate a simple strategy for real estate advertisers that builds progressively, and over time, enables highly effective and competitive action.
Advertising platforms and programs come and go. The confidence of a real estate broker or agent with experience utilizing advertising effectively allows for evaluation of what works and what doesn’t, and avoids the miasma of vendors and platforms that will happily take the industry’s money.
Brokers and agents may notice a bump in the cost of advertising in a local market the days or weeks after a marketing seminar comes through. Wait it out, and when everybody gives up, increase advertising spend and take back the market. Consistency matters. When brokers and agents bounce in and out of advertising programs, the overall return is diminished.
All advertising channels have a maximum capacity, and this is why it’s important to develop multiple advertising channels and programs. Only so much audience exists on any given platform. The key to making money with advertising is efficiency in conversion. Whoever has the most efficient conversion can afford to pay more for advertising.
In the new digital era, advertising is a numbers game. Always advertise for leads first, and for brand second. If you can’t measure it, don’t bother.