The ABC’s of ROI

If you’re investing in marketing but not tracking your returns, stop and read this before you spend another penny.

By Gwen Moran

Whether you’re investing in marketing a specific listing or promoting the brand name of your real estate business, the only way to determine how effective your efforts are is to measure your return on investment, or ROI. To do so, you need to keep track of your spending on each activity as well as the leads coming in and action being inspired by them. REALTORS® should be tracking as much as possible, says marketing expert Ann Willets, who is based in Toms River, New Jersey.

“With today’s analytics, some of the online activities are done for you. But you should train your staff to always find out where your leads are coming from. That tells you the marketing that’s working in addition to the referral sources that are working for you,” Willets says.

The Ripple Effect

As you run your business, you must evaluate all expenses throughout a transaction, says James Nellis II, CRS, Team Leader with The Nellis Group, Keller Williams Capital Properties in Fairfax, Virginia. Nellis knows that from placing the sign in the ground to closing, each listing costs him a minimum of $2,000 to sell. From there, he parses his marketing methods, customizing a plan for each property. He typically uses a combination of social media, blogging, print advertising and actually passing out flyers in person by knocking on doors around the property.

Nellis uses “door-knocking” for what he calls the “ripple effect.” Based on 20 years in the business, he has noted that when one neighbor puts a sign in the yard, it is highly likely that two to three more owners will list their own home in the same community. Rather than waiting for other agents to pick up that business, start knocking on doors and capture it yourself.

Start with results. Nellis says the key to tracking ROI starts with the results you want. You need to be clear about what you expect each marketing effort to do for you so you know if you’ve hit the mark, he says. If you’re marketing a unique property, for example, you know you’ll want to find qualified leads who are likely to be interested in that property’s specific attributes. That will require more specialized — and, possibly, more expensive — methods than promoting a listing that is typical for the area.

Track everything. Sam Miller, CRS, with RE/MAX Stars Realty in Mount Vernon, Ohio, and his team make it a point to ask clients where they heard about their business or a listing both when they first call and as part of a pre-listing questionnaire. He also keeps logs of how many leads came in from various sources, tracking the ones that are most effective.

Review the residual payoff. Beyond the immediate return on investment, it’s also important to look at the residual payoff, Miller says. He and his team host an event at a movie theater each year at a cost of about $1,500. They invite customers, prospects and local referral sources. He says holding it is a “no-brainer” because he consistently receives buyer referrals during and immediately after the event.

“The residual effect of marketing from the invitation, the people calling us to thank us or to tell us they couldn’t make it but they appreciated the invitation, and the overall goodwill it generates are worth it. There’s a lot of trickling back later on that’s positive. When you look at that, the rate of return is massive,” he says.

Reduce cost-per-lead. Being strategic and precise can also reduce your cost-per-lead, Willets says. For example, Miller finds that in his market, direct mail works well. He says that mailing just once will do little, with a response rate of just 1 to 2 percent. However, repeated mailing can yield as much as 6 percent or more. He uses the U.S. Postal Service’s Every Door Direct Mail service. That service allows users to mail up to 5,000 pieces per day, targeting every residence in a specific area, for 17.5 cents per piece.

To generate interest, Miller doesn’t send his mail to the neighborhood where the house is located. Instead, he looks for neighborhoods where the listing would be a 50 percent increase in home price, which he finds is a typical increase when people want to move up into a new home. So, if he has a $200,000 listing, he’ll mail to neighborhoods where the houses range from $100,000 to $150,000, since the listing will likely be in the price range prospective homebuyers are seeking, he says.

Master the “free” mediums. Nellis is an ardent social media user, with more than 3,000 Facebook friends, 1,300 Twitter followers and a Facebook business page. Through these platforms he delivers a combination of both general and real estate-related content. Even though these vehicles are free, he says he wouldn’t use them if they didn’t generate results. You have to count the cost of your time and the resources that go into using any marketing method, he says. If you’re spending time on something that isn’t working, even if it’s free, you’ve incurred an opportunity cost. In addition, when Nellis and his team have something “hot” or interesting to put on Facebook, like a great new listing or impressive sale, they’ll pay for Facebook’s Promote function so more people see it.

Test. Willets says the value of testing can’t be overstated. Test email subject lines and headlines, and different methods of marketing. You can drastically increase the return on investment on a direct mail or email campaign.

Measuring ROI helps you understand whether your marketing budget is performing the best it can. By tracking, testing and tweaking your efforts, you can get more promotional power from every dollar you spend.

Gwen Moran is a writer based in Wall Township, New Jersey.

Learn more marketing strategies in the CRS course
Business Planning and Marketing for the Residential Specialist (CRS 200).