How and Why Real Estate Pros Need to Track ROI

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dotloop

February 22, 2019 | comments

Do You Know Which Lead Sources Really Work?

Following one simple formula and staying focused on the factors that matter most can help you better identify which lead gen sources provide the most profit.

John Wanamaker, one of the founding fathers of modern marketing, is famous for saying: “Half of the money I spend on advertising is wasted. The trouble is I don’t know which half.”

Real estate agents and team leaders often feel the same way, wondering which lead source is most effective at increasing their bottom line. Many find themselves chasing every new opportunity in social media marketing or alternative advertising on the promise that it will attract new clients. The problem is they never get a concrete idea of what’s actually working.

Carolyn Thompson, a managing broker at Keller Williams Realty Local in Tulsa, OK, finds that most agents don’t do a good job of tracking their ROI (Return On Investment) for leads. In her years as a coach and a trainer, she has seen agents constantly trying out new lead sources but not tracking them beyond the short term.

“They would try something for a while, but they weren’t focused on long-term results. If you’re not constantly tracking lead sources all the way through to the end, you can’t find out what’s actually working.” – Carolyn Thompson

Stay Focused on the ROI Target

According to Chris Speicher, co-owner of The Speicher Group with RE/MAX Realty Centre in Olney, MD, many agents make the mistake of paying too much attention to the CPL (Cost Per Lead) versus conversion. They may get distracted by social engagement, click-throughs on emails and other metrics that divert attention from the total ROI.

“Conversion is insanely important, that’s the one thing the agent has complete control over. If I’m converting at 2% and making a 500% ROI, doubling my conversion rate to 4% doubles my ROI to 1000%. It’s simple math. I don’t really care about CPL. I care more about the ROI.” – Chris Speicher

It’s relatively easy to measure opens on marketing emails, likes on social media and new leads added to the CRM. But what’s more difficult is to track those leads all the way from their source through to closing and determining the key statistic that’s going to drive business — the ROI. In the end, it’s the ROI that will direct marketing budgets and determine how much time should be committed to various lead generation methods.

While it’s possible to track leads manually across the various client information systems, an automated system will work harder to capture clients’ digital behavior patterns and produce real-time, accurate results that are readily available to use in decision making.

How to Measure ROI

There’s a military tactic used by the ancient Babylonians, Alexander the Great and even armies today, in which a commander concentrates his forces into a small area until they overwhelm the enemy. This principle has also proven valuable to real estate professionals when marketing themselves to new clients.

Most real estate agents know that, to compete, they must develop a specific niche in their local market that only they can serve. The same strategy works for finding leads — identify those sources that are most likely to result in commissions and then target those sources with the available marketing resources.

To accomplish this, agents and teams must first identify their best lead sources by accurately tracking their ROI and assigning a profitability score to each. The math is simple.

ROI Formula

Return on Investment = (gain from investment – cost of investment) / cost of investment

The resulting number is a multiple of the return the investment produces in which 1 = 100%. An ROI of less than 1 means the investment lost money. Consider the example below:

An agent is spending $1,200 per year on lead source A, which she can track directly to $4,000 in commissions. She’s also spending $9,600 per year on lead source B, which she can track directly to $50,000 in commissions.

A is cheaper than B, but how does their ROI compare?

Lead source A: ($4,000 – $1,200) / $1,200 = 2.33
Lead source B: ($50,000 – $9,600) / $9,600 = 4.21

So while lead source A is profitable and less expensive than lead source B, it has a significantly lower ROI. Based on the ROI, the agent might consider moving the money she’s spending on source A into source B.

The Time Factor

ROI is not the only metric in which to base a real estate business marketing allocation. Conversion time should also play a significant role. After all, the faster a lead source is able to convert into a commissionable sale, the more valuable it becomes.

For example, lead source X with an ROI of 3 may be worth more than lead source Y with an ROI of 5, if leads from source X tend to convert to sales in half the time. This shorter payback period would allow the broker or agent to reinvest proceeds from source X while source Y has yet to pay a return.

Tracking a Complex Situation

Of course, accurately calculating ROI in real life is often not as simple as our above scenarios depict. A potential client may have heard about an agent from a friend, checked out the agent’s rating on Zillow and ultimately contacted them through Facebook. Lead sources often overlap and, as in this case, play a different role in landing a new client.

To get an accurate picture of where the best leads source, it’s important to gather and track as much information as possible about a lead’s origin.

Tracking leads manually, such as through a CRM, requires the agent to identify the lead source at the beginning, input the information and then update the record with actual dollar figures after the sale. Even if the agent is diligent throughout these steps, they still have to export their sales data and analyze it to extract actionable information.

Dotloop can help facilitate the process by automatically tracking leads through lead tagging. Melanie Poche, transaction coordinator for the Diane LaPlace Team at Keller Williams, Mandeville, LA, loves how her dotloop for Teams dashboard allows her to tag loops according to the paid lead source. Check out her video below:

“That was something I was doing in a spreadsheet before. Now I can tag a loop to show where the lead came from, like a paid source, and run reports based on that tag.”

Poche says tagging leads in dotloop for Teams’ loops has helped her identify exactly which paid leads are actually working and greatly increased her efficiency. Because dotloop offers a true end-to-end, contract-to-close platform, agents, teams and brokers can track and follow leads all the way from creation to deal closings.

Closing the Loop with Zillow Leads

Teams and brokerages integrated with Zillow Premier Agent have the opportunity to gain even deeper insight. When a potential customer makes contact through Zillow, agents and brokers can gain insight into the homes clients are viewing, saving and searching, even before they made contact with the agent.

When this kind of information can be linked all the way through to closing via dotloop, brokers and team leaders receive an accurate picture of who, where, when and how their Zillow leads are being generated. They then can use that information to refocus their marketing resources accordingly.

“We’re hearing from brokers that they want the kind of analytics that will result in more business,” says Griffin Dassatti, Product Marketing Manager for Zillow Premier Agent. “When they integrate their Premier Agent account with dotloop, it ‘closes the loop’ so to speak and allows us to give them better marketing intelligence.”

Best of all, dotloop users who link their Zillow Premier Agent accounts enjoy the benefit of having review requests automatically sent to clients and homes sold data posted to their Premier Agent profiles upon closings.

Automating ROI Tracking

The use of data has already transformed marketing outside of real estate. Walmart, which used in-store data to become the world’s largest retailer, is now rivaled by Amazon, which has leveraged an even deeper analysis of customer buying behavior.

Successful brokers and teams realize that to compete in the crowded real estate market, they must also use data to their advantage. It’s not enough to simply specialize in a certain region or type of property. They must find the most efficient and effective ways to reach the clients they’re best equipped to serve.

Using a platform like dotloop for Teams or dotloop Business+ that can automatically track lead sources and calculate ROI at any point in the transaction will play an essential role in the most effective marketing strategies.

As broker/owner Speicher says, “If you don’t know where you’re spending your money, and what the return on that investment is, you’re not really running a business, you’re just guessing.”


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