How To Know If You’re Wasting Money On Advertising

By Craig Forte, Founder - Posted on
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Last Updated on April 24, 2017

How to Track and Measure Your Way to Success I could write a complete book on the importance and ways to track and measure your marketing (and other areas of your business), but here’s a quick primer you can quickly use in your business… Why do you want to track and measure your marketing? Three reasons: First, you want to know where you’re getting most of your business. When I ask agents where they get most of their business, I usually get a blank stare or they try to remember or estimate where their clients came from. Both of these are problematic. You need to know exactly where your clients are coming from so you can exploit that source further for more business. It’s easy once you start to measure. The second reason why you want to track your marketing is to know how well you’re spending your marketing dollars. You don’t have an unlimited budget, so you want to spend your money in the most productive places as possible. The third reason you want to track is you will never know how well any marketing effort performs unless you have a reliable system in place to tell you – AND, you’ll never know what your marketplace wants until they tell you. The only way to know is to track and measure. What do you want to track and measure? You can be as detailed as you like, but I usually track the key areas that bring me business, then go from there. This includes Ad Tracking (both display, classified, radio, etc.), Listing Tracking (how well you’re marketing off your listing: sign tags, flyers, just listed/just sold, etc.), Target Farming tracking (how many leads you get from “target” farming, and your cost to generate a client) and Referral Tracking (how many referrals do you get each year from your continuity marketing, such as Service For Life!®). You can even track your results from cold prospecting. How do you track and measure your marketing? There are 2 steps in measuring and tracking marketing. The first step is to use a simple “tag” on everything you do. A tag is an identifier that lets you know where your lead or client came from. For example, let’s say you are running a display ad for homes you have for sale. You should use a toll-free 800 number (hotline) for information about the home, with an identifier in the ad (such as “call 800 222-2222, and enter extension 111”). This way potential leads call the number and enter the identifier code to listen to information about the home. By having a dedicated tracking number, you can “source code” the leads and clients that came from that ad. You can do the very same thing with info-tube flyers, classified ads, farming, and even referral tracking. Just assign a unique tracking code (hotline extension or dedicated number/email) to each response system, and simply total and report the results on a weekly or monthly basis. Now, the second step in the measuring and tracking process is to establish a report you can review on a regular basis – either weekly or monthly. You can create your report any way you want with a simple spreadsheet program, like Microsoft Excel. On the left column, simply enter the lead or client name. Along the right columns, simply enter the marketing promotion and they “type” of contact (“I” for Inquiry, “P” for Prospect, or “C” for Client). Again, you can create your report any way you want, but here’s a simple example…


5 Helpful Marketing Measurements Now that you have your report together, it’s time to measure how well your marketing efforts are performing. Calculating your success is easier than you think. At the end of each week or month, take time to evaluate your marketing efforts. Total up all the check marks on your marketing tracking form to determine which methods work best for you. Consider dropping efforts that either do not perform, or the cost per sale is too high. Here are 5 simple calculations you can use to measure your marketing performance:
1. Cost Per Lead (or inquiry) Generated. This tells you how much money you spent to generate a single lead with any one or all of the marketing efforts you make. For example, if you run an ad that costs $80, and you receive 15 inquiries, you can figure your cost per lead is $5.33 ($80/15 = $5.33) with the following formula: $$ Cost Of Marketing Promotion (divided by) Total Number Of Leads/Responses 2. Your Overall Closing Ratio. Your closing ratio is the overall percentage of prospects you generated (leads, referrals, inquiries, etc.) that became clients. As an example, let’s say you generated 8 clients last month from working 140 inquiries (or prospects). Therefore, your Closing Ratio would be 5.7% (8 / 140 = .057). So here is the simple formula: Total Number Of Clients You Received (This week, month, etc.) (divided by) The Total Number Of Prospects Or Inquiries You Received 3. Cost Per Sale. Cost per sale tells you how much money you spent to make each sale for a specific promotion. To take the example from #1 above, let’s say that out of the 15 leads, you converted 2 of them to clients. Then, following the formula below, your cost per sale will be $40 ($80/2 = $40). $$ Cost Of Marketing Promotion (divided by) Total Number Of Sales Related To Promotion 4. Your Referral Conversion. Referrals are the lifeblood of your business – if you’re not getting regular referrals, you probably have no Personal Market Share™, and your business will ultimately suffer or die. If you’re lacking in referrals, go right now and get our Free marketing system, “The Ultimate Real Estate Success Secret” and devour it. Your referral conversion is the overall percentage of referrals you received for a certain period that became clients. Not all referrals become clients, but the higher, the better. Using the example above, let’s say you received 2 of your clients from 5 referrals that were made to you. Then your Referral Conversion would be 40% (2 / 5 = .40). This tells you how effectively you’re converting referrals into clients. Total Number Of Clients You Received From Referrals (divided by) Total Number Of Referrals You Received 5. Percentage Of House List Harvested. This is the number of referrals you receive as a % of the total size of your House List (your sphere of influence). It tells you how well you’re cultivating your list for referrals, word of mouth and repeat business. For example, let’s say that you received 2 referrals last month, and your House List consists of 400 people. Then your Percentage Of Referrals Harvested for the month would be .5% (2 / 400 = .005, which is one-half of 1 percent). You can also measure for the past year to see how you’re doing on a rolling basis. This is a very, very important ratio to measure. It’s the key to building Critical Mass™ in your business. Total Number Of Referrals You Received From Your Network (for a period) (divided by) Total Size Of Your Network And Client Database
Know the Difference Between “Response Rate” and “Return on Investment” In closing, I want you to see an example of how and “uneducated” agents can lose a lot of money – and I don’t want you to fall into the same costly trap. Not long ago an agent called me and said he was really disappointed with his marketing results. He told me that he placed info tube flyers just like the ones we teach here at Agent Inner Circle™, and after 2 months only got just 1 client from them. He said that 1 client is a lousy response rate and he probably won’t continue the promotion. So we talked. I asked him how many active listings he had. He said 4. I asked him how much he spent to keep those info tubes full with his “Premier Properties Flyer.” He said about $40 on each listing per month. I asked him how many calls he got all totaled in those months. He said he got over 110 calls, but most were lousy leads and interruptions. I asked him how much in GCI he made from that 1 sale. He said his co-broker commission was about $9,600 on the buyer, but after deducting out expenses and splits, his gross profit was about $5,000. “OK,” I said, “let’s do some simple math.” You spent about $160 a month on 4 listings, which totals $320 a month in marketing expenses for those 2 months. You received 110 calls, which means you spent $2.91 per lead you received ($320/110 = $2.91). Of those 110 calls you actually closed 1 of them to clients – netting you a total of $5,000 in gross profit. “Yeah” he said, “but I only got 1 sale from all those leads.” And then I asked him, “If you went down to your local bank and handed him $320, and 2 months later he handed you a check for $5,000, do you think that would be a good deal for you? He said it would be a windfall – an unbelievable return on his money. I said, “then why do you think getting $5,000 for spending $320 on your marketing is a bad deal??” He said he expected more, so we talked about how to motivate more calls and convert those calls to clients. But the point I want to make here is, while this example might be a little extreme, it happens ALL THE TIME with agents. Why? Because most agents look at “response rate” and NOT “return on investment.” And so they quit promotions that are working, and implement promotions that are duds. They just don’t know the difference. This is the single biggest reason why you should be measuring the effectiveness of your marketing…so you’ll know the difference between a windfall profit…and a hopeless loss.

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Craig Forte
Craig Forte has helped more than 32,000 real estate professionals over the last 22 years, helping them generate more clients, more referrals and repeats, and grow their production with less stress, time and effort – all by using innovative marketing training, systems and tools.
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