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INSIDER: Rules of Engagement - Focused Internet Marketing

Sept. 1, 2012

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By Jacob Christie, MBA Candidate

Internet Marketing Success

In his book 100MPH Marketing for Real Estate, author and real estate veteran, Mitch Ribak, details the formula for Internet marketing success in a no-frills approach that is sure to generate quality leads, efficient lead conversion, and, ultimately, greater closed sales per marketing dollar. By setting a fixed but flexible advertising budget and monitoring key metrics, Ribak advocates for a system that will garner predictable returns based simply on the number of an agent's website hits. Scaling up and down, then, becomes only a matter of capacity.

The key performance metrics Ribak outlines are the clicks-to-leads ratio and leads-to-sales ratio. If an agent can increase his clicks-to-leads, then sales naturally increases in the raw aggregate. However, if the agent can further refine his leads-to-sales relationship concurrently, the marketing program can really take off and leverage more sales for each marketing dollar spent. These two goals take very different efforts to control, but by employing a scientific approach to understanding the factors that affect them, agents can drive value to the bottom line.

THINK POINT #1: Create "Landing Pages" For Online Advertisements

If an agent's Internet advertisements are simply linking to his site's homepage, then the agent is likely hemorrhaging leads. To remedy this commonly overlooked mistake, Ribak recommends creating a "landing page" that users will arrive at when clicking on a link. Further, by using an Internet Data Exchange (IDX) system in conjunction with a Multiple Listing Service (MLS), agents can direct clickers straight into a registration form to capture their info and pass it to a database before allowing them access to listings on the MLS. Ribak notes that this strategy may temporarily lose a website some Internet traffic, however the loss in lead quantity is more than compensated for with an increase in lead quality.

THINK POINT #2: Classify Leads Effectively

After capturing a user's contact info and some basics about what they are shopping for (with quick but informative questions on the registration form), an agent can effectively classify leads and delegate them to categories for follow-up. By including a question to gauge a potential buyer's timeline on the registration form, agents can assign leads into more aggressive contact profiles (e.g. someone looking to buy a home in the next three months) or a more steady "drip" campaign (e.g. someone looking to buy a home in 12+ months). By classifying leads deliberately and effectively, agents can devote valuable follow-up time to pursuing the hottest leads first and foremost, while maintaining steady contact with colder leads until they transition from a cold to warm lead.

THINK POINT #3: Assign Follow-Up Accordingly

The warmer the lead, the greater the urgency to follow-up with a prospective customer. The hottest leads should be called within the same day, if at all possible. Call the warm contacts to determine an appropriate time to contact them again if they are not ready to start looking aggressively. Consider sending monthly emails and bi-monthly newsletters to keep your name on the minds of all leads, but be sure to set reminders for when to contact the colder leads (as they get closer to buying). Ribak suggests employing a sliding scale of contact: a) if a lead is looking to buy within 12 months, follow-up monthly until b) the lead is looking to buy within six months, then follow-up every 2-3 weeks until c) the lead is within a month of buying, then follow-up weekly.

THINK POINT #4: Pay-Per-Click Advertising

Ribak advocates for pay-per-click (PPC) advertising with the search engine giants like Google and Yahoo. This is elemental to maintaining a consistent marketing budget because, with programs like AdWords, users literally pay for what they want. If an agent can only budget for 200 clicks per day at $1.50 per click (for a daily budget of $300), then that can be done precisely.

Ribak also devotes some time to describing the bidding process that determines which ads are shown on which results pages for searchers. Essentially, users only pay one cent over what the next bidder's maximum bid. For example, if agent A is in bidding position one with a maximum bid of $2.50, agent B is in position two with a maximum bid of $1.80, and agent C is in position three with a maximum bid of $1.10, then agent A will pay $1.81, agent B will pay $1.11 per click, and agent C will pay $1.10. However, since the top three bidders appear on the first page of search results, there are often monetary efficiencies to be gained from being in the number two or number three positions instead of being the highest bidder on any particular keyword.

The bidding system is turbulent, though. Returning to the example, assume agent C increases her maximum bid to $1.60. This would displace agent B who was previously in the second position and increases the amount agent B pays per click to $1.61. By the same token, agent C could "probe" agent B's maximum bid by slowly increasing her own maximum bid until she's supplanted agent B's $1.80 max bid, pushing agent B into third position. This technique can be especially useful for dislodging advertisers who bid up huge amounts (like $20 per click) just to secure the top position (and are, thus, trying to game the system). If a user gradually raises his maximum bid, the amount he pays (provided the person behind him isn't employing the same tactic) won't actually change, but he will make it more and more cost prohibitive for the company ahead of him to stay in that position until they have to lower their maximum bid and drop out.

THINK POINT #5: Keyword Management

Advertising through a program like AdWords involves using targeted keywords that will display an ad when someone browses to Google and searches the terms the user selected to pay for. The top three bidders for the keywords a Google searcher has entered will show up as sponsored results on top of the other natural search results. Users are then charged whenever someone clicks on a sponsored link out of this as a result. Since the ad is displayed based on user input, Ribak urges his readers not to ignore the power of misspelled searches, since these are often cheaper than properly spelled search terms. He offers the example of advertising for the search term "Coco Beach" (the cheaper misspelling) in addition (or alternative) to "Cocoa Beach." Misspelled searches are natural low-hanging fruit.

THINK POINT #6: The Impact of a Focused Internet Marketing Initiative

Once the PPC budget is set and an advertisement's "landing page" is established, the clicks-to-leads ratio can be accurately measured. The clicks-to-leads ratio will be the number of people who stay and register on the IDX system (rather than simply navigating away or closing the browser) divided by each paid click. Ribak finds this number to be, in his experience, between 12-25% on any given day (where 20 % is an ideal and not necessarily a figure someone should expect immediately from implementation). From that point, leads tend to end in a transaction about 1 in every 25 times (4%) for him, so users can see quickly about how much they pay for each transaction.

Using the standards Ribek sets forth (a 20% clicks-to-leads ratio and a 4% leads-to-sales ratio), a rational example can be created to show the impact of a focused Internet marketing initiative.

Imagine that an agent sets a $60/month PPC budget, spends $1.50 per click and garners 20% lead conversion. This means that the agent spends $12.00 per lead (20% of $60 = $12.00). If the agent's leads turn into transactions at a 4% rate (it takes 25 leads to make one transaction), then the agent spends $300.00 for each transaction (25 x $12.00) . If the agent's commissions average out to around $3,000, then the agent spent $300 to earn $3,000. This is a no-brainer.

Each of these vital metrics is a degree of leverage on the bottom line. Learning to understand and manipulate the metrics (through selecting the best mix of keywords and paid clicks at each keyword or investing in a quality customer relationship management system to improve the leads-to-sales ratio) can drive greater and greater efficiency in an agent's overall marketing budget. The program outlined in Mitch Ribak's book is not a set-and-forget kind of marketing plan; it requires constant attention and experimentation. Like any worthwhile investment, an agent's efforts in this area will be accordingly rewarded.

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Recommended Reading

Ribak, Mitch (2010), 100MPH Marketing for Real Estate: Internet Lead Generation and Sales Success, Bloomington, IN: Xlibris Corporation.

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About The Author

Jacob Christie, MBA Candidate, May 2013, Baylor University
Graduate Assistant, Keller Center for Research

Jacob is a graduate student from Portland, OR. He earned his bachelors degree from Tulane and is currently pursuing an MBA with plans of transitioning into technology consulting.

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