Calculate the Value of Leads = $ In Your Pocket
Paying for leads online can give a nice boost to business – wouldn’t it be nice to be able to calculate the value of leads? When those leads are tied to a highly focused, optimized website and automated follow up system, buying leads online can create an ongoing income machine.
Let me first say this: I don’t mean to offend anyone with the title. It comes directly from a meeting I recently had with a group of real estate pros who shared with me the incredible frustration of needing leads and getting so many that are not of good quality (and I quote: “crappy”).
One could argue that buying leads is expensive — and who knows if the precious resources poured into buying and nurturing those leads is even worth it? Add to it the time cost of sorting through unqualified leads, and the cost-benefit analysis becomes even more complicated.
Make the Most of Your Money: Calculate the Value of Leads, Track, and Adjust
If you really want to increase your revenue and maximize your marketing dollars, you must track what you do and make adjustments where and when needed! If I could force you to do anything, it would be to track your marketing! I almost want you to stop reading anything else about buying leads online until I have your commitment that you will track your efforts. Are you committed? I worked with a company that spent $800 per month for 12-20 leads. I was floored – I couldn’t believe the cost for so few leads! Then I spoke with the owner, and he shared his frustration about the fact that most of the leads were of very poor quality. Some were duplicates, others were professionals in the industry just checking out who was being referred through the source, and some were bogus leads: “Name: person, Phone: 406-555-5555, Email: email@example.com.” Does any of this sound familiar? Just when the pit in my stomach over the pricing was starting to relax, the lead provider raised the monthly rate. Then they did it again. And again, until it was $1,200 per month. The business owner believed that it was worth it. I was pretty sure that he was right, but still curious, I created a spreadsheet to evaluate the performance for the past year. I continued to track the cost of leads, contact and sales conversion ratio, time to sell, average gross sales, and average net to the company over the next few months. We found that the lead source was well worth it, and the actions we subsequently took to improve the sales conversion rate added even more to the value and ROI. I spent the day creating a sample for you with some comparisons showing “ball park” estimates (and guesses) of three different leads online. It is very similar to the tracker that I use. Would you like access to it? Enter your email address into the form at the bottom of this page to get your own worksheet. It also has a simple lead value calculator and an overview comparing the three lead sources. If you know that maintaining a tracking system is simply not something you want to do, it is something that I do for my Secret Sauce clients. Those customers get to see the results each month. This tracking system is gold. I don’t know how to express enough what a huge difference continually and systematically tracking your leads will make in your business. Not only will you be able to make important marketing investment decisions, but it will empower you to make adjustments to things like your ads, emails, landing pages, and give aways to get even better results — without spending a PENNY more!! I may be a spreadsheet nerd, but everyone should track and adjust marketing; it really works like magic on your bottom line. Take a look at your new spreadsheet (sign up using the form at the bottom of this page). Don’t be overwhelmed, because I’m going to tell you how to use it. Here’s a bit of amazing news: you only need to spend about an hour per month — yes, only once per month — making the updates.
How to Use the Tracking Spreadsheet Once you Sign up to get the “Calculate the Value of Leads (Even The Crappy Ones)” workbook. It’s free. You’ll get a link to a Google document that is “read only.” Download the document with either Excel or Google Drive (the email that provides you with the link has instructions).
Take out the data that comes as default, BUT — ONLY EDIT DATA IN THE FOLLOWING COLUMNS: C,D,E,F,G, and H. Changing other data could change or delete calculations. The good news is that, if that ever happens, you have access to the original and can retrieve those functions.
Delete all of the orange, monthly rows except the top one.
Block out 45 minutes the first workday of each month
To Do the following:
- Go to your leads provider or email list and download the list of leads for the last calendar month. For example, on November 2, 2015, download all leads from October 1-31 into a .csv or Excel file.
- Open the file and condense it into two columns: the date lead was captured and the lead’s name (in that order). Delete any and all columns between those two columns.
- Copy the lead content of ONLY the two columns (not any headings) and post it into the “Monthly Tally Worksheet” within the worksheet I sent to you, under the respective month heading. If you didn’t get it, click here for free, immediate access.
- Add the “source” to each lead within the worksheet.
- Update the calculations to the right of the month for the totals for only that month.
- Update the “Total and Monthly” totals (cells J1, K1, L1) to include the new month data.
- Check the data and make any corrections, if needed.
Update As There Are Sales
- Control+F to find the lead name of the sale.
- Highlight most of the line green, as shown in example on the worksheet.
- Type “1” in the “sold” column.
- Enter the sales price, net profit, and date sold. “Days to Convert” will automatically calculate.
Much of the overview is plugged into and can be seen on the sheet titled, “The Value of Leads.”
Now that you are tracking and you know how to determine just how much your leads cost, let’s talk more about buying leads online.
Should You Even Consider Paying For Leads?
Many industry professionals do not recommend purchasing leads online as the center of your business marketing plan. The truth is, if you do not work the leads properly or fail to track the leads, conversion, and Return on Investment (ROI), you will likely lose money buying those leads.
Also, when buying leads, be prepared for costs to go up. Diversifying your sources is a great way to leverage your business development so an unexpected rate hike won’t put you in a bind.
How to Purchase Leads Online
There are countless numbers of options to purchase leads online, from Pay Per Click (PPC) through Google or Bing, to guru programs like Dave Ramsey’s ELP or demographic lists from InfoUSA.com, to industry-specific options that collect leads, such as realtor.com, zillow.com, or trulia.com for real estate agents.
Evaluating Your Lead Capture, Management, and Tracking System
Let’s take a look at PPC, realtor.com, and zillow.com paid leads online as examples. Any lead program can be evaluated the same way.
Daniel Furtick is a buyer’s agent with Keller Williams Realty in Columbia, South Carolina who represented buyers on 25 transactions in 2013.
Inman News reports that he doesn’t advertise with Zillow and Trulia because consumers can send leads to more than one agent on those portals, but instead opts for realtor.com’s exclusive agent referral program.
Furtick says his lead-to-close ratio on realtor.com leads has been in the 3 to 6 percent range. If he’s on top of his game, the ratio hovers around 5 percent. He will measure the value of the new program against that success, he said.
Paying Per Ad View
FitSmallBusiness explains that agents pay [Zillow] based on the number of times their ad is seen and zip code(s) which they are targeting with their ad.
Paying $100 (10 cent per view) to get your ad seen would be typical for an agent.
We assume that for every 500 ad views that an agent will receive one lead and that the typical agent needs around 25 leads to generate a sale. Or, put another way, highly targeted ads need to be shown around 12,500 times to produce a transaction. If it costs 10 cents per ad view, an agent will be spending $1,250 per sale.
The median home price in the Unites States is currently around $180,000. Assuming a 3% commission per sale, that is a commission of $5,400 per sale.
Thus, spending $1,250 per sale will generate $5,400 in new commissions. This math will not hold true for every agent. some will have have lower or higher ROI.
The cost of Zillow Premier Agent varies depending on the competitiveness of your market and the number of ad views you want per month. I’ve heard of realtors paying anywhere from $500 to over $10,000 per year. A typical annual bill, however, is around $3,800, or $320 per month. The actual costs are not readily available, since it varies by zip code, but browsing realtor forums I found it varies between 2 cents per impression (for “cheaper” zip codes) to 16 cents or more for wealthier and more competitive areas.
The Pay Per Click Strategy
Paying only for the performance of a marketing strategy was one of the most revolutionary advancements in modern marketing. Think for a moment: you only pay for what works. It would be like placing an ad in the newspaper – and not paying a penny for it unless and until someone not only reads it, but flips to a page that talks more about it!
If you are new to PPC, I recommend starting with advertising on GoogleAds, determine your keywords, the budget, develop your “ad,” which is simply four lines: a headline, two description lines, and the display URL. Much more is to be said about how to go about it, and there are companies who do the pay per click marketing for you.
A good starting point for keyword research is Moz’s Beginner’s Guide to Keyword Research. From there, explore how to determine and evaluate search keyword ideas so you end up with choices that not only grab clicks, but attract visitors who find exactly what they were looking for when they land on your page.
Make your PPC marketing budget goals clear and simple. “To generate motivated seller leads at under $60 per lead” is an example of a very clear and measurable goal. A good minimum PPC ad budget, at least to start out, is $350.
Another thing to remember is that most PPC marketing campaigns don’t start off profitable. “It’s the optimization process that makes your PPC campaign profitable as you go… and that can take 1-3 months to really hone down a campaign.” Investor Carrot.
The Basics of Getting and Using Leads Online
According to Placester:
- The average close rate of an online lead is 2.0 – 4%. This means that an average business who gets 100 leads online will close a deal with 2-4.
- On average, it can take 4 – 6 months to close an online lead. Some lead sources could convert in as long as 18-24 months! My answer to that is this: will you need the money in 18-24 months? Once that time frame hits, the momentum continues, giving your business a wonderful boost.
Placester also says that real estate agents who apply lead nurture best practices such as lead capture, lead magnet, and email automation, can see close rates increase to 5–6%. Investor Carrot, an online marketing company, says that websites are optimized for qualified lead conversion and systems are effectively set up for sale conversion, can enjoy conversion rates upwards of 15%.
Should You Buy Leads Online: Yes or No?
Realtor Magazine Brian Talley is broker-owner of Regent Property Group in Austin, Texas. He shares why he pays for leads and Sam DeBord is managing broker of Coldwell Banker Danforth in Seattle explains why he doesn’t. He wrapped it up by saying:
Overall, buying online leads is a stop-gap measure if you have to generate business immediately. In the long term, however, it’s shooting yourself in the foot. If Internet lead generators suddenly raise their prices dramatically—which they’ve done—you could lose your income source overnight. You have no control over the rules, the platform, or the pricing for online leads, and building a business on something you have no control over is a fundamentally flawed strategy. In addition, if you’re paying someone to provide you with Internet leads while you’re trying to generate them from your own Web sites, you’re financing the people you’re competing against online when it comes to search engine optimization. Ultimately, it’s smarter for brokers and agents to focus on investing in platforms that will generate long-term business themselves.
At the end of the day, buying leads is a great idea for businesses who are set up to make the most of those leads.
Featured Image by Mish Sukharev on Flickr, used under Creative Commons 2.0 License.