No one knows exactly how much the real estate industry spends on lead generation as a whole. We do know that agents and brokers are spending over $100 million a year on marketing lead generation programs provided by the Zillow Group alone.
But industry studies show that for every 100 leads, the average closed transactions range between 1 and 3. That’s a one to three percent success rate. Another way to look at it is that 97 out of every 100 leads are cold.
That cold lead rate may help explain why a study on lead responsiveness from the WAV Group registered such poor follow-up performance by so many agents, including:
In defense of the average agent, it’s tough to get rejected 97 times out of 100. No wonder agents are exhausted and dismayed from following up on third-party Internet generated leads.
Worth the investment?
Still, many agents find tremendous success with online leads, and know that just a handful of transactions can pay for their annual investment in online lead purchases many times over. There are even some agents who spend as much as $60,000 a month or more purchasing online leads. While online leads may have a low batting average, they clearly have performed well enough to have a decent ROI.
So, the challenge for the broker is how to manage agent resources and not cause agent lead burnout by channeling so many unproductive leads while demanding timely follow up.
That’s the conundrum: Brokers try to deliver online leads to agents; agents complain about the quality of the leads and then take what they believe to be cold leads and stick them in a drawer. Meanwhile brokers and agents continue to spend millions of dollars on new online leads with the great likelihood that the majority of them will never really be acted upon and may just as well have been thrown away. What is a broker/owner to do?
Enter lead nurturing
The big missing link in how lead generation is often managed today, is how the industry handles a lead once it is deemed “cold” or “dead.” Most brokerages really don’t have a process in place that systematizes the lifecycle of a lead. In many firms, once a lead is deemed cold, nothing happens to it. At best, it remains in a database or tucked away in a file.
Other programs focus on just the first 30 days when trying to resuscitate a cold lead, which assumes these leads are currently ready to buy or sell. But you can’t convert a lead into a sale by generating 15 emails and 15 phone calls in 30 days unless they really are ready. The problem, according to agents who have spent time working online leads, is that many of these leads are currently lookers, not buyers or sellers.
The secret sauce is to take the long-game approach: Today’s cold leads are tomorrow’s closed sales. Keep in mind that tomorrow is being used as a metaphor here, and it could be six months or two years before a cold lead can become a closed sale. While agents don’t typically have a system in place to nurture these cold leads, the brokerage can and should.
A long-term strategy
Every broker should have a lead-nurturing system in place to handle cold leads. Agents don’t have to do a thing until the lead is warmed up and close to being ready to transact. This is the model that is missing in real estate: handling the tens of thousands of leads that will someday turn into someone’s client.
Capturing leads early in the process is something agents and brokers are already doing. But if the lead is not ready to transact soon, they are often ignored. The challenge becomes how can a broker help an agent keep those leads in an incubator and slowly, methodically bring them back to life? Because if a broker helps an agent by nurturing these leads, giving them value month after month, keeping them connected to their agents, providing them with something of value that keeps these future buyers and sellers interested and inside your circle, you will have the greatest long-term opportunity in real estate: To create clients for life. The key to avoid throwing away leads that will someday become a real deal is to have a system that stays in touch with future clients by providing them a service that has long-term value to them.