Few issues in brokerage management are receiving as much attention as lead generation and management.
Traditionally, the vast majority of a company’s leads were generated by its agents through their farming efforts, word-of-mouth referrals, personal circles of influence, and lots of hard work out in the trenches.
But now the industry must adjust to the fact that traditional lead generation ratios are changing to one that will likely see the majority generated through one or more company-run lead generation programs.
The picture is becoming clearer as more and more firms are having growing success with Internet or virtual lead programs, both in lead capture and conversion. Firms with more mature “lead incubation” programs are beginning to report twenty to thirty percent conversion rates.
This transition has not been without pain and struggle. This column reported not long ago that in two recent tests involving over 5500 virtual leads sent directly to listing agents and brokers, between seventy and ninety percent of targeted lead e-mails remained unopened after three days.
The industry still hasn’t universally accepted the fact that today’s consumers show a strong preference toward interacting electronically. Coming to this understanding quickly may well be a defining moment for a firm’s future success.
Despite these startup difficulties, it is abundantly clear that Internet leads will play a key role in the business mix for those brokerages that make the cut.
It seems equally clear that firms making the decision to enter this zone of operations could save a great deal of expense, frustration and profit if they stopped for a moment to consider a couple of basic questions before plunging into the virtual lead generation and management morass. This column is intended to facilitate that process.
The first decision is whether or not a firm should invest time and energy in building its own learning curve on virtual leads or whether it should outsource its lead generation and management functions.
The decision is made more difficult since it is difficult to get a concise estimate of the actual costs involved. What is certain is that virtual lead program development costs will exceed most of the investments a firm has made in technology in recent years.
From a cost perspective, programs like this are probably best compared to acquiring another firm -- because in many ways that is exactly what it is. Up to now, only a few firms that have successfully installed these programs have maintained a record of their direct, allocated, incremental and incidental costs.
The process must also include an analysis of per-customer acquisition costs compared to the traditional agent-centric process. A key expense in this calculation must be maintaining and operating a current, state-of-the-art website. In a world that is now welcoming the sixth generation of websites, most brokerages are still working on a forth generation model.
It appears that a new generation of websites will be emerging about every fourteen to eighteen months from now to forever. Each iteration will involve an additional investment of tens of thousands of dollars.
Those who doubt this fact would do well to spend fifteen minutes browsing through Warnerbros.com, an experience that should prove both entertaining and sobering.
Offering an out of date website to today’s increasingly Internet savvy consumer will be the equivalent of offering silent movies at your teenager’s next social event. Moreover, each new website design will incorporate increasingly sophisticated lead capture and customer communications mechanisms.
The next step in the decision-making process is to project what contribution these lead generation programs will make to the firm’s overall market share and business volume. Some firms have decided that the amount of traffic from these leads will be incremental, while others have focused on making it a significant business stream.
At this point in the decision-making process, it’s critical to understand the economic and operational differences between the “traditional lead” and the “virtual lead”. Most important is the fact that with virtual leads, the firm exercises far greater control over both the lead and any resulting transaction.
This control extends to commission splits, the ability to direct business to agents who support the firm’s business model, the program’s value as a recruiting tool (especially for Generation “X” agents), and the positive connection that can be made with techno-savvy agents. Factoring in these considerations, in many ways virtual leads could prove much more valuable to the firm.
If the “do it yourself” lead program option has survived these last three steps, it must next consider the learning curve that goes with either establishing a whole new team within the company or, worse yet, attempting to cross train a traditional real estate services team into the virtual lead business model.
Thinking that “We’re simply targeting the same customer who used to show up at an open house” does not contribute one bit to the decision making process.
This is a different consumer using a different point of contact that requires a different approach and different follow through. Even if ownership and management is fully committed, the virtual lead learning curve is steep, rocky and slippery.
Virtual lead management is more than just forwarding e-mails to interested agents. It involves increasingly sophisticated filtering, scrubbing, incubation and relationship building processes that must be built in. It is not a matter of pruning the virtual lead to fit the company’s traditional lead processing techniques.
Within this new system, the brokerage needs a presence at every step of the transaction. Each critical consumer decision must be accompanied by relevant, value-based “coaching” from the company.
Every element of the company’s intended consumer experience must be monitored, measured and supported. Every aspect of this process will be different and, for the next several years, under continuous development.
A firms engaged in this decision making process must be candid about its existing aptitudes in systems design and implementation. Is the management team good at designing, creating, implementing (and most importantly, managing) systems? The new process will be all about effective and profitable systems.
The costs of creating a new agent workforce must also be factored. It now appears the agents who will be the most successful at this new business format may be those who have never practiced traditional lead generation methods versus experienced agents trying to transition into it.
Only a supremely (and perhaps irrationally) positive person would envision today’s mature agents migrating into this business model with open arms. It may be just too great a leap of faith.
Lastly, the decision making process obviously must include financial pro-formas that incorporate the advertising costs it will take to drive consumers to the website to begin with.
While this investment promises to deliver a far greater ROI than classified ads, nevertheless it is a significant investment, especially for firms that will be maintaining their existing traditional marketing program through the transition.
As of today, there is adequate and growing evidence supporting the proposition that virtual leads will play a critical and significant role both in terms of market share and profitability. Management needs to start now considering how they are going to address this issue.
The American real estate consumer is already demanding a new transaction experience and the Internet will play a central role in meeting that demand.
