Customer acquisition – the cold hard truth
Warning: don’t read this post if you have a less-than-robust constitution. It’s probably unlike anything you’ve ever been told before….
Around 80% of independent agents cite ‘word of mouth’ as their primary source of business? Followed closely by ‘referrals’, which is pretty much the same thing. Then ‘local reputation’; oops, there it is again.
I’m sure, if you’re in the 80%, that you’re proud of your referrals and local reputation. And so you should be. The lack of a positive reputation will seriously hamper any marketing initiative.
But ‘word of mouth’ is NOT a business generation strategy. It’s a by-product of all the good things you’re doing.
Don’t believe me? Let me ask you this; if I told you that next month you had to double the number of valuation appointments you generated, how would you do that using ‘word of mouth’?
If you want to build a business that has a robust and sustainable growth strategy, you HAVE to be able to ‘buy’ leads and valuations. That is, you need to be able to generate leads via a paid method, so that when you need to turn on the tap, you can.
What are paid lead sources?
Glad you asked. Here are the top three we use in our agency, AshdownJones:
- Sales letters
- Facebook ads
- Digital marketing funnels
Plus, they’re all mutually supportive. For example, we could include a url in a sales letter, sending the reader to a downloadable guide and email nurture sequence – in other words, a digital marketing funnel. And then anyone who goes to that web page, but doesn’t opt in for the downloadable guide, we could retarget on Facebook and send them an advert. Maybe for an instant online valuation tool.
If you don’t pay for customer acquisition, you don’t have a real business.
Not one you can sell, anyway.
Maybe you don’t plan on ever selling your business. That’s fine. Paying to acquire customers (aka marketing) means that you can figure out what works, and what gives you the best return on investment, and then you just do more of that.
For example, if you’re one of the vast majority of independent agents who thinks that £500 is a lot to pay out per month on Facebook ads, then the agent who is willing to pay £1,000 per month will acquire the instructions that could have been yours. When we first opened AshdownJones in 2017, we decided to out-spend (and outsmart) our competitors with sales letters. We were crafting beautifully-written, long-copy letters, professionally printed and sent out in the hundreds every month – in hand-written and stamped envelopes. None of our competitors would do that, so we acquired many quality instructions that could have been theirs.
Take the first step towards building a robust and sustainable growth plan
Create a spreadsheet with these column headings:
Then complete the information from every valuation you’ve done in the last 12 months – longer if you have the details. Yes, your CRM may be able to do this for you but I find that a spreadsheet you create yourself sharpens your focus and lets you see what’s really working for you. These are our valuation sources:
- Facebook Ads
Decide what your valuation sources are going to be, but I recommend you don’t have any more than 10-12, so you can calculate a percentage for each one. I’ve highlighted the 3 lead sources we’d consider to be ‘paid’ in this list, namely, letter, Facebook Ads and ValPal. (By the way, if you’re not a client of ValPal and you’d like a discount off ValPal’s set up and monthly fees, just message us and I’ll send you a special link.
How much should you pay for a valuation?
This is a great question, but there are many variables, so let’s look at it a bit more closely.
Let’s say that you spend £500 on Facebook ads, which gives you 20 leads at £25 each. These leads are useless if you don’t convert them, so you have an email nurture sequence in place to do just that, and over the next couple of months you convert 5 of them into email responses, of which 2 convert to valuations and 1 to an instruction.
Facebook Ad spend £500
Cost per lead £25
Cost per email response £100
Cost per valuation £250
Cost per instruction £500
Now this is fine if you’re securing a fee of £5,000 or more. If not, it’s going to get tight. Our average fee is just shy of £10k at the moment, so we’re pretty confident we’re well in profit, even if we end up paying £1,000 to acquire a customer.
The other variable is how well you convert. You may find you can create inexpensive leads but they don’t convert. ValPal is typical of this challenge, and you need to improve your conversion or better target your ads to make sure the funnel is still profitable.
Sales letters can be very profitable in the long run, but they sometimes take a while to get a response, especially if you’re the new agent in town. A known name on a letter will always get a better response than a letter from an agent they’ve never heard of. We’ve now really honed our targeting and our letter-writing skills, and can get a response from just 20 letters sent to on-market homes. But we aren’t typical. Usually, you’ll get one response per 200 -300 letters, depending on how good your letters are. (If you’re a Firewave member, you get the letters written for you!)
Here’s what a letter campaign might look like, sending out 250 letters a month for 3 months. You get 1 lead in the first month, 2 in the second and 3 in the third. (This often happens as the campaign builds awareness.) All 6 book valuations (usually the case) and you convert at 50%. Here’s how that breaks down:
Direct mail x 750 cost £750
Cost per valuation £125
Cost per instruction £250
As you can see, on the surface this is a much more profitable lead-buying option. However, you are limited with how many properties are on the market in your area. It’s difficult for us to find more than 50 homes we’d want to target, as even though our area is large, it’s sparsely populated. Added to that, we only target unique homes, so the pool of available properties is relatively small. That said, direct mail is by far our most profitable lead source, adding up to a whopping £300,000-plus in listed and sold fees in our first 12 months.
if you’d like more information about how we can provide you with our hugely profitable sales letters, drop me a line at email@example.com
Paying for leads is not an unnecessary expense, it’s a vital business transaction. Without it, you just have lots of goodwill and a warm feeling inside. With a sustainable way of growing your agency, you have a business you can one day sell, and that in the meantime gives you a repeatable, predictable instruction-getting system that will help you sleep easy, knowing where your next instruction is coming from.
If you’d like us to provide you with a expertly-written authority content plus a highly-effective sales letter every single month you can use to target these very special (and highly saleable) homes, make an enquiry here to check if your area is currently available.
Sam and the Firewave Team