This beginner’s guide to real estate marketing in the digital age will start with identifying the ideal customer for your business. Then, we’ll discuss the value of online marketing versus traditional marketing. We’ll close with an overview of the various online channels and discuss which ones are most relevant in real estate marketing.
Identifying your ideal customer
Our guide to real estate marketing begins here. With your ideal customer.
If you’ve never gone through this exercise, it’s crucial to stop and do this before moving forward. If you’ve mapped out your ideal customer in the past, consider re-evaluating this customer profile today. The subsequent lessons in this course will help you refine your real estate marketing strategy and help you reflect at how effective you have or haven’t been at marketing to this specific customer profile.
Many real estate agents put together an income plan – essentially a business plan that includes how much money you will make and how exactly you’ll get there. An agent’s income plan is typically made up of estimated number of transactions, average sale price of homes, commission percentages, business expenses and more.
We suggest that agents get even more specific when it comes to your targeted customer.
Picking a target market doesn’t mean that you will reject clients that don’t fit in that market. But it provides a focus for your real estate marketing that allows you to attract the types of clients that will help you meet your income goals.
When deciding on a target market, choose a client that is common in your area. You wouldn’t want to focus on military relocation if there aren’t many military installations nearby. Your ideal client should make sense for both your income goals and your area.
The following list will help you narrow down the type of client you will market to:
- Military Relocation
- First Time Homebuyers
- Luxury Homes
- Vacation Properties/Second Homes
- Neighborhood (Areas or Subdivisions)
- Single Families
- Rehabbing old homes for primary residence or investing
- Home sellers
- Commercial Property
Here are a few more questions to consider when identifying your ideal customer:
- Are you a new agent? It might be beneficial to focus on buyers in the beginning of your career (easier to attract for new agents)
- Is your ideal customer common in your area? It’s important to narrow your focus sufficiently, but narrowing too much might result in difficulty finding enough business.
- What’s the lifetime value of your ideal customer? Is your target customer likely to require multiple transactions over time?
Real Estate Marketing: Should you focus online?
Let’s start with defining the term of internet marketing. Simply put, internet marketing (or often called online marketing) refers to the promotion of a brand, product or service over the internet.
As more and more users get increasing amounts of news, information and content online compared to other media formats (print content, television content, etc.), it’s no surprise that companies and brands continue to increase marketing spend on internet-based platforms.
In a recent report, the IAB (Internet Advertising Bureau) announced that internet advertising revenue for the quarter ending at the conclusion of 2016 increased 20% year-over-year. As the below graph shows, advertising spend online is in a firm trend higher for the foreseeable future.
Why market your brand and services online?
Why is internet marketing becoming increasingly attractive for businesses and brands? There are two main reasons:
- Targeting – Because of new technologies, the targeting ability of many online platforms is vastly superior to other non-internet platforms. With internet marketing, you can drill down your marketing to match your ideal customer very easily. As such, you have greater confidence that your investment is going towards individuals that are actually potential customers. Contrast such targeting with a traditional advertising form: the billboard. The billboard stands on side of a road visible to anyone passing by. The only targeting criteria utilized is its geographical location. As you’ll see, internet marketing targeting allows incredibly specific messaging that targets very specific customers.
- Tracking – Internet marketing is also attractive because you can track the results much better than other marketing initiatives. Sending out a mailer or recording a radio spot might be useful, but how do you track the increase of business that results from such an initiative? It can be difficult. But not so with a variety of online platforms. Tracking impressions, conversions and your overall return on every dollar spent is a pillar of online marketing campaigns.
An overview of the different ways you can target customers online
Many technologies are built into a number of advertising platforms that enable you to target your ideal customer. Targeting is often categorized in the following ways online: Demographic targeting, Location-based targeting and Behavioral targeting. Let’s briefly look at each one.
Demographic targeting refers to targeting an individual based on his or her age, race, sex, economic status, income level, marital status, etc.
Location-based targeting slightly overlaps demographic targeting as some marketers would consider location a demographic criterion. However, with the increase in mobile use and advanced technologies, location-based targeting has become a bigger component of marketing plans. For instance, with today’s ubiquitous mobile phone usage, location-based targeting can now be incredibly specific even down to the restaurant an individual just visited.
Lastly, behavioral targeting is a major part of internet marketing today. Behavioral targeting refers to showing certain advertisements to a user based on his or her own web browsing behavior. Retargeting is a popular marketing technique today that falls under this category. For instance, you can show specific advertisements to users that have already visited your webpage. Data shows that retargeting individuals can lead to greater ROI levels in your marketing campaign.
As you understand the targeting capability with various internet marketing platforms, it will become increasingly clear why choosing your target customer is so important.
Tracking your internet marketing effectiveness
Just as technology makes possible impressive targeting capabilities, the tracking options available for internet real estate marketing campaigns also are quite impressive.
As you’ll see as you get into specific channels and strategies, it’s important to track everything from web traffic, lead conversion rates, and even phone call tracking (did an ad on the internet lead to a phone call?). This information will help you calculate on-the-fly what marketing spend is resulting in what kind of performance. Knowing what campaigns online are working best will inform future investment decisions.
At this point, it’s not important to know details about how to target individuals or how to track your marketing spend online. Just know that targeting and tracking are two very important reasons why internet marketing is attracting increasing amounts of marketing dollars for both real estate professionals and most other industries.
Next we will look at an overview of the various internet marketing channels that you might consider for your real estate marketing initiatives.
Let’s dig into the various internet marketing channels
This channel refers to buying advertising inventory across the web on various websites. This type of advertising is typically designed to 1) build brand awareness and 2) drive traffic. Display advertisements are typically purchased on a per impression basis. The common pricing metric for this type of purchase is CPM (cost per 1,000 impressions).
It’s worth noting that the effectiveness of display advertising has largely declined in recent years as internet users become better at ignoring ads and as web usage becomes increasingly mobile.
Most real estate agents won’t be purchasing display advertising as part of their internet marketing initiative. Some agents may buy display ad space on a hyper local website offering local community news and information, but even with such a targeted website, the purchase rates (CPM) would need to be quite low in all likelihood to warrant the spend.
Can display advertising be targeted? Yes. For websites that are large enough, most display ads are trafficked through an ad server which can target by location and by device. Note: Smaller, local websites are likely to be relatively small websites and thus not using ad server technology. As such, targeting won’t be possible – you’ll be relying, instead, on the quality of the web traffic the site receives.
Can display advertising be tracked? Yes. For display ads trafficked through ad servers, tracking pixels and other technology can be used to track impressions, click-through rates and more. Moreover, your own website can use Analytics to track traffic by source.
Verdict: Not relevant for most real estate agents.
Pay-Per-Click Advertising (PPC)
Pay-per-click advertising is similar to display advertising in that it often results in advertisements that are displayed along other web content, but the key difference is that you are buying the exposure by the click rather than by the impression. The common pricing metric here will be cost-per-click, or CPC (contrast that with the CPM pricing discussed above).
The biggest example of PPC advertising, of course, is Google Adwords. Google pioneered the format when they began allowing advertisers to pay for positions at the top (and eventually alongside) of search results. Rather than charge a flat fee, or a fee for a certain number of impressions, Google charges you by the click, so you only pay for results.
That doesn’t mean it’s always a great deal. Buying PPC placements typically functions as an auction. You are bidding against other advertisers for the same positions. The more competitive, the more you will pay for each click. For example, if you’re buying ad placements for search results pages when people search for “new york city real estate,” it is likely that those clicks will cost many times the clicks for when people search for “gainesville georgia real estate.”
Google Adwords targeting mostly involves keyword and topical targeting. At a high level, you’re matching up your ads with keywords that individuals are searching for when using the Google search engine.
Google, however, does let you extend the advertising to the millions of websites that serve Google ads (referred to as the Google Display Network). When your ad shows up on another website through Google, it’s no longer on a search result page, but on another website. It’s not a random placement, however. Google uses algorithms to match up your ad topically to the content on that page.
You also have the ability to target Google ads by location, language and device. Missing here are more granular demographic and interest targeting capabilities (like you can do on Facebook), but because Google owns search, it’s worth noting that you can target a user’s search intent which can be very beneficial in real estate.
For instance, if someone searches, “Moving to Miami Florida,” there’s a decent chance that that person intends to move to Miami and may need a new place to live. While Google might not be as good when it comes to targeting a person’s age or income level, the ability to target intent can be very beneficial.
Verdict: Very relevant for real estate agents
Organic Search Traffic and SEO
This internet marketing channel is somewhat different from the other channels discussed here because it doesn’t involve actual advertising spend.
SEO is one of those topics that everybody knows they want, but few understand well. Search Engine Optimization (SEO), also similar to Search Engine Marketing (SEM), is the effort to build content and pages on your website that rank highly in Google’s search results pages. The end goal is not just high keyword rankings, but actual organic traffic.
Today, SEO is all about keyword research and producing high quality content. Creating the highest quality of content that is optimized for well targeted keywords can lead to long-term success in increasing organic search traffic and provide a free, steady stream of leads for your business.
What do we mean by well targeted keywords? Selecting keywords to optimize content around typically revolves around three factors: how relevant the keyword is to your business, how many people are searching for that keyword and how competitive or difficult would it be to achieve high rankings for that keyword.
This is just a brief overview of SEO and the other channels, but if you are interested in more specific strategies and resources on the SEO topic, please let us know.
Verdict: Very relevant for real estate agents
Email marketing refers to distributing content, promotions and other information to an email list that you have built over time.
Email marketing can be quite effective due to the fact that your email list is typically a list of people who have opted-in for more information. The very opt-in action indicates they like what you provide and they want more from you.
While DRIP campaigns (an automated sequence of pre-set emails that gets sent to a subscriber) are popular in all industries including real estate, real estate agents can also employ the use of property updates in their email marketing strategy.
Many IDX providers offer the ability to send automated property update emails to subscribers according to that subscriber’s specific listing criteria.
Both DRIP campaigns and IDX-powered property update emails are very effective ways to stay in front of individuals and be the first person they think of when it’s time to buy or sell real estate.
Verdict: Very relevant for real estate agents
Social Media Marketing
With the popularity of social media networks like Facebook, Twitter, Instagram and Snapchat, social media marketing is always a hot topic.
Note: We’re going to separate Facebook from social media marketing in general. Facebook advertising is more akin to PPC advertising and because of the offerings that Facebook provides, we’re putting it in its own category. For today’s purposes, social media marketing mostly refers to building a following on a social media network like Twitter or Instagram and distributing information and content via this account.
In our experience, we see very few clients and real estate agents landing new business via social media marketing. Having a presence on social media makes sense for most businesses and individuals, but investing a great deal of time or money into the platform typically doesn’t yield much return.
These social media networks can be useful in keeping a connection and staying in front of past clients or existing relationships.
Verdict: Mostly relevant only for maintaining existing relationships
We put Facebook advertising into its own category because it essentially merges the PPC advertising approach with some elements of social media marketing. It also gets its own category because we believe it is one of the best places for a real estate agent to start his or her real estate marketing campaigns.
Facebook’s advertising offerings range from super simple to incredibly robust. A new marketer can get up and running in minutes or an experienced internet marketer can spend days crafting massive campaigns for the biggest companies in the world.
And it’s not just Facebook’s ad creation interface that is impressive. Facebook’s Audience Insights tool on Facebook’s Ads Manager allows you to analyze your target group of customers on Facebook down to very specific details: demographic information, how active they are on Facebook, financial status, what pages they typically like and much more.
Facebook’s reporting functionality is also second to none. Tracking conversions and effectiveness of your ads is quite easy, but even more importantly, Facebook will tell you what segments of the audience you’re targeting is performing best so you can hone in your targeting and increase your ROI.
Verdict: Very relevant for real estate marketing
Lifetime Value of Real Estate Clients
Lifetime Value (LTV) refers to the total inflow of cash that results from the entirety of your relationship with a single real estate client, not just the cash inflow from a single transaction. Determining the LTV of your clients can help you immensely in your real estate marketing plan as it can help you determine budgets for various marketing channels.
How do you calculate the LTV of your clients? Financial factors such as commission percentage and average transaction size are certainly important to factor into your LTV calculation. However, additional factors might also be considered: the average age of your client, the average number of years your clients typically live in a home, repeat business and referrals.
Let’s look at a simple example. Let’s assume an average transaction price of $300,000, your average commission of 3%, and the average broker fee of 20%. Looking simply at these figures, the average take from each transaction would be $7,200. For new Realtors, you probably want to keep a simple LTV calculation in order to be conservative in your marketing spend.
However, if you’re experienced and have a grasp of your repeat business and referral rates, you might take it further. Let’s say the average age of your client is 40, and the average length of time your clients live in their homes is 10 years. How likely are you to get the repeat business? Let’s estimate 25%. If you limit the repeat business element to just the possibility of a transaction 10 years later at a likelihood of 25%, you can now add $1,800 to your LTV, now totaling $9,000.
What about referrals? If on average, your clients refer you at least one time over the next 5 years, you can now increase your LTV of your client even further.
It’s important to be relatively conservative in your LTV calculations mostly because the goal here is to determine a number that is useful in determining what we’re willing to pay for new customers.
Track your own data as you gain new clients and close transactions for those clients. Do you know your average referral rate, or your probability of a client using you a second time? What about the average age, and how long such clients typically live in a home? The more data you know about your customers, the better informed you’ll be when making decisions for marketing.
The other element that this exercise reveals is how important it can be to have quality processes in place for pursuing repeat business and referrals. By moving those two areas forward, your LTV of each client acquired can go up dramatically.
Cost Per Acquisition of New Clients
Now that you have a good estimate of the LTV of your clients, you can start to work backwards and analyze what cost per acquisition numbers make sense for your real estate marketing plan.
What is Cost Per Acquisition (CPA)? Simply put, it refers to how much you have to spend to acquire a new customer. In real estate terms, it refers to how much you have to spend to gain a new client that leads to an actual transaction. Note that in some marketing circles, CPA can be used to discuss cost per new lead or the cost per new newsletter signup. For our purposes, we’re talking about the cost to acquire an actual client with a closed transaction.
In order to identify a quality CPA number for your business, you’ll have to get very good at tracking your marketing spend and conversion rates of various methods.
To illustrate, let’s start with a simple example. On our website, we have a community landing page with IDX-powered listings. We also have forced registration setup where users have to register via the IDX platform in order to view listings. This is a common lead generation technique in real estate.
Now, let’s assume that we’re using a Facebook ad or a Google ad to send users to this landing page. Let’s say that our cost per click on the ad is $1, and that 25% of these web visitors convert to leads via the IDX registration. Right there, we know that we’re essentially paying $4 per lead.
Next, let’s say that 1% of those leads turn into actual closings. That means 100 leads that cost you $400 to acquire will result in one closing. If your LTV as mentioned previously is $9,000, then you just spent $400 to earn a return (over lifetime of customer) of $9,000. This is obviously an over-simplified example, but it does reveal a few important points.
First, you must track conversion rates at each level of your marketing system. Tracking how many new leads result in actual closings is critical. Since many real estate clients browse real estate online without a near-term intent to buy or sell, you must 1) be able to track conversion rates over a period of time and 2) have a system in place to stay in front of clients over many months, even years to turn as many leads into closings as possible (even many months later).
Moreover, the cost you pay per click on your ads will have a major impact on your CPA. If, in our previous example, the cost per click went from $1 to $5, then our cost per lead would jump from $4 to $20 and our acquisition cost for a new client would go from $400 to $2,000. Maintaining a healthy cost per click gets back to how well your targeting is setup and your ability to manage your advertising on places such as Google or Facebook.
What is a Healthy CPA to LTV Ratio for Your Business?
In some marketing circles, you might hear that a 3:1 ratio is a good place to be when it comes to the lifetime value of your customers and the acquisition cost to get them. That’s fine, but a ratio by itself without any context is pretty meaningless. We prefer to discuss the ratio in terms more specific to you career and your personal situation.
For New Realtors
If you’re starting out, a better way to approach this ratio analysis is to consider how many transactions you need per year to maintain a full-time income. For example, let’s say you determine you need $50,000 after expenses to maintain your standard of living.
If your LTV is $10,000, your CPA is $2,500 and you have a regular overhead of roughly $15,000 per year, then you can assume you need at least 9 transactions for the year to meet your living expenses. For new Realtors, this bottom-up type analysis might make sense as you build your marketing plan and consider LTV and CPA variables.
For Established Realtors
For real estate agents already making more than a full-time income, the analysis is likely different. These Realtors already have a base of clients and a decent referral base established. Allocating some of the proceeds from an established client base to diversify and widen a referral base over time can be a good strategy.
Adding a reliable channel such as Facebook ads can strengthen the business and grow the channel of customers while maintaining LTV across all clients. Established agents can likely expect a higher LTV compared to new agents considering the repeat business and referral processes are more established and refined. As such, established Realtors should ask themselves, what are 10 new clients really worth to you?
Self-Reflection: Real estate marketing questions to consider
As you consider your own real estate marketing efforts online, consider asking yourself the following questions:
- What internet marketing channels have you experimented with?
- How would you rate the effectiveness of each channel?
- Were your advertisements targeting your ideal customer?
- What were your lead conversion tactics for such campaigns?
- What is your estimated lifetime value of your customers?
Do you have any questions about real estate marketing online, or about any of the specifics laid out in this article? Feel free to contact us at any time.