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Tuesday, June 08, 2004

How Brokers Can Grow Their Business In A Rough Market

by Peter G. Miller

Those who have been in real estate many years understand that while general market activity may rise or fall, even in tough times some individuals and firms continue to grow and prosper.

Why is it some succeed when the going gets tough? A single formula seems unlikely, but surely there are a few keys which point the way:

Market, Market, Market

Look at local real estate photo guides and you can see a nice collection of homes as well as something else: A community may have thousands of licensees but only a small proportion who regularly market. Yes, signs go up on new listings, open houses are held and small classified ads are run, but consistent producers generate monthly print newsletters, send out cards with each listing, tell neighbors about each sale, have websites -- and actually answer their e-mail.

In other words, as others cut back during slow times, consistent producers remain, well, consistent. To borrow a phrase from the corporate world, our consistent producers prosper by gaining "market share," taking more of whatever business there is and leaving less for competitors.

Spend Money On You

In the past few years there has been a considerable debate regarding the value of referrals and leads. Some brokers explain that paying for leads is profitable because it creates additional revenue that otherwise would not exist. However, money paid for a referral fee -- perhaps thousands of dollars -- could instead underwrite a personal marketing campaign to promote you and not a third-party.

The reason many brokers prefer referral fees is that no money is spent unless there's performance, the delivery of a productive lead. In contrast, personal marketing requires payment in advance for paper, postage, websites and such with results which may not be certain.

But how much risk is there? Let's do the math: Imagine sending out 1,000 postcards, 5.5" x 8" with color on both sides. The cost: Less than $600 -- including First-Class postage, addressing and mailing from a central postal facility.

How many responses are needed to succeed with such a mailing? One? Two? And over time what is the value of having your name in front of a given community on a consistent basis? At what point do people call simply because they associate your name with local brokerage?

Consider that the home next door was recently listed and sold. The owner interviewed at least two brokers, and which brokers did he choose? The two most visible in our community.

If you're going to promote someone, promote you. It might seem that third-party referral sources can be a good investment, but the same dollars invested in marketing directly to your community can produce a stream of income undiscounted by referral fees. As well, why give money to folks who are effectively competing for your prospects -- and with your funding may be more competitive in the future?

Target Messages

Unlike manufacturing jobs, call centers or computer programming, brokerage is entirely local. No one overseas can show a home down the block -- even being a few miles from some properties can be a huge disadvantage in many markets. The result is that brokers concentrate in given areas.

No less interesting, buying is largely local. According to the 2003 Profile of Home Buyers and Sellers by the National Association of Realtors, purchasers typically moved just 10 miles.

Combine the local nature of real estate with targeted marketing and you can see how to make the best use of promotional dollars.

Should you have a website? Sure -- in large measure because local prospects will see it, not because you'll find a prospect 8,000 miles away.

But most marketing dollars should be spent where you find buyers and sellers, not too far down the road. Targeted marketing -- mail, zoned shopper newspapers, participation in local groups -- likely translates into the best business chances.

Find Help

It takes a certain number of transactions to support a given population of brokers. Nationwide, we now have about 2.2 million licensees, including more than 1 million NAR members. At the same time, we are likely to have 6.5 million existing home sales as well as 1.1 million units of new construction this year.

Reduce unit sales and we will still have about 2.2 million licensees -- but many will shift from "active" status to "hey, I have a license." But some of the folks who do not succeed with sales have other qualities which give them great value in real estate: They're licensed, they know about the business and they have local contacts. In effect, they represent an ideal pool of staffers and assistants for top producers -- and in tough times they may want precisely the type of work which produces a biweekly check.

So if business seems to be slowing down in your community, don't worry. There are always listings and prospects to be gained from competitors who "save" money by not marketing, spend money for leads instead of their own marketing and fail to see the bounty around them.

For more articles by Peter G. Miller, please press here.

Published: June 8, 2004

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