The Truth About Improving Lead Conversion Rates
Most real estate agents don’t get it! That’s probably a socially incorrect statement but facts are facts. If you look at some very believable statistics, from very reliable sources, we see that sales and success in real estate, like every other business, is a numbers game if you do certain things correctly and consistently. That said, we all know that only a small percentage of people in the real estate industry make a great living? Why? It’s simple. They either don’t do the work, don’t know what to do, or they don’t invest in the tools and services they need to be successful. In this post I want to share some very real statistics and ideas that should help to take the mystery out of lead conversion rates and some things that may help you to improve yours. If you do, the payoff is very real!
Buyers and Sellers On The Internet
Let’s start with some statistics to put this all in perspective. NAR’s 2013 Profile of Home Buyers and Sellers includes survey responses from 8,767 people who purchased a home between July 2012 and June 2013. The seller information in the report is from those buyers who also sold a home.
For those who purchased a home during that time period, the highest share ever — 92 percent — used the Internet to search for a home, up from 90 percent in last year’s survey and 71 percent in 2003.
How Consumers Find Agents
OK, so we know that 92% of buyers use the Internet to search. The NAR report also tells us that two-thirds of recent buyers only interviewed one agent before they found the agent they worked with. 42% of buyers found their agent through a referral from a friend or family member and 12% used an agent they had used before. 39% of sellers found their agent through a family or friend referral while 25% used an agent they had worked with previously. But, here are the important numbers. 9% of buyers and 4% of sellers find their agent online!
Compare To Conversion Rate
I found these numbers to be really interesting for a couple of reasons. Research shows that 35-50% of sales go to the vendor that responds first. (Source: InsideSales.com). If we take the average of those numbers it equals 42.5%. Since we know that 9% of buyers find their agents on the Internet, to me, that means you have a chance equal to 42.5% of 9% to convert an online lead. This equals nearly a 4% conversion rate. 2% is often used as a reasonable conversion rate for people that really work online leads. When I look at these numbers, they tell me, that if I am really good at what I do, those conversion rates can go way higher than 2% and if you look at what that means in terms of revenue, it is pretty exciting. I showed these numbers in an earlier post to demonstrate the point but I think it is worth taking another look.
The chart above shows the impact of improving your conversion rate on your total revenue from online leads. Using the same numbers in terms of commission, split, average price, etc., revenue goes from $402,413 to $804,825 when the conversion rate climbs from 1.5% to 3%. Things obviously get more exciting when it climbs to 4% or even 5%.
Why Most Agents Don’t Convert Leads
The ugly truth is most real estate companies do a lousy job in responding to online leads consistently and quickly. According a study published in the Harvard Business Review called, “The Short Life of Online Sales Leads” , “…although 37% responded to their lead within an hour, and 16% responded within one to 24 hours, 24% took more than 24 hours—and 23% of the companies never responded at all. The average response time, among companies that responded within 30 days, was 42 hours.
In a study by the WAV Group, titled “Agent Responsiveness Study Reveals Critical Flaws in Real Estate Lead Response”, the WAV Group detailed lead responsiveness results from a sample of 384 different brokers across 11 states. Researchers posed as consumers and inquired about listings on broker websites, Zillow.com, Realtor.com, and Trulia.com. They found that:
- 48% of buyer inquiries were NEVER responded to.
- Average number of call back attempts after the initial contact was 1.5.
- The average number of email contact attempts was 2.07
- Average response time was 917 minutes (or 15.29 hours).
While this is substantially better than the 42 hours reported in the Harvard Business Review report, it is still abysmal.
Keys to Lead Conversion
Speed is Number 1
According to a study conducted by Prof. James. B. Oldroyt at MIT, your odds of reaching a lead if you call them within 5 minutes of their reaching out compared to waiting 30 mintues drop 100 times. The odds of qualifying a lead if called in 5 minutes versus 30 minutes drop 21 times. Short response time is by far the most critical component of capturing an online lead! Your number one job in capturing and converting online leads is “be responsive”. Hand in hand with speed is being the first to respond. Research shows that 35-50% of sales go to the vendor that responds first. (Source: InsideSales.com)
According to research conducted by InsideSales.com, across 7,960 companies between the years 2008 and 2012, sales reps make, on average, only 1.3 call attempts to a new lead before giving up. This is the bar that you have to leap over in your own personal lead management. When working leads you have to develop a mindset that you have to identify the worthless leads to uncover the real leads. Using that approach you remind yourself or your team that online leads are a number’s game. You can’t just reach out once or twice or even three times and think that you are working online leads. Research shows 95% of Internet leads convert between the 2nd and 12th contact attempt. It is well worth your time to keep trying. Every lead that doesn’t convert takes you closer to the ones that will.
Make Personal Contact Immediately
I hate leaving a voice message or waiting for an email or text response when I am on an information hunt and I think most consumers feel the same way. We have become an impatient society and we want immediate results, especially when we are searching for anything on the Internet. If we are doing a search and can’t find what we want quickly we move somewhere else. The same is true for consumers looking at real estate.
If you are talking or even meeting with a client set an expectation that you may have to take a call or respond to an email at some point, so you can let that new, potential client know you are with an existing client and will get right back to them. This tells them you are a real person and they have reached you and you will respond quickly. This personal contact, even when you can’t talk to them at length immediately creates a connection. When you do this, they will give you the time to respond, but if they don’t get anything but an automated email your chances of landing them as a lead decrease dramatically. Let your existing client know you will do the same for them because, in real estate, not responding may mean a missed opportunity on a perfect home or buyer for them or the other client. If you say something like, “Excuse me, would you mind if I just responded to my other client quickly to let them know I will contact them as soon as my meeting with you is over? “ most people will be totally fine with it. You can explain that time is critical in real estate transactions and you will do the same for them so they always feel connected to you and that you are always available.
If you really can’t respond immediately, create pre-written texts and emails in advance that don’t sound canned, that you can use to buy some time. Saying something like, “Hi, I got your request. I’m just finishing a meeting and will call you/email you as soon as I am finished. Let me know the best number to reach you. It should be within the next 45 minutes”, is a lot better than “your call is very important to me”.
Hire a Lead Specialist
If you really are too busy with clients or aren’t comfortable asking them to let you contact a lead immediately think about bringing on an assistant who’s sole mission in life is to be immediately responsive and to qualify leads for you. As I pointed out earlier if you can raise your conversion rate even slightly you will more than cover the cost of an assistant. Remember, your technology is an investment and just like any other investment it has to be managed. Spending money on technology that creates lots of leads and not nurturing them and converting them is worse than not having the right technology.
Create a System For Capturing Leads
When a potential lead comes in the last thing you should be doing is thinking about how to respond. It has to be automatic. You need to have a system that works for you so you can respond quickly and capture the lead. You or your assistant should have a very comfortable set of interview questions ready to go as well as a quick way to share your value proposition and what you can offer them if they work with you. This doesn’t have to be a big presentation but consumers want to feel like they have connected with someone that understands what they need, that can find the right home for them or help them sell their home. Here a few ideas you may find helpful.
Create Sample Scripts
There are really only a few different things that consumers will contact you about, when it concerns real estate. They either want information on a particular property, or need some help in the search process or perhaps they want to list their home. Create some sample scripts for yourself or your team that identifies their need quickly so you can respond to them effectively. Trulia actually offers some nice sample scripts for free that you can use as a starting point. You will need to register but I think you will find them useful.
Give them something of value immediately, before they even commit to working with you. This approach is detailed in the great business fable book, “Getting Naked”. The whole idea is to begin serving them “as if” you were already their consultant or Realtor. If they contact you about a certain house, send them 4 more very similar homes for them to use as a comparison without asking for anything in return. Maybe you could have a write-up prepared for every neighborhood you work that you can email to them, for the area they are considering. Or you could send them a list of your favorite restaurants near that address and some personal review on why you like them. Things like this don't cost anything but immediately create a personal connection. Get creative and think of things you would find useful if you were in their shoes. When you give a prospect something of value without asking for anything in return you are creating the business relationship as if it already exists. People love this because they are getting something they want, there isn’t any pressure and it sets a really comfortable tone for them to want to continue working with you.
Set and Track Goals
Yes, it is a numbers game. You have to work those numbers quickly and persistently. If you, an assistant or a team member is working your online leads, set goals that will help you improve your conversion rate. Like any goal it needs to be written down and then it needs to be tracked on a daily basis.
In a study by Psychology professor Dr. Gail Matthews she had test subjects create goals. One group simply thought about their goals while 4 other groups wrote their goals down along with action commitments of varying degrees. The 5th group went the furthest by writing their goals, setting action plan commitments plus sending a weekly progress report to a friend. At the end of the study, the individuals in Group 1 only accomplished 43 percent of their stated goals. Those in Group 4 accomplished 64 percent of their stated goals, while those in Group 5 were the most successful, with an average 76 percent of their goals accomplished. So write down your goals, track them and hold you and your team accountable and you will see results from it!
Real Estate Webmasters is here to help you get the most from your real estate technology. Feel free to contact me at audet@realestatewebmasters, or 716-839-4628, if you have any questions or would our help in creating a solid lead conversion plan.