The Truth About Improving Lead Conversion Rates

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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)

Be Persistent

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.

Get Naked!

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!

REW Consulting

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.

 

Michael Audet
Vice President, Business Development
Real Estate Webmasters
94 Harper Rd
Snyder, NY 1426
(716) 839-4628

Comments

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Morgan Carey

The crazy thing about this stat, is that it's likely ONLY 9% BECAUSE the buyers and sellers turned to referral AFTER the internet did not give them a response. If 48% of buyer inquiries were never even responded to, then that means that's almost 50% MORE leads you could have captured - Forget 4% - that's 8% potential conversion!!!

"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. "

Michael Audet

Morgan, that is a great point. We can only measure things after the fact but if people are getting the types of information they want, fast, responsively these numbers are likely way higher.

David Teefy

Mike, great article and one which I hope all real estate professionals will read. I have already passed your link to the article to a FB group I host. Thank you again for the information.
Sincerely,
David Teefy
RE/MAX LLC.

Michael Audet

Thanks David, glad you enjoyed it and thanks for passing it on.

Frank Harris

Great article Mike. I've had a lot of buyers tell me they used me to help with there purchase because of how fast I always responded to there emails, or text messages. I also clicked on all the links and got 404 error message.

Michael Audet

Hi Frank,

Thanks for the feedback. Not sure why the links aren't working but will go back and fix them right away. Thanks for the heads up.

Mike

Michael Audet

FYI, the link issue has been corrected. Sorry for the inconvenience.

Jason Painter

For your conversion rates you are assuming every person registering on the website will buy a property, is that correct? If that is what I am understanding I am sure you see that thinking is flawed. Maybe I am interpreting this incorrectly.

Michael Audet

Jason, that isn't what we are saying. What we are saying is that of the people that visit your site, some small percentage will become a lead, through registration, enquiries, etc. The number we use is 10%. A small percentage of this 10% , let's say 1.5% to 5%, will convert to become your customer and buy or sell a property. So, as an example, if you start with a 1000 visits, at 10% this becomes 100 raw leads, which converts to 2 customers at a 2% conversion rate. We realize that many people that register are just "looky loos" browsing the Internet. That doesn't matter. Those are part of the group of 98, or whatever the number is, that don't convert. The key to driving your revenue up is (1) have a great site, which hopefully we are doing for you, (2) invest in SEO and/or PPC to get the lead pool you can work "effectively" and (3) make sure you have a plan in place to really work the leads or your money on SEO/PPC is wasted. I have spoken to a number of real brokers/agents that are doing it well and they tell me they find their "sweet spot" that they know they can manage in terms of leads and they don't spend money to try to go beyond that because the additional leads will be wasted. Better to work on improving your conversion rate than increasing your total lead count with a low conversion rate. I hope that helps explain it better but let me know if you have any other questions or comments. Thanks.

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jeffrey Gordon

I dont get your math! 9% of buyers find their agent online. 42.5% of sales go to vendor who responds first. multiplying those two facts together does not have anything to do with the obtaining a 4% conversion rate. Rather it says if you were to obtain almost half of all online buyers by responding first you could have 4% of all buyers. The conversion rate is a factor of how many of those people who come to your site end up registering and then closing. You are assuming that every buyer goes to every competing site, and 100% register and you capture 42.5% percent of them to get to 4% of total buyers. That is very very unlikely that a buyer is going to visit every site, and register at everyone of them.

Estimating traffic for a local site based on a national stat seems like a garbage in and a garbage out since search traffic can vary by locale etc.

If you research the local traffic and find 1000 searches a month and you buy PPC traffic then some percentage of that search traffic will click on a PPC ad, most of it is more likely to click on an organic ad so that 9% buyer business segment should probably be split up between organic and PPC traffic which at most probably goes 6% organic and 3% PPC for buyers to get to your stat of 9%. So now you have 3% of buyers and 100% of them are not going to click on every front page PPC ad regardless of what position they are in. Lets say 30% of them click on an ad, now we are down to .09% of online buyers and 10% of them register so you are at .009% of online buyers and 4% of them close so you are at .00027 of online buyers.

that is a far cry from your number of 4% conversion rate, or am i completely missing your point/math? :)

jeffrey

Michael Audet

Jeff, I think you are getting things mixed up on this or I didn't do a good enough job at explaining it. Maybe there is some of both.

Either way I appreciate your feedback. You are right, at the end of the day all that matters is that you are getting and converting online leads. My point using the statistics is to show that there is a huge opportunity for those brokers and agents that really create a solid online site and use a system where response times are fast, because we know, most agents either don't respond to a large number of online enquiries or they are slow to do so. Since we know a good portion of online leads go to first/fast responders that is the first step, to capture the lead.

I didn't estimate traffic to a local site based on statistics, so I'm not sure what that comment is referring to. In the chart I just used numbers that we know, from working with our own clients, is a very reasonable number.

In your last comment you go back to that 9% of the buyer business coming from online and share some stats about how it converts to .00027 of buyers. You mention 1000 searches a month. That is actually a very low number from our perspective as we have many clients getting many more hits/searches on an ongoing basis. You seem to be using the numbers to show that you can't get real business from online leads and all I can tell you, from real world experience is that (1) most agents don't know how to work online leads even if they get them. That means, even if the percentage of available online leads is smaller than I mention there is still the opportunity to get a bigger share of them if you do things right, and (2) we have clients doing online lead conversions that blow away the numbers I shared in the little spreadsheet, so even if you find my stats and math unconvincing I hope you find the "real world" proof more convincing.

So in the end, all I was really trying to do with this post is to get our clients to use our technology more effectively to increase their lead pool, to increase their conversion rates and to make more money. If you don't agree with my stats, no biggie, don't let that keep you from the real opportunity that is still there. With a great site and SEO strategy you will get more leads. If you respond quickly, give good service etc, you are going to increase your conversion rates. That means more GCI for you.

Thanks again for the thoughtful feedback.

jeffrey Gordon

Hi Michael, thanks for responding. I have no issues with online marketing as a source of transactions, I have opinions about it, but see it as a viable strategy and would agree most folks could do a much better job of it by having a great website optimized for conversion, and commitment to following up on a timely basis and a great CRM to keep track of a heck of a lot of people.

My first experience with Adwords was that Monday mornings were a bear when I had to followup with Sunday print direct response ad replys added to the normal daily PPC registrations.

What I felt was confusing was your use of the 9% of all buyers find the agent online state multiplied by the first agent to respond 45%+ stat end up at 4% conversion--to me that implied that a great PPC campaign could expect 4% conversion. I was trying to point out that a lot of online visitors to websites come from organic traffic and not PPC, in fact I am sure much more comes in on the organic side and not the PPC side--i.e. most organic traffic probably lands on a website page that is not optimized for registration/conversion and thus would seem to me as comparing apples to oranges in regards to registration/conversion rates for PPC traffic being directed to a specific optimized landing page--okay, and IDX landing page could be on every page, but I am not sure what the comparative numbers are for conversion between true landing pages and regular pages with IDX registration on them.

I was not implying that there was no opportunity to develop closed deals with PPC etc. Rather I was just challenging the math calculation. At the end of the day, all an agent wants is closed deals and it doesnt take a lot of them per month to be in six figures income.

I might add though, that from my personal experience if you gave me the choice of having a higher close rate on a few number of registrations versus a lower close rate on a larger number of registrations I would be inclined towards the former. The amount of time and energy to develop a lower interest prospect is something I would rather put into a online and offline strategy which would reduce the shear number of registrtion prospects down dramatically while at the same time significantly increasing the likeihold that the would close.

To me that focusing on upgrading the quality of the content on my site, greatly improving the percieved value and uniqueness of my offers and allowing me to develop a much much smaller list of prospects--i.e. warm them up a lot further along the purchase chain prior to them feeling comfortable to start contact.

9% of buyers finding agents online tells me that traditional "Old School" methods are still the most effective manner of developing new business--i.e. belly to belly prospecting.

2-4% closing rate of 10% registration rate is a really crappy close rate compared to what most agents can achieve working old school.

When you combine the challenge of trying to respond to a registration with a quality response in 30 minutes by an agent already running a full time business and then taking a long time for most of the business to close along with a significant upfront investment in capital for this system, it is not for the weak of heart.

But, all that being said, online lead generation with direct response strategy can surely be a great part of an agents lead generation business. I think it is just very important that it not interfere with Old School proven strategies and that the agent do everything they can to "warm up the prospects" so that the register further down the buyer prospect continium so that the "load" on the agent to cultivate the prospect be reduced through automation and content etc.

I especially feel that online marketing is really appropriate for "relocation" buyers who are not readily accessible to the agent and usually have a 1-3 year gestation period from initial search initiation till final closing on a new property. And they need a lot more information on the distant market, the community and identification of an agent to work with.

thanks again for your thoughts.

jeffery

Michael Audet

Jeff, I wasn't pushing PPC at all, so I'm not sure where the confusion is. I was just showing a ROI based on particular technology spend which could straight SEO (organic leads) as well as overall costs for the site the. I agree that that organic leads are far better, when possible, and a lead list should only be as big as your can truly manage. Fewer good leads is far better than a high volume of poor leads. Bottom line, I don't think we are disagreeing on much. Good luck with your online conversion and thanks again for sharing your feedback. Great information.

Steven Mullen

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Steven

http://webuyhousesintampa.net

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