Listing Marketing Budget

[shredder]

Ok, I have a different slant on marketing budgets for listings. Please let me know your opinions.

Here it goes:

1. Lets say after running your business plan you budgeted approximately 5% of GCI to marketing specific listings.
2. Lets say that on average 50% of your listings sell and 50% expire.
3. Lets say for sake of arguement that the average days on the market is approximately 6 months.

Ok, phew got all that crap out of the way.

1. Say you took a $1mil listing at 7% (4% to you the listing agent, 3% to buyers agent).

A. That gives a potential commission of $40k to you the listing agent.

2. But, because only half of your listings are selling - you're real potential commission average is about $20k.
3. Now, earlier we said we wanted to only budget 5% of GCI to marketing specific listings - so that gives us $1000 to market this one listing.
4. Average time on the market is 6months, so $1000 divided by 6 is about $167/mnth to spend on this listing.

What do you guys think? I'm considering using this as a plan in 09, but I'm not sure. The hope is that some properties will sell much sooner than 6months and some much later. Hopefully the law of averages will come into play here.

- Shredder

[Ryocheck]

I do not agree entirely with your philosophy on this one though I can see where you are coming from. I do understand markets are different in other places and I am sure my market is different then yours. Currently my expiration/cancellation rate is under 15% for 2008 so that is a pretty good indicator right there.

Now back to my point. I do not feel that $167 a month is an adequate budget for a $1 million listing, especially if you are charging 7%. I find that when you market individual listings you tend to get more sales in that area as well as typically other listings. Last year I got an additional 4 listings by marketing just one throughout the entire neighborhood. People just assumed I was the person to call to sell because they kept seeing my name. If I had not been aggressively marketing that specific property I would have been lucky to get just one of those. I do not believe in cutting or limiting you budget rather I feel you should adjust it to what brings you the best return in your market. So what if you spend 20% of your gross commission marketing a specific property but in the process you pick up an additional list or sale and actually get your listing sold. If you are like me I am sure your overall goal is to grow your business and that is difficult if you are putting limitations on it. I think the best opportunity for anyone to grow their business is when everyone else is cutting back.

Someone once told me that, “The man who stops advertising to save money is like the man who stops the clock to save time.” Just some food for thought.

[shredder]

I totally understand where you're coming from. The specific numbers aren't that important to me. I was just wondering what everyone thought about actually setting a firm budget and schedule for marketing/advertising.

Everyone here in our office seems to fly by the seat of their pants when it comes to running ads and marketing.

- Shredder

[DMG]

Someone once told me that, “The man who stops advertising to save money is like the man who stops the clock to save time.” Just some food for thought.

I like that :-)

I think its hard to set a budget (IMO) on property using "x" % for each home, so you would have $1,000 per month on a $1M property then that would be almost nothing on a $200k property - but you did say the actual number was not what you were looking for so, moving on then.

I think any business should have a marketing plan and those that don’t I could not see how they stay in business, its been said that McDonalds knows the cost if they removed pickles from their burgers for a week, point is "yes" you need to know your numbers, where the money is going, why, when and for what benefit. Flying by the seat of your pants as you stated other agents do is perhaps ok in a hot hot market but not now for sure. What I do is advertise the same way in the same areas for all my listings (but my price range is pretty consistent and the monthly plan took me 5 years to dial in to something that works) so I now have no set price to advertise plan for each house but a monthly plan that works well. Here is what I would do...

How many homes do you sell a year
What is your average sale price
What is your average commission
What does it take to sell a home in your area - what do sellers look for - what do you know works for both sellers and to get you more business - now make your budget - Dont be afraid to spend money - Many coaches say 10 - 12% of your income is a good number to use, now I am sure there are many more sides to that.

[Mitch]

Our budget for our listings, and we don't carry to many in our market right now because they don't sell, is pretty low. One of my favorite marketing tools is postyourlistings.com. This site sends all our listings to 19 different, major websites for $79 per month for brokers and I think $29 for Agents. We get a ton of clicks on each listings per month...usually 200+ per property.

We also have invested in a virtual tour camera that does 360 pictures..very cool. It's called Giroptic. We normally spend $120-$200 for virtual tours. This camera cost $1,000 but it should eliminate our virtual tour costs and pay for itself pretty quickly.

Because we attract up to 55,000 visitors to our sites each month, most of our marketing is geared toward those buyers. We have also built a database of 35,000 buyers over the past years.

If you have a strong internet marketing plan it will be more effective than any print marketing plan. We sell about 50% of our listings ourselves.

[TheRealOBX]

its been said that McDonalds knows the cost if they removed pickles from their burgers for a week,

I used to be a gm of a McDonald's, they would definitely know that number and factor in a variance for lost sales due to people leaving because of the change. That's why there are 40,000 of them. Once you have a system that works and can be duplicated, your golden.

[shredder]

Thanks for all the feedback. Great thread!

Just as an FYI.. The reason I thought about this was because of one agent in particular in our area... He sells very high end property for the area. I'm talking about property that literally only 10 people in the county can probably afford to buy. Yet, year after year he finds the out of town buyers. He sells about 10mil a year all double-sided at 7%. Nothing is on the MLS.

He said his marketing budget is about 30-40k.

So, I was just trying to figure out how he does it and I think I just did. He has a very targeted print advertising campaign in high end publications around the country.

I've looked into running ads like he does and they are indeed very expensive, so I think he's literally just budgeting an $X amt per listing for marketing.

Thank you all,
- Matt

[Ryocheck]

Shredder, One thing that I do for my marketing is each year I track where my sales came from, where my listings came from and what return I am getting for my marketing dollar. For example, this year roughly 27% of my business came from the Internet. The majority of my business was repeat buyer's and referral clients. Once you have this information it is not difficult to determine the best places to spend your money marketing for the next year.

As for my advertising I spend the least on marketing to my past clients yet I am getting the most business from them. This year I am adding to that part of my advertising budget. I am also adding to my online budget because it pays me the highest return when advertising for new clients. I do not plan to cut back in other areas because my plan for 2008 helped me stay near the top of my market when things were slow. My plan for 2009 is to continue to grow and get more past clients and hopefully create an even more stable business. Some of my marketing does not have a great return such and newspaper ads and real estate publications but when I figure out my cost vs. return they are at least a wash for new business brought in. I use these as tools though. Seller's like to see there home actively marketed in the area. Print ads have deadlines and that is a great reason to call to secure a listing or see if the seller would like to reposition themselves in the market before the new ad goes out. I find asking them to reposition themselves in the market works better then asking for a price reduction. It also seems to give me more credibility when I meet a new buyer or seller if they have been reading through the publications.

This has been successful for me in my market and I hope it can be of some help to you.