If you don't track your ROI, you're not alone. But we do want to help you change that, because ROI is one of the most important numbers in your lead generation strategy. If you understand what investments are bringing you money, you can make smart business decisions—like increasing budgets that produce twice as much money as you put in, and axing campaigns that aren't profitable.
What is a conversion?
First, let's define a conversion. On a real estate website, you're going to see two different types of conversions: people who land on your site and convert into leads, and leads that convert into sales. While it's important to watch both types of conversions, it's the latter that's most important for ROI. You want to know exactly how many sales you made off your real estate website and all the corresponding marketing efforts.
How to track your conversions
Tracking conversions is straight-forward but it does take some manual work, which is why so many real estate agents skip the step. To help alleviate the temptation to take a shortcut, we've put together a very straight-forward process for tracking your conversions.
Here's what you need to do:
Ensure all leads and follow-up actions are being tracked in your CRM
When a lead buys or sells a home, change their status to "Closed"
Once per week, review your team's closed transactions. You'll want to cross-reference with the CRM to determine their source and then calculate the value of the lead, based on commissions. In the end, your data might look something like this:
Split Commission (50%)
Dec. 1, 2017
Dec. 4, 2017
Dec. 16, 2017
Dec. 18, 2017
Dec. 29, 2017
Keep in mind that this is a very simple tracking sheet. You can make this as complex as you want, including information such as lead registration date, time from registration to closing, specific ad campaigns, and more. However, the most important thing is to get into the habit of tracking this information, so start simple if you're short on time.
Tracking your digital marketing expenses
We already calculated our split commissions in the example chart above, so let's take a look at our website expenses with a basic example:
Website setup (divided by 12 months)
By knowing our expenses and our profits, we're now able to accurately calculate our ROI.
Calculating your website's ROI
The easiest way to calculate your website ROI is to view all your investments as a collective. When you do this, you can quickly determine whether you're making your money back in any given month or year.
The basic calculation for ROI is:
Return / Investment = ROI
Split Commissions / Digital Marketing Costs = ROI
Using our example numbers from the two charts above, our ROI calculation looks like this:
$24,599.85 / $6,918 = 3.5x ROI
In other words, our example investment of $6,918.00 has allowed the fictitious brokerage to make 3.5x the amount of money they put into their digital campaigns. Based on that information, the brokerage can then confidently continue to invest in their online marketing services, knowing that it's a profitable endeavor.
Evaluating individual marketing channels
Using the data you've already collected, you can also measure the ROI for individual marketing channels. For example, we can apply the same ROI formula to just our SEO channel:
$6,772.00 SEO commissions / 2,500 SEO investment = 2.7x ROI on SEO
This will allow you to determine which channels are most profitable—just be careful in your decision making, because some channels support the success of others. For example, SEO work can actually improve PPC quality scores, leading to lower ad costs.
One last thing to keep in mind
One challenge with calculating ROI for real estate is that it often takes several months to close leads. A lead closed in December may be the result of your digital marketing efforts from June. For that reason, it's important to look at your ROI over the long term and average expenses out over several months. Once you have a steady marketing investment and see a fairly consistent stream of results, you'll be able to compare single month slices in your ROI calculations.
All in all, ROI is an extraordinarily important metric to be measuring and we strongly encourage all real estate agents to start doing so. With just a few minutes a week, you can take control of your digital marketing investments and make confident lead-generation decisions!