The good news is that it’s largely a disease of the mind, and as such, can be cured with a shift in thinking.

Mentally, marketing should be thought of like an investment, not an expense (or worse, a necessary evil). However, in order to think of, and thus treat marketing like an investment, you have to have solid numbers as a diagnostic tool to differentiate which marketing avenues make you healthy from those that cause you ill.

Having cold, hard facts that tell you the status of your investment is what it’s going to take to settle your tummy.

Think about your marketing as an investment in the stock of your own company. You should expect (nay, demand) a positive return on that investment. The healthy feedback cycle: Invest, track, and make changes based based on performance.

More on tracking when we get to the 7 steps, but first, let’s define marketing in a useful way. Successful marketing has 2 key components:

1. Have a great product
2. Tell people about it

Simple, huh? Let’s dig deeper.

Your Web Presence is Your Product

“But I thought I was in the real estate business?” you say. You are. Sort of. See, for those folks who don’t yet have a personal relationship with an agent, there is about a 90% chance their first encounter with you, your product (real estate services), and your company, will be via the web.

And for those that do have a relationship with one of your agents, they are still highly likely to spend more total time with your website than any other aspect your brand (newspaper ad, office lobby, phone, face-to-face with an agent, etc.). That puts you in the Product business. Which means first and foremost you must design a great user experience on the web.

More on this in future posts. For now, let’s assume your web presence is adequate to the task and get back to marketing.

Marketing Makes it Scale

Once you know you have a great product / service, the role of marketing is to make it scale simply by telling lots of people. The goal then, is to find the most cost effective ways to tell lots of people.

Knowing we can measure the effectiveness of every available marketing opportunity allows us to scale with the confidence that every $1 invested in X-marketing effort will result in more than $1 in return. Once you know this, the limit to how much you invest is a function of cash-flow and the size of the market.

The two sides of marketing create a positive feedback loop. If you put the proper tools in place to measure effectiveness, you’ll also get the feedback you need to make the product better (your website as well as your quality of service). The really interesting thing about measuring effectiveness is that when you measure something, you can’t help but make it better. And making the product better is the best possible form of marketing.

So, how do know with absolute certainty that every penny you’ve invested in your marketing efforts to both drive and keep traffic on your website is working as hard as it can for you? Measure it. Convinced? Here are the steps:

The 7 Steps to Measuring Marketing Return on Investment

1. Have an office website with listing search
2. Install Google Analytics (GA) on your website
3. Setup GA to track leads from your site
4. Track of leads and their results
5. Track income (closings) from those leads
6. Track your marketing expenses
7. Calculate your Return on Investment

I know what you are thinking: “Blech! That sounds like Accounting. I specifically went into real estate because I abhor accounting.”

It’s not as tough as it seems. First, you probably are already doing steps 1, 2 and 6.

The final ROI summary analyis might look something like this:

Figure 1. Example of an ROI Analysis

Note: In this case we have 2 distict ROI numbers. One for total revenue and one for broker revenue. Depending on how you handle leads from your website, it’s important to distinguish between the two. You may, for example, be making the investment as a broker, whereas the return goes to agents (your return is indirect).

You can use the detailed analysis to make shifts in how you market your website, to do relative comparisons between ad opportunities (for example, REALTOR.com vs. Trulia) or to share with your agents as evidence when your print contracts come up for renewal.

In future posts, I’ll break each of these steps down in minute detail and show you step-by-step how to setup a system that will make this super easy to manage over time.

We’ll also get into how to use the above data to make relative comparisons between advertisers as well as how to use the knowledge to improve your website in a way that increases the effectiveness of every dollar you are already spending.

When we do that, we’ll go beyond simply healing the disease and move into Optimal Health.

What would a real estate company built based on these principles look like?

The economy of scale in publishing vanishes online and as such, I see no strategic need for brokers to participate in recreating this legacy dependancy.

From Joel @ futureofrealestatemarketing.com — Zillow goes to the Presses

I suggested that they look beyond banners and classifieds and build out a whole platform to support real estate agents and brokers taking their marketing messages to the web; a listing syndication engine, a blogging solution, an advertising platform, a video hosting tool.

Sensible reform cannot avoid causing significant pain, which is worth enduring to gain extra safety and more exemplary conduct. And only when there is strong public revulsion, such as exists today, can legislators minimize the influence of powerful special interests enough to bring about needed revisions in law.

source:
How We Can Restore Confidence
By Charles T. Munger
Washington Post
Wednesday, February 11, 2009

The share of adult internet users who have a profile on an online social network site has more than quadrupled in the past four years — from 8% in 2005 to 35% now, according to the Pew Internet & American Life Project’s December 2008 tracking survey.

source: Pew Internet: Adults and Social Network Websites

What does this mean for Real Estate?

If you dig into the study a bit (download), it’s clear the vast majority of folks are there to connect with people they already know. This should bode well for agents who are used to receving 80%+ of their business from people they already have a relationship with.

I’ve struggled a bit with a cogent analogy — usually something along the lines: “Blogging is more for people you don’t know, whereas social networking (Facebook, Twitter, etc.) is for reconnecting with people you do know…”.

Dustin (of Rain City Guide and 4realz) has a great post today on the difference. The money quote:

If you don’t mind dealing with internet leads, then by all means focus on building out a website like Rain City Guide that will drive relevant traffic.

However, if you want your real friends to start sending you clients, then you better start interacting with them in a “real” way. Maybe that means throwing ridiculously cool parties, joining the local PTA, coaching a little league team, or sharing inside jokes and other gibberish on Twitter. Either way, your real friends expect you to be a real person.

Read the whole thing.

We’ll, I’m happy to announce Windermere Branded, Agent Web Sites. Learn more on the product site or see the full announcement.