Put Your Money Where the Results Are

New data from the USA shows that agents spend heavily on print ads, but don’t believe they are effective. Many Australian agents do the same. This is the first economic slowdown in which agents can shift their spending online, cut their total marketing spend yet improve their overall results. Story by Dave Platter.

American agents spend a significant portion of their listing budget on newspapers, even though only one in five think this medium is “effective.”

How much should you spend on marketing?
It might be easier to answer this question if you know what agents spend in other countries. Some recent data from American video marketing company VHT Inc. show that the majority of agents in that country fall into one of three groups:

  • One quarter of agents spend $250 to $500 per listing
  • One fifth spend $500 to $1,000 per listing
  • One quarter spend more than $1,000 per listing
    (This data is presented in US dollars. I haven’t converted it to Australian dollars on the theory that in the area of marketing expenditure an Australian dollar has similar buying power in this country as an American dollar has in the US.)

Irrational Actors
The survey also revealed some behaviour that on the face of it seems irrational. American agents spend a significant portion of their listing budget on newspapers, even though only one in five think this medium is “effective.” On the other hand, half of the American agents surveyed feel that online ads are “very effective.” However, they don’t put more money where the results are because, they say, they feel their vendor clients prefer print advertising.

In Australia, there are some agents who spend much more online than on print. Simon Khouri, Director of Barry Plant Point Cook in Victoria, told me his agency spends 85% to 90% of its marketing budget online.

In our first year, 2006, we didn’t advertise in print at all, and out of 78 Barry Plant offices in Victoria we finished tenth. We wrote over $2 million in commissions-he said.

Simon also told me how he asks for – and gets – vendor paid advertising.
We charge $450 [for internet marketing, including Guaranteed Top Spot, Featured Property, eBrochure, etc. Our vendors’ average marketing spend is $1,200, covering the internet, professional photos, picture board and more, he said. “It costs $1,800 extra to put a palm-sized ad in the paper for five weeks, reaching 35,000 homes. The vendor has to decide if the paper is worth it.

The Online Safety Net
Not every agent is like Simon. However you split your marketing spending today, the changing real estate market and economy is likely to bring changes. You don’t need an economist to tell you that when you have less money, you also spend less on advertising. Unfortunately for us all, the economy seems to be hitting a rough patch and most experts say it will be 2010 before we come out of it.

Roger Coleman, an analyst at CCZ Equities, recently pointed out that, in past economic downturns, print media giants saw profit drop by as much as 48%. That is because real estate agencies and other businesses like them cut back on their advertising.

This economic slowdown is no exception.
In the past, real estate agents just had to live with the fact that they couldn’t afford as much advertising when times were tough. Those with less money to spend simply lost business to other agents who had more. And when the economy picked up again, those who had been able to keep their presence in the marketplace throughout the bad times were the ones who grew fastest.

Today agents have a safety net. This is the first significant economic slowdown to take place since the web has become by far the most powerful real estate marketing tool. Yet, it is underpriced compared to the results it delivers.

As Simon Khouri pointed out, you can spend $450 for an effective property marketing campaign online. Or, you can spend $1,800 for a newspaper campaign that most agents, according to the US survey I quoted earlier, believe is not effective.

Agents who want to thrive through the downturn will take a hard look at their marketing spend, and at the money they are asking vendors to spend on marketing, and put the most money where they will get the best results.

Dave Platter

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