Here’s a radical idea for brokers to help real estate companies convert more prospects into deals. Like most of our ideas, real estate agents will probably hate it. Which means consumers are going to love it. Stop assigning leads to an agent because they are “next in line” on some imaginary roster. Or they happen to be sitting at a desk on “floor duty.” Instead, only assign leads to those agents whose actual past performance indicates they are best qualified to turn potential business into actual deals.
Originally published 5/6/2008, this blog entry comes to mind as one of the key decisions still left taken by the real estate industry in 2010. After meeting a few companies that are testing out such approaches, we thought it would be constructive to refloat this idea into the minds of our clients. Let’s see if the current market makes them a little more receptive to the concept that performance, not process, matters most….
Ok, stop shrieking. Take a breath. Think this out with me…
There is only one form of competitive performance that matters in business. Did the consumer actually buy from you? That’s it. Whether it’s measured by listing their home with you or buying a home with your help, if consumers are paying you, that means your company is generating value for them. And that’s the only rational and measurable metric of “success” in business.
It’s also one of the best indicators of your future performance. Actual success is the best indicator of future success.
Now consider how this applies to new leads – potential new clients – and how they are handled at your real estate firm. In other industries, if you sell a product – like a computer or a stock – your personal qualifications to receive the “best leads” from the company is directly determined by the number of consumers who actually bought from you in the immediate past. In most sales industries sales, the only measurement of performance is, well, performance!
Now, back to real estate leads. Today, most companies generate the vast majority of new leads for their agents. They do this through various forms of advertising. These leads arrive as consumers who walk into the office, call by phone or inquire by email. Each lead – which we ought to really call potential customer – costs a lot of money to generate. Yet the vast majority of these prospects fail to actually buy our products and services, even though the same majority eventually buy those services from another company in the next 12 months.
So the consumer isn’t broken. Even in this market, the trouble isn’t that the consumer isn’t buying real estate services; It is that most companies are failing to convert the consumers into deals a greater proportion of the time. So their marketing is working. The problem is their sales intake process.
It’s the case offline and online. Offline, telephone calls, property showings and open house have a huge failure rate to create paying buyers or sellers. Open houses are the premier example. Virtually no sales activity is conducted at an open house. It should be called “house sitting” in most cases. The vast majority of visitors to an open house do not purchase the house they visited or any other house from the agent whom they just met there. In other words, the agent failed to convert the consumer into a customer of that house or any house.
Online, it’s worse. Even scary. In recent studies of brokerages, the average number of leads that are simply abandoned by agents within the first 72 hours is 88%. This means that nine out of ten potential customers never become actual customers of the company. The marketing worked to catch their attention and encourage them to inquire. Yet for some reason, they aren’t actually buying. We could blame the “product” for not turning them into customers – but we all know who chooses the houses and sets the prices they are offered at, so that would be dishonest. In truth, the failure to turn most prospects into customers isn’t because of the commodity we offer; it’s because of something else.
That something else is our new business sales process. Today we call that “leads management” but for most of the industry’s history, we called it “turning leads into deals.” No matter what we call it, the process is gravely dysfunctional at most brokerages today.
Traditionally, most brokerages assign company-generated leads to an agent according to arcane rules of “fair play.” Essentially, they assign leads to agents based upon non-performance standards. For example, if a consumer sends an email to a broker requesting help purchasing a home in “Andover” the broker usually finds an agent who claims that market area. Simply put, their “territory” on a piece of paper includes Andover. So agents can “claim” leads based upon arbitrary personal preferences.
The broker rarely asks himself, Who has sold the most homes for us in Andover in last month or year?
The same is true for most other criteria like house type or price. If a consumer is interested in a luxury property, the broker matches them up with someone who has taken a “luxury property course” not necessarily the agent who has sold the most number of luxury homes recently. Some agent says they “work with renters” and we direct renter leads to them. Another agent says they are “qualified” to work with land, and we zip land-requests to them. Everyone scrambles to claim their qualifications so they can get more leads. The result is that everyone is qualified for everything, so we’re back to legacy “round robin” lead distribution. And if the numbers are be believed most of everyone isn’t converting any of the leads into actual sales.
If brokers wanted to convert more leads, they need to radically rethink their lead assignment system. Performance is what matters. The only measure of an agent’s qualification to be considered with the high-value opportunity of a potential new consumer is their actual past performance turning leads into deals. Period.
Look at it another way: when you go to the hospital for an appendectomy, do you want the surgeon who is “qualified” to do the surgery because it’s on their general resume, even though they haven’t done one in years? Or, do you want the doctor who does ten appendectomies a week and every patient goes home fine? Do you want the mechanic who can make a flyer saying he works on Mercedes cars, or the mechanic who repairs ten S-class models a week reliably and consistently?
Do new consumers want to work with “qualified” agents or “performing” ones?
Leads are too expensive and too important to simply hand out to the next agent in line. Brokers are converting a paltry percentage of their potential business: Averages are 2% or 3% of online leads, and only slightly more of walk-ins and calls. Agents throw away most leads handed to them: our research indicates that they simply give up after a few contact attempts. The most common reason leads are abandoned is that “the consumer didn’t call them back.”
Each lead thrown away is company dollars down the drain. Perhaps companies had this money to burn in days gone buy, but today it’s unlikely they can sustain such a leads management approach. For many reasons – mostly due to lack of manager oversight – most agents treat incoming leads very poorly. They either don’t have the skill or the stamina to work with consumers who are taking their time approaching a volatile market. And they have been empowered to discard – cherry pick, we say – the vast majority of new business that somebody paid to generate. No wonder marketing budgets are going bust.
To turn this situation around, here are three radical leads management ideas whose time has come:
- Assign new leads to agents who actually convert them. Pick a start date and set everyone’s record at “zero.” Then look back at the last six months of performance. Rank agents according to their actual results, not the towns, property types or price ranges they prefer to work in. Now match incoming leads to those people whose performance record warrants it. Send more leads to the top performers.
- For everyone else whose performance record is yet to warrant the opportunity of expensive new company generated leads, create an opportunity window. Assign each agent three new leads. Then monitor and measure what they do to them. It’s possible those customers won’t become deals for perfectly legitimate reasons: they are working with another agent, they lost their jobs, whatever. But at the very least, measure the tenacity, stamina and process the agent applied making the absolute best effort to turn that lead into business. Based upon the test leads, qualify or disqualify them for future leads. Then send them back to training.
- After six months, start incorporating new consumer feedback into the criteria for qualification. While we certainly want to give leads to agents who can close deals, if they can’t create customer service experiences that generate future referrals and repeat business, then they are good but not great. Considering the vast majority of new business in real estate is referral generated, the customer satisfaction element is a critical metric of leads management performance. Survey every consumer from every closed deal. Rank important feedback related to their experience. Collect that information and incorporate it into a new filter for agent performance. Many other companies do this (see Guru.com, where service providers can sell their services online but their customers can “rank” them online which helps new customers evaluate them for new projects).
If you do even one of these three steps, here’s what you’ll get. More paying customers. Happier customers. And natural attrition of non-performing agents. Plus more profit. You’ll be converting more leads because you’ll be assigning them to people with track records of converting leads.
It’s possible that after time, you’ll end up with a few of agents with high conversion rankings and good consumer feedback. So you might have to return to a “round robin” distribution of leads amongst these top performers. All of your non-performing agents will have left (or been fired) so you’ll have the unfortunate problem of evenly distributing business to a few agents who will be converting a high percentage of it.
What a nice problem to have!