Lead Tracking 101: Return on Investment

Posted by: Eric Bramlett on September 26th, 2008

It goes without saying that anyone in sales should track their leads: Where they’re coming from, how much they cost, and how many close.

Why is this so important?

If you’re spending $500/month on a lead source, and you only close one deal per year from that source, then you paid $6,000 to close one deal. If the lead source provided you a $1MM closing, then it was definitely worth it. If, however, the closing was a $250k home, then your money is probably better spent elsewhere.

While detailed lead tracking is always a great idea, it can become a bit complicated, unless you have sophisticated software to help you with the process. However, tracking return on investment is relatively easy, and is a great place to start tracking leads, if you haven’t already.

If you’re a real estate broker, manage a team of agents or a solo agent, the first step is to itemize your lead sources.

Common sources include referrals, sign calls, ad calls, purchased leads, and web leads. It’s a very good idea to be as detailed as possible when categorizing lead sources. If you purchase leads from multiple sources, you obviously want to know how much each source produces.

The next step differs depending on your role in real estate.

If you are a broker or manage a team, stress the importance of assigning lead sources to every potential client. Leave an option for “personally produced,” otherwise you run the risk of receiving bad data.

Then, introduce the required field of “lead source” to your completed transaction reports. When the completed transaction reports are filed, record the lead source, transaction amount, and agency (or team) net.

If you’re an individual agent, the concept remains the same, but the execution is slightly different. Simply start a spreadsheet and enter the lead source and personal net for every transaction you close.

At the end of the year (or whenever you choose to evaluate finances), you now have a nice record of how many closings and how much revenue each lead source provided. You already track how much you spend on each lead source (and if you don’t, you should).

Simply divide the total revenue earned by expenditure for each lead source and you now know each lead source’s ROI! Spend more on the lead sources with the highest ROI and axe or reduce the amount spent on low returning lead sources.

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Comments

10 Comments on “Lead Tracking 101: Return on Investment”

C Richey

You make some excellent points. I bet a lot of agents don’t track their leads at all or with not enough detail. It is so important to diversify where you obtain your leads from, especially in today’s marketplace.

Joshua Ferris

Great advice Eric. Tracking your sources of income is an excellent way to hold your expenditures accountable for their production. Otherwise you might as well throw the money you’re spending away.

Ryan Ward

Eric,

This is something that I am in the process putting together. Now that I have expanded into a full team and plan on continuing to expand, tracking our lead sources has become far more important. It;s critical to know where the business is coming from so you know what to dump and where to work harder.

Louis cammarosano

Eric
What about “self generated” leads like those derived from Blogging or SEO efforts.
How do you apply a cost to those to determine ROI?
while those sources are “free” they do require time.

Eric Bramlett

Hey Louis –

It really depends on how much you’re spending on your referral DB. Many agents subscribe to programs like Buffini, so it’s very easy to itemize their expenditures. If you’re talking about time invested, then it’s a whole ‘nother ball of wax.

Heather Tawes Nelson

I just went through a similar exercise and pared down many marketing efforts that were not producing. Agents are bombarded with marketing tactics all of the time – The key is finding those that actually have a decent ROI. Thanks for a great article.

Missy Caulk

Eric, on all the closings my team turns it to me, it is on the form, source of lead. I then enter it into excel to evaluate what is having the best ROI.
It also shows me which Buyer Agents are bringing in their own business vs the leads I am handing them.

Ken Smith, Barrington Illinois

One thing that is a little complicated about this process is that you can’t always assign what lead source caused the business. For example I have had a number of clients claim they found me on the web yet after more discussions they also tell me they had seen a TV commercial or postcard mailer. Many times the postcard will send them to the website and they then sign up for our MLS search, but in reality the postcard did all the work.

Many times a client doesn’t come from one type of advertising, but rather the top of mind presence that you have achieved with multiple advertising channels. This gets more and more complicated the more advertising you do as some items will not drive many direct leads, but as soon as you stop them you notice all other lead generation activities are less effective.

With that said you do need to track the best you can and make sure to ask lots of questions. More questions you ask the better your tracking will be.

Real Estate Taxi

Real Estate Agents need to understand what they are spending on ADs and what they are getting back. Its more of just having a good business model with the understanding of return. Its also important too know what ADs are working and what aren’t.

Francesca

What Online software would you recommend as being the EASIEST to use? I need help, and have already researched Simple Sales, Zoho, Salesnet, Smart Sheet, SalesForce, and Free CRM. ALL of these have drawbacks, and most of them are REALLY COMPLICATED. I just need a way to track a lead to a sale, through the steps necessary.
Any advice out there??

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