Monitor Your Marketing
Savvy professionals keep track of what delivers the best returns.
Whether the rollercoaster ride known as the commercial real
estate market is slowly rolling up the curve or barreling down a dizzying
descent, one thing is certain: In this highly competitive world, marketing
savvy is essential for success.
There are several marketing techniques that a commercial
real estate professional can cultivate, including community involvement,
sponsorships, print and online advertising, and public relations strategies.
But no matter what marketing discipline is used, it is important to continually
measure its results.
The best way to track which methods are most effective is to
monitor which ones generate specific leads and quantify the return on
investment of each approach. To be accurate, each technique’s ROI should be
evaluated after each 12-month period. To calculate the ROI, the total gross
commission income, or GCI, made from each closing resulting from leads
generated by that specific medium in the 12-month period is divided by the
annual costs associated with that marketing discipline.
For example, suppose a commercial real estate professional
uses a personalized postcard campaign and mails 250 postcards a month to
prospects and past clients. Each postcard costs 50 cents to mail. The mailings
result in 20 leads, which ultimately lead to two closings.
Assuming a GCI of 3 percent and average sales price per
property of $1 million, the evaluation formula will look like this:
ROI = $60,000 ($30,000 commission per sale x 2)
$1,500 (3,000 postcards @ $.50 each)
Since the professional invested $1,500 during a 12-month
period resulting in a return of $60,000, this is a 4,000 percent ROI.
The Time Factor
What this formula fails to take into account is the time
spent on this project, creating the concept, writing copy, helping design the
card’s appearance, and talking and working with the printer and mailing house. This
is considered the opportunity cost of the marketing strategy. So, if 100 hours
are spent on average to reach a closing that results in a commission of
$30,000, the commercial real estate pro’s hourly pay rate would be $300. Assume
you spend 35 hours helping to create and distribute the postcards. Plug this opportunity
cost into the above formula and the following ROI augmented equation is the
ROI Augmented = $60,000 (same two closings) = 500%
$1,500 + $10,500 ($300 x 35)
Clearly, if you don’t factor opportunity cost into the
equation, the ROI is inaccurate. As it turns out in the example above, the ROI
for this particular marketing campaign was still impressive, with sales
commissions equaling more than five times the cost of the campaign.
Periodically checking the augmented ROI of marketing
communications techniques helps commercial real estate professionals make more
informed and timely decisions about how to market their businesses and services.