What Should You Spend On Lead Generation?

Q: When planning a marketing campaign, how much should be spent on lead generation, and where?

A: There are a number of providers that typically offer zip codes, pay-per-click, impressions, paid advertising and/or social media. In order to determine the best place to spend your money, you must perform due diligence, and most importantly, calculate your ROI, because ultimately, that’s all that matters. Here, we’ll focus on online lead generation from third parties via zip code purchasing.

Getting exclusivity to a zip code is next to impossible these days. With agents competing to secure an exclusive zip code, many providers have gone from exclusive, to shared, to selling impressions. For those unfamiliar with the term, an impression simply means that your name/picture appeared on someone’s computer screen or mobile device—the idea being that the more times you appear, the better the likelihood of someone contacting you.

The challenge is determining how many impressions you’re getting for how much money you’re investing. Beware that some providers have no limit as to how many agents can participate in the same zip code.

So how does it work? Let’s assume, for example, that there are 100,000 impressions available per month in a given zip code, and there are a number of agents (including yourself) spending money for that zip code. The combined total spending of all the agents is $20,000 per month. You’re spending $500 per month yourself—or 2.5 percent of the $20,000 total. In this case, you’ll receive 2.5 percent of the impressions—or 2,500 impressions per month. As you can see, the chance of you getting some leads isn’t great.

In another zip code, there may be 100,000 impressions available per month, but the total spending of all agents for that zip code is only $10,000. In this zip code, your $500 would be 5 percent, or 5,000 impressions. As you can see, not all zip codes will have the same ROI.

So how can you figure out where to spend? Most providers offer very good analytics that break down how many actual leads you’ll be getting, how many potential sales, how much each lead is costing you and your expected return on investment. These numbers will fluctuate as the collective agent investment increases or decreases. You may find your portion going up or down.

You must constantly monitor these numbers and be aware of your ROI at all times. If you find that a certain zip code isn’t working on your budget, you may have to change to a different one.

Here are some tips to keep in mind when planning your online marketing:

  • Pay to have your listings enhanced on at least one of the major websites.
  • Do your homework and monitor the activity on the zip codes you purchased.
  • Increase or decrease your budget based on your research and results.
  • Choose zip codes carefully. Your association has a plethora of information such as number of sales, average time on market, selling price, etc.
  • Never choose a zip code based on ego. Ego doesn’t pay the bills.
  • Choose zip codes with the most transactions.
  • Consider how many other agents are competing in the area, and how much money they’re investing.
  • Make a business decision.

Lead generation through online marketing pays for those that take the time and invest in it wisely.