Radically Rethinking Real Estate Leads Management

Here’s a radical idea 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 giving agents leads because they are “qualified” to work in a certain area, property type or price range. Instead, only give leads to agents whose past performance indicates they are really qualified to work with consumers.

Ok, stop shrieking. Take a breath. Think this out with me…

There is only one form of qualification that matters in business. Did the consumer actually buy from you? That’s it. If consumers are paying you, that means you’re generating value for them. And that’s the only rational and measurable metric of “qualification” in business.

If you sell a product - like a computer or a cell phone - your “qualification” to be a market leader or a top company is directly determined by the number of consumers who buy your computer or cell phone. If you sell insurance, then your “qualification” to work with consumers is measured by the number of consumers who subscribe to your policies. In sales - which ultimately all for-profit businesses are in sales - the only measurement of performance is, well, performance!

Now, back to real estate leads. Today, most companies generate leads. They do this through advertising in print, mail, television, radio and web. These leads arrive as consumers who walk into the office, call by phone or send an email. The leads cost a lot of money. Yet the vast majority of them fail to “buy” our products and services - even though they eventually buy those services from another company. It’s not that the consumer isn’t buying a real estate service; it’s that most companies fail to convert the consumers into deals a greater proportion of the time.

And it’s the case offline and online. Offline, telephone calls and property showings have a huge failure rate to create paying customers. 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) and 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 met there. In other words, the agent failed to convert the consumer into a customer (of that house or any house).

Online, it’s almost worse. Comical but scary. Most brokers give their company-generated leads to agents who are “qualified” 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 is “qualified” to sell in Andover because, simply put, their “territory” on a piece of paper includes Andover. The broker rarely asks, Who has sold the most homes for us in Andover last month/year? Instead, the qualification is simply that a couple of agents work Andover while another few work Methuen territories.

The same is true for other “criteria” like property 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 in the last year. 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. Quick, write down all of your qualifications so you can get those leads! The result is that everyone is qualified for everything, so we’re back to “round robin” lead distribution.

And of course, nobody’s converting anything into sales.

If brokers wanted to convert more leads - and provide better services to consumers, who, in turn, would pay more (or more frequently) for the services - then they need to improve their qualification and matching systems. Performance is what matters, not “certifications” or skill lists. How many “E” certified agents have listings online without a photo? How many “relocation” trained agents can’t close on those consumers? If you want to measure an agent’s qualification to work with a consumer, then base it on their actual past performance.

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 the guy who does ten appendectomies a week and every patient goes home fine? Do you want the mechanic who can “purchase” a sign that says he works on Mercedes cars, or the mechanic who repairs ten cars a week reliably and consistently? Do consumers want “qualified” or “performance”?

While it’s important to know that an agent has been “trained” to work with certain property types or has knowledge of certain market areas, once you have more than one agent with the same basic profiles, you have to find the next metric of performance. And that is sales. If two agents work with buyers of colonial homes in Andover, which one sold a greater percentage of his leads last year (not volume, but percentage)? Even more importantly, which sold them at a greater overall profit margin (less time on market, lower advertising cost, higher list-to-sell ratio, etc)?

Leads are too expensive and too important to simply hand out to “anyone.” Brokers are converting a paltry percentage of their potential business - maybe 2 or 3% of online leads, and only slightly more of walk-ins and calls. Agents throw away most leads handed to them: years of evidence indicate that they simply give up after a few calls because “the consumer doesn’t call them back.” Most agents don’t have the skill or stamina to work a real lead - although they are “qualified” to work in an area or price range. As usual, we’ve been qualifying agents to work with a “marketplace” rather than qualifying them to work with “people.” Leads are people; houses don’t call to sell themselves. But most agents are more qualified to talk about the house than talk to the people.

If you want to radically improve your business conversions, try these radical leads management ideas:

1. Only assign leads to agents who actually convert them. Pick a start date and set everyone at “zero.” Then look back at the last six months of performance in critical metrics: market area, property type, days on market, net profit per deal are all good starting points. Then rank all of your agents according to these business criteria. Forget about towns and certifications: A good salesperson can brief themselves on a town’s features and benefits before talking to a buyer, even if they have never sold a home in that town before. Now match incoming leads to those people whose performance record warrants it. Send more leads to the top performers, and a few “tester” leads to the lower performers (so everyone gets some leads but not evenly because you can’t afford it).
2. Start measuring the next six months of conversions. This gives the lower performers a chance to improve their scores by converting greater percentages of leads provided to them, at better profit margins. As they do better with more leads you provide them, their “record” will improve and they will be “qualified” to get a greater percentage of new leads. Those who can’t perform will receive fewer leads, and if you’re honest, you’ll fire them.
3. After six months, start incorporating consumer feedback as the highest level of qualification. While we certainly want to give leads to agents who can close deals, if they can’t create customer service experiences that send referrals or repeat business, then they are “good” but not “great.” Remember that the vast majority of business in real estate is referral generated. So that’s a critical metric of performance. Start surveying every consumer from every closed deal. Rank important feedback related to their experience. Collect and average that information into each agent’s performance profile. 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) and it’s the best way to ensure that customers are both paying and valuing your service.

If you do this, here’s what you’ll get. Happier customers. More paying customers, Attrition of non-performing agents. And more profit. You’ll be converting more leads because you’ll be assigning them to people with track records of converting leads, not working in an “area.” Performance matters; and that’s how you should assign new business.

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!