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The best, most profitable market you could ever work is your network of past clients, friends, family, business associates and acquaintances.
Why? Because they all KNOW you. And studies have shown time and time again that, given a choice, people prefer to do business with people they know, like and trust. Plus…
The cost to maintain a relationship is minimal compared to the cost of creating a new one.
Unfortunately, many agents and brokers have a tendency to spend the majority of their time, efforts, and limited resources searching for new, self-generated prospects - running ads, mailing Just Listed/Just Sold postcards, holding buyer and seller seminars, knocking on doors and phoning FSBOs - looking to fill the funnel with new leads, new blood, and new opportunities.
There is nothing wrong with this approach. After all, leads ARE the name of the game. BUT marketing for new, self-generated leads is the most expensive, least effective way to grow your business.
The most profitable, way to grow your business is via word of mouth, referrals and repeat business.
In fact, I would go so far to say that if you re-focused your time, attention, and marketing resources to purposely increase your personal network in both size and quality of contact - you could very easily (and very quickly) eliminate virtually ALL of your current overhead marketing costs, increase the volume of your business, and dramatically improve your lifestyle within a matter of 3 to 6 months.
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Chuck and Nicki Pousson with RE/MAX Achievers in Phoenix, maintain a 80-120 unit listing inventory and recently hired a full-time buyer's agent. They do very little advertising for new, self-generated business, have made a science out of networking, and work their personal network deep by sending everyone a monthly Item of Value. The results? Incredible volume, great profitability, and a 95% "by referral" business.
Paul Conti, CRS, with RE/MAX Valley Properties in San Jose, emails his personal, nationwide network of internet savvy real estate agents on a monthly basis at a cost of only $19.95 for dialup services. The benefit? A high six-figure REFERRAL income!
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It All Boils Down to Visibility
"The more you tell the more you sell" is a truism in any business. You can have the best product or service in the world, yet if no one is exposed to your product or service, no one will take advantage of it.
Out of sight, out of mind.
So one of the fundamental keys to growing your business is to increase your visibility in the market.
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Joe Girard, a very successful automotive salesperson at a Chevrolet dealership in Detroit, won the Top Salesperson of the year award so many times in his career he actually provoked the ire and envy of his peers to such an extent that they actually "booed" him at the awards ceremony. His success was largely due to his understanding the importance of gaining visibility from the start. Reportedly, when Joe was hired at his first dealership he was handed several hundred business cards and was told by his manager, "These will last you for years." Joe realized, however, that to become successful in selling cars, he would have to gain visibility and become KNOWN for selling cars.
Consequently, early in his career, Joe and his wife would take bushels baskets of business cards up on the catwalk at Tiger stadium in Detroit and literally shake them down on the crowds during the games. The cards had special discounts and premium offers to encourage people to come by the dealership and "ask for Joe."
And it worked. Joe gained incredible visibility in the market and quickly became KNOWN as the guy who sold Chevys.
But this unique prospecting and marketing effort is NOT what put Joe Girard in the Guinness Book of World Records. Word-of-mouth advertising, or what Joe calls the "Law of 250" is what put him there.
The Law of 250
Essentially, Joe's "Law of 250" states that every person you contact in a positive or negative way will, eventually, through chain reaction, be responsible for passing along their experience to 250 other people - friends, family, co-workers, and associates. And, according to Joe, "the law of 250 is what really lies behind the most successful advertising you can get, word of mouth. It's what sells movie tickets, good restaurants, books, doctors and dentists. Best of all, it sells people. It sell you."
So using this principle, what Joe did was leverage off the visibility he had gained from his initial prospecting efforts by compiling a HUGE database of every person he knew or ever came in contact with and marketed to this database on a continuous, monthly basis.
He focused the majority of his time, efforts and resources to building a relationship with everyone in his personal network and, in so doing, created visibility where it counted most - with those people who already knew him.
He worked the most profitable MARKET available - his personal network - and it paid of handsomely for him.
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This about it this way: Let's assume you have (or can compile) a personal network of 500 people who, over the course of a year, you spend about $0.40 a month to stay in contact with and ensure you keep YOUR name, face and occupation in the forefront of their minds. And let's assume this effort generates only a 2% return… or 10 new referrals.
Factor in a commission of 3% based upon a medium price of say $145,000 and you gross $43,550. Subtract $2,400 in costs and… wow! You pocket a slightly more than $40,000!
Now, sharpen your pencil and, using the actual numbers you have from last year, figure out how much it actually cost you in advertising and marketing fees to generate and close 10 self-generated deals last year.
Notice a difference? I bet you do. And I would even venture to say the difference will shock you! (In fact, we recently helped an agent figure out his average cost per closed transaction for the year 2000 and the figure came it at an incredible $2,149 - or almost 9 times what referrals and repeat business would have cost him!)
Again…
The most profitable way to grow your business is via word of mouth, referrals and repeat business.
So, where do you begin?
Begin by building a list and strive to add to your list on a daily basis.
Then, make it a point to contact everybody on your list on, at least, a monthly basis.
That's it!
- Build a list.
- Contact your list.
Two, tiny, pain-free, low-cost steps and that will allow you to literally write your own ticket!
Want a $40,000 raise? Just add 500 more people to your network and contact them on a monthly basis. (This would mean adding only 2 people a day, 5 days a week).
Want a $80,000 raise? Get out of your office, network a little, and add 1,000 new people to your database! (Or go to a large sporting event and dump out a few bushel baskets of business cards!)
True story!
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According to an eight-market study of home buyers conducted by the Newspaper Advertising Bureau asking why buyers and sellers chose a certain real estate brokerage and/or agent:
1. They KNEW the agent previously - 40%
2. Repeat customers of agent - 19%
3. Agent was recommended - 14%
4. Newspaper ad call-in - 14%
5. Brokerage was known - 9%
6. For-Sale sign call-in - 2%
OBVIOUS CONCLUSION:Over 70% of the time, all other things being equal, people will do business with, and refer business to, people they KNOW, LIKE, and TRUST.
Now, if 70% of your business can be shown to come from those people who know, like, and trust you, doesn’t it make sense to increase those numbers of individuals? This network of people CAN and WILL create an endless chain of repeat and referral business for you if you play your cards right. If you take a proactive stance and actually work at making this goldmine of potential business work for you.
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Why is the referral so valuable?
Referrals come from people you already know
You shorten the cycle of familiarity and visibility by simply working with someone who knows someone you know. Common ground already exists through a friendship, acquaintance or business relationship. This eases the pressure on the initial getting-to-know-you steps of selling and serves to dynamically "pre-sell" you, your expertise, and your services.
Referrals extend the network
Every new contact widens the circle of relationships with each new referral (remember the 'Law of 250'), increasing your ability to tap that network for additional business, new business and more referrals.
Referrals reduce sales expenses
You reduce not only time but expense by asking for and following up with referrals. In most businesses it costs six times more to sell a new prospect than it does to sell a referral; in real estate it often costs 9 to 12 times more!
Referrals add value to the source of the referral
When you follow up on referrals, get the business and create a new delighted customer, value is delivered to the party who gave the referral. Your new client often credits and thanks the referrer - a great way to win YOU points! When you bring joy and appreciation into people's lives… YOU become a hero they WILL sing about.
Referrals help you use your best sales force
Happy clients constitute your strongest sales force because word of mouth is the single most effective form of advertising. Claims that you make often require proof sources for credibility in prospects' eyes. However, claims from existing clients, friends, and people of standing in the community carry instant credibility and seldom require additional information.
Bottom Line…
The most profitable way to grow your business is via word of mouth, referrals and repeat business.
In fact, this strategy is so powerful and so important to growing your business that we will be dedicating many future issues to this very topic and will discuss, at length, a number of ideas, tools, and proven systems designed to minimize your marketing costs as well as how to increase the number of referrals and repeat business opportunities your efforts generate.
So until then…
- Build a list.
- Contact your list.
…and enjoy the fruits of your labors!
Happy Selling!
Brandon Patrick
Dean of Students
Real Estate Toolbox University
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