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Ranch Marketing: It’s Time Ranch Brokers Understood ROI

Understanding ranch marketing ROI for ranch brokers

What? Brokers do not look at returns on their ranch marketing dollars spent? You just fronted $14,000 on the ranch listing you just took on. How soon will you get that money back? What is the ROI on that ranch marketing investment? This article is probably going to be a “duh?” article that we all read …one where it states the obvious on a subject we already knew but what the article does is formulate the thought and process into an actionable list for ranch brokers.

I’ve found that the ROI calculation for ranch brokers is simple, but where you get tripped up is costs. Allocating costs to a listing isn’t always clear and straight forward. What is cost of goods sold (COGS), operating costs, marketing costs, etc. I’ll hold off on allocating costs discussion until the end of the article to maintain the simplicity of our example below.

Let’s begin with high level ranch marketing budget. The best way to develop a marketing budget is to treat that budget as if it’s an investment, i.e. something that delivers an expected return. Your listings represent the portfolio of investments.

Review last years ranch marketing spend and calculate the ratio of cost to revenue to give you a benchmark starting point in the new year. So if your firm did $500,000 in fees and spent $100,000 in marketing (yes you need to include fees from outside vendors) then your marketing cost ratio is 20%.

Now, there is a catch. If your brokerage let’s say carries 10 ranch listings on average your ranch marketing cost ratio is likely higher than if your brokerage carries 30 ranch listings on average. The ranch brokerage with more average listings count gets an economies of scale in most cases because resource costs are spread over more listings and higher total revenue. An example of this is print advertising where larger ranch brokerages put more listings on their full-page ad. A smaller brokerage may only be able to put 4 listings in an ad whereas another brokerage may have 10 listings in the ad.

Another example would be somewhat fixed service costs such as SEO or social media. Whether you have 10 listings or 30 listings those services may not increase with more listings.

I see marketing cost ratios vary from 10% to 25% depending on the total revenue of your brokerage and other variables. The important data point here is get your benchmark ranch marketing cost ratio from last year and use to measure against going forward. This is a measurable key performance indicator (KPI) for any brokerage.

Now that you have your ranch marketing cost ratio, let’s get into an example listing and ROI. I like round numbers so let’s start off with a property for sale at $1,000,000. It has 400 acres with a nice cabin to add some liveability. That’d make it $4,000 per acre.

Easy commission calculation is $1,000,000 x 3% = $30,000. So if your marketing cost ratio was 20% last year then your planned ranch marketing spend could be up to $7,500. This listing marketing budget doesn’t mean allocating all of it to paid ads such as print, social, video, etc. You have to leave plenty of room in there for services.

NOTE: I don’t like to plan commission percentages on “double ending” deals. The best practice would be to budget a marketing spend around representing one side or the other on a transaction.

The next number we need is “average days on market”. Take each listing that sold last year (or last several years) and individually calculate days on market from listing creation date to closing date. Sum the days on market for all these sold listings and divide by total number of sold listings in your data set.

I personally prefer to look at months so take your average days on market number and divide by 30. You probably won’t get a whole number so just keep it to 1 decimal place.

Let’s presume that your brokerage average months on market is 10 months. This means that your $7,500 investment will likely come back to you in 10 months. If all goes well the brokerage commission will be $30,000. This would be net return on investment of $22,500 or 75% Return on Investment (ROI) or 360% annualized yield.

Now take this a step further …your brokerage has 30 listings and each listing has $7,500 in marketing costs tied up in them. That totals $225,000. So presumably you’d have about a quarter of a million dollars tied up at any given time in marketing of ranches. If you’re running this as a line of credit with a bank then there is a carrying cost associated with these allocated funds.

Key Takeaways:

  1. Benchmark your marketing cost ratio. Work from there moving forward. Possibly work to lower it with more efficient ranch marketing spends that can achieve better or same results in sales as in past.
  2. Benchmark your average months on market. All brokers want to sell listings fast but in many cases the velocity at which a listing sells is largely due to a number of factors …months supply of similar listings in that area, popularity of an area, proximity to major metro areas, income production, land amenities, and much more.

By benchmarking your ranch real estate brokerage you’ll be able to target new listings that fit your formula for marketing cost ratio and average months on market. Any time you can make a more informed quantitative decision, the more likely you’ll realize the anticipated ROI.

Quick notes on allocation of costs to listings …

I’ve found it hit or miss that a brokerage will assign direct costs to specific listings. Here are some simple practices to start allocating costs to listings accurately and some suggested practices.

  • When you purchase a print ad and receive an invoice from the publication, enter the invoice into your financials then itemize the total to each “product” aka listing. By itemize, if the total print ad cost $3,000 and included 6 listings then each listing would get charged $500 when itemizing the invoice.
  • You’ll also have direct costs from outside vendors that can get directly charged to the listing such as professional photographer/videographer, surveyor, GIS mapping services, soil samples, etc. When you have these direct service costs, assign the invoice to a specific listing.

Ranch marketing expenses that appear to be operational expenses:

  • SEO services
  • PR services
  • Social media services
  • Brochure design services
  • Website hosting
  • Online classifieds subscriptions (i.e. Lands of America)

These ongoing marketing expenses can be consistent or fluctuate depending on how you operate your brokerage. My suggestion is take your monthly average spend on services used monthly and divide by average # of listings you carry at any given time. So if your monthly services average $5,000 per month and you carry 20 listings on average then each listing costs you $250 per month it isn’t sold. Then if your average months on market is 10 months that equates to $2,500 per listing of services carrying costs for the year.

Remember the $7,500 marketing budget from earlier? Well, there goes $2,500 of that budget in marketing services carrying costs. Now you have $5,000 left in the budget.

Bank fees and interest. There is always interest cost if running your brokerage on a line of credit (LOC). That interest is certainly entered into the financials each month during reconciliation. Again, you can chose to average it out based on months on market to arrive at a month finance fee to charge to each active listing that has money tied up in the LOC.

If your brokerage has an in-house bookkeeper, controller, or CFO then you should make absolutely sure your business begins measuring these number every month, quarter, and year. If you use outside financial services, then make a point to set down with your bookkeeper or accountant and get a game plan together to begin tracking these numbers and measuring against your brokerage benchmarks. This is how efficient business are run!

Get started benchmarking ranch marketing cost ratios and listing average months on market. Take a deeper look at how best to allocate costs to individual listings and establish cost averages where fees are spread over all listings.

To learn more about ranch broker marketing, visit https://realstack.com/digital-marketing/

YEAR END Lands of America Advertising Assessment

Have you ever truly evaluated your Lands of America advertising with real analytics?  You can now …

It’s that time of year when brokerages are evaluating their marketing spend and performance. Lands of America advertising performance will certainly be one of the top segments evaluated in a brokers marketing mix.

For many brokers, just being online is enough. But with today’s online buyers doing months of research and monitoring for land listings and brokerages, the online presentation (merchandising) is the critical starting point for a buyer.

Lands of America works for a lot of brokers and agents, but critically evaluating the data and how you merchandise property on this network of sites can result in thousands of dollars in new found money. In this article we are going give you key analysis techniques and data points to evaluate Lands of America advertising and better yet tips to improve your brokerage merchandising of land listings on Lands of America.

Lands of America Advertising Analytics
lands of america advertising assessment templateLike most online classified websites, Lands of America provides some basic analytics for your land listing performance on their site. They provide some simple metrics such as Searches, Views, and each of these data points over time with a line chart. Ok, great, but really how do I evaluate performance of my brokerage or individual listing?

If you get 10,000 searches on a listing …is that good? What if you get 1,200 views …is that good?

These are good for showing sellers that they are getting online activity on their listing, but individually they really don’t demonstrate much in the way of results in most cases. Now, if we compile some of these data points we’ll get incredible performance insight as to how your listings are performing against others by calculating averages, rank, and per day analysis.

Let’s unpack this data to better assess its performance.

I’ll start by explaining that when a visitor searches LandsofAmerica.com and listings display on screen, the default sort is price highest to lowest. This inflate your “Searches” total. You see, if your are one of the largest acreage listings for a particular county then it is very likely that you are one of the highest total price listings. That means you are by default at the top or near the top of the list. Also, if you are in a county that has very few listings then it is more likely that you’ll be page 1 or at the top.

The important point here is you want to be on page 1 of typical searches you believe the buyer will perform. There are countless articles and research to support that being on page 1 of a search result is critical. We’ll save this topic for another article.

Being at the top of the list has value no doubt, but I just want to be clear that it inflates your “Searches” data point for this listing. Searches (for Lands of America) is the quantity of times a listing appears in a visitors search results. A Searches rate on LandsofAmerica.com can vary widely because of demand or popularity within certain counties and as already mentioned being one of the top ranked in total asking price.

So overall, Searches on its own for individual listings isn’t much of a value …which brings us to combining it with the next data point to create a real meaningful Key Performance Indicator (KPI).

Lands of America uses the word “Views” to mean the number of times a listing is clicked aka viewed. This is pretty simple, Listing A appears in the Search Result and a buyer clicks on Listing A. That click counts as a “View”.

As with Searches, Views are generally interesting, but as a single data point not very insightful because it can vary by thousands based on days on market, county demand, and total price rank.  Check out #1 below for a better performance indicator.

Ok, time to really pay attention!! Here is the important metrics of four key performance indicators.

4 Key Performance Indicators for Lands of America Advertising

lands of america ctr

1. Click Through Rate (CTR) – this is number of views divided by number of searches to give us a percentage rate that site visitors click on a listing.

Based on general marketing click through rates, a good CTR average should be 3-5%. There are several factors that play into your CTR though. Consider your marquee photo displayed, did you use video, or is your written copy compelling?

So evaluating yourself and your brokerage here is key. Spend some time critiquing your own listings compared to others in your market. The best performing listings have professional photos with professional color enhancement or display video as marquee photo, and have compelling intro sentence about the listing.

Which listing would you click on?
lands of america photos

Actually the question is which one would you NOT click on …B!  You are asking the full market prices and $2.8M, but you can’t even get the photos done well.  So B is obvious, but lets critique A & C.  Photo A is ok, but it really doesn’t sell me any value.  It is shadowy, the road really just looks like a worn path, and trees don’t lend to picturesque scene.  Every ranch has a scene like this one pictured, but surely there is a better scene somewhere else on property …you have 800 acres to pick from.  I don’t know this for fact but I bet the agent took this photo or unqualified photographer.

Now take in photo C.  The tree line is perfect horizontal centered, the water feature is clearly large, sky is awesome blue bird day, reflection on the water is enchanting, water totally calm, and there is fish habitat on the shoreline …ok, I’m interested …click.

Just for the exercise, read the description excerpts of each listing A, B, and C.  Are you starting to see a better merchandised listing surface?

I took some description excerpts from other listings as well just to focus on my point.  Here is a comparison of example written copy:

  1. 560 Acres WKL RANCH, BLANCO COUNTY 181 Pape Lane, Blanco, Texas 78606 DESCRIPTION: Conveniently located just 2 miles west of the town of …
  2. Spectacular acreage tract just west of Blanco. Gorgeous spring-fed creek and Pond on the property, along with incredible views in all directions

I’d go with listing #2. It is more intriguing to get me to click with talk of spring-fed creek, a pond, and views. This excerpt is the first words you put into your description. Choose your words carefully and be persuasive to get the click …something advertising experts have been doing for decades.

lands of america

2. Searches per Day – this is the most accurate way to compare listings in your portfolio. It takes out the “totals” and evens the comparison by accounting for days on market. Easy calculation is number of searches divided by days on market.

Your average searches per day should be between 100 and 200 per day on average.

The important assessment for your own listings is comparing it to your average. Download the REALSTACK spreadsheet for easy calculations here.

lands of america views

3. Views per Day – this is where it matters to a broker or agent. Again, we factor in days on market to give comparisons a common denominator. Simple calculation is total views divided by days on market.

In marketing, when a visitor clicks on a listing this is a behavior. A behavior in this case demonstrating that they are interested at some level. We don’t necessarily know where they are in their shopping process or marketing funnel but statistically it does help us gauge market interest. Most importantly, this data point helps us benchmark each listing against a consistent average.

Your average views per day should be between 5-9 per day. Although views per day can vary from brokerage to brokerage depending on your portfolio of listings. It is important to establish YOUR averages.

Download the REALSTACK spreadsheet for easy calculations here.

lands of america leads

4. Leads per View – now we’re talking …leads, people who engage with your online listings.  Just as views are a behavior, so are engagement.  Engagement meaning a visitor to your listing inquires, shares, prints flyer, visits your website, or views your phone number.  This is a slightly stronger behavior than a view right?  Absolutely and as marketers we’d say they are moving down the marketing funnel and hopefully on their way into the sales funnel.

Leads per view is import metric because we must understand why people are engaging more or less than other listings.  To calculate, take number of leads divided by number of views.  This will give you a percentage of leads per view.

Your leads per view should be between 1% and 2%.  Remember this is based on views total for a listing not searches.

Self assessing your marketing is a must-do activity that any business has to do. Land brokerages are no different. I encourage you in 2016 to make statistics and analytics part of your quarterly evaluation of the business and your portfolio of listings. Start simple and grow from there.  Getting a baseline for averages will be the key starting point.

I’ve created a spreadsheet intended just for you to get started in the new year at evaluating your brokerage performance with Lands of America advertising. Get your download copy today and be on your way to better decisions and marketing practices with your land brokerage.

 

Click Download button to get your Lands of America Advertising Assessment template spreadsheet.

lands of america advertising assessment

 

 

P.S. There are two other factors that directly impact your online marketing results …Price per Acre to Market (PPATM) and Price per Acre Rank (PPAR). Often times these can be the 2 most important factors for marketing results.  People just don’t waste their time on overpriced land and if you are priced correctly at price per acre but in the top of total price then you’ll have to exercise some patience.

Definitions:
Searches – the quantity of times a particular listing appears in the search results.

Views – the quantity that a listing is clicked or viewed

Click through rate (CTR) – the ratio of times a listing appears in search result compared to number of times a listing is clicked. LDV / LSR = X%

Price per Acre to Market (PPATM) – percentage of a listing price per acre to the average price per acre for similar listings in that market.

Price per Acre Rank (PPAR) – numerical ranking of listings from highest overall price to lowest overall price.