To Compete Or Not To Compete?
That Is The Question
By Joshua Konowe
President & CEO – e-Agent, Inc.
Many of you may be involved in compete and
win lead generation models which are touted as “opportunities”
for you to gain more business. These models are very attractive
for a variety of reasons. Usually, you can pick and choose the
leads you want to compete for. In some cases you can turn the
leads back in and get money back if the lead information is
incorrect (although many of them now make you pay no matter
what). And most importantly, they allow you to compete for the
business they have generated. So, it sounds like a great deal
right? Wrong. Here is what is really wrong and bad for your
business as an independent contractor when you participate (and
pay) to be in these programs.
1) Why are you competing for business?
Isn’t this what you do already everyday and even with the people
you sit next too? The answer is of course, yes. Many of you
compete for business even inside your own organization which
means you are already in the middle of a lot of competition as
it stands right now. Why would you pay to be part of a network
to get leads that other people (in some cases more than 5) are
already getting as well? Enough said on that talking point, let
us drill down a bit further…
2) Let’s say you really like competing and
you want more of it, so you participate in these types of
programs (i.e. – Realestate.com, Reply.com, GuidetoRealty.com…etc.).
What do you think you need to offer to consumers on these sites
in order to get them to work with you? You need to offer them
more money back, because in all likelihood the 5 other agents
who just paid for the same lead you did are doing just
that…cutting their margin to ensure that they will get the
business. Here is an example of how this works. Sally, Dick,
Jane and Edward all get a lead for a home purchaser who has
$500,000 as her high end limit to buy a home. Sally, Dick, Jane
and Edward all buy the lead for lets say $25 each. Then the
consumer is presented with the 4 different offers from Sally,
Dick, Jane and Edward. Let’s also assume that the services of
each of them provides is roughly the same checklist. What is
going to make this consumer work with Sally, Dick, Jane or
Edward…you guessed it, it is whom ever offers that consumer the
best price to close on a home. Dick offers to give this
consumer $500 back on his closings costs, Jane, Edward and Sally
then get an email from the consumer that says Dick is offering
$500 back so Jane, Edward and Sally are now forced to offer more
money or a percentage off of their losing price. At the bare
minimum Sally, Dick, Jane and Edward if they get the business
will have paid an extra $500 for this lead, simply because Dick
offered to give the consumer an additionally deal if they worked
with him. So anyone who effectively got the business will have
paid at a minimum $525 for this lead or more. That is of course
assuming the other 3 parties involved did not offer a better
deal in front of the one Dick made. Assume they did and would
have offered even more which again drives up the real cost of
the lead.
3) One other major reason to want to
compete for business is because you can pick and choose the
leads. Here is the fatal flaw with this system which is why it
will always cost you more money to compete. Assume 3 leads are
generated for Sally, Dick, Jane and Edward again. The first
lead is a consumer who wants a $100,000 apartment in a 250,000
median home priced city. The second is someone who has
indicated they have bad credit but really want a $300,000 house
in that same city. The third lead is someone who is looking for
a second home worth $600,000. Which lead do you think is going
to get purchased by all four – hmm – you guessed it, lead number
3. This means Sally, Dick, Jane and Edward combined spent $100
for lead number 3 and they now have to compete (again) to get
that consumer to work with them. Sound like fun yet? Not
really…but it gets worse. Two more bad habits are now at play.
The first is that consumer 1 and 2 will probably get ignored.
That’s right, Sally and her 3 other musketeers probably did not
bother to purchase the other leads because they assumed those
folks to be useless. This kind of behavior is not just bad
business, it reinforces to consumers that real estate agents are
not going to help or follow up with them which is exactly the
wrong message to send. The second problem is, why would Sally,
Dick, Jane and Edward throw away potential business? Just
because these people say they want something that is not
possible now does not mean in the future they would not need or
want help for something again. Every 22 year old will end up
(all things being equal of course) as a 44 year old with more
money, more influence and more reasons to buy a home. They will
remember the place that did not help them, count on it. It is
the same in the food service industry. If you have a bad meal
you are likely to tell 7 people not to eat at that
establishment. Imagine how many people you turn away indirectly
or directly because of the taste you could possibly be leaving
in their mouth.
The next time
someone “offers” you the opportunity to compete, think twice
about what that actually means for your business, the consumer
and your marketing wallet.____________________________________________________
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You mentioned
to e-Agent that more than half (54.3%) of all the transactions
that you closed in 2006 originated from e-Agent leads. How were
you able to effectively convert the leads generated through
e-Agent into closed deals and what tips can you provide to other
agents?