It goes without saying that in a market downturn, every business opportunity counts. Of course, this should be the standard practice for real estate companies on any day. Yet a paradox of the industry’s current troubles is that many companies continue to treat leads the same way they did during the boom. Which is to say, they maintain “supply sided” attitudes that force the consumer to chase agents for service and information, rather than the other way around. More than two years of our research nationwide tells this story all too well.

In our experience, it’s important for brokers and agents to understand that these performance metrics usually occur within their existing lead generation efforts. Increasing marketing efforts and expenses to create more leads, therefore, is rarely the solution to companies struggling to increase sales. Almost none of the companies we have worked with required an increase in marketing budget, although some investment in prospecting training, manager coaching and data management was required. It remains, however, the greatest paradox of the modern real estate market: after more than a decade improving our ability to attract customers, especially online, many companies today find themselves in need, not of more leads, but simply of more sales stamina.

Getting Going

For starters, most companies do not regularly assess their leads management situation. Brokers simply do not know how many leads they have generated this month – by phone, online or walk-ins – and which agents they were distributed to.

Worse, even if they know who received leads in their company, they have little further information as to what happened with that lead – and where it stands today.

Disastrously, even fewer brokers have any idea how many of the leads they generated now lie abandoned. So the paradox of leads management is that while there are plenty of leads, many companies have no idea how they are being managed.

As a management consulting firm, we see this in companies big and small, in every corner of the country. Brokerage web sites are working just fine, generating inquiries on listings every day. The consumer is working fine, too, even willing to ask for more information when online listing data routinely remains incomplete. Even open houses are generating plenty of “nosy neighbors” who visit, not to buy the house, but to “shop” the potential competition as they decide whether to sell as well. Needless to say, there are plenty of leads.

Getting A Grip

In fact, we have rarely worked with a company that needed “more” leads – unless, of course, they were trying to increase the number of consumers they ignored. Routinely, we find that companies and agents are generating a sufficient number of leads online and offline to support significant increases in their business. The challenge lies in incubating and managing them better.

To begin to address this paradox, companies must be able to identify three critical performance measurements: The ratio of leads generated to leads currently being incubated by sales people; the number of leads abandoned in the same time period; and the average time between lead assignment and lead abandonment. These three factors provide a starting point for measuring the “health” of a company’s leads management – and business growth – infrastructure. To give you an idea of the scope of the problem – and the opportunity – let me share some research with you.

Most of the companies we work with started with very low incubating-to-total-leads-received ratios. Over a typical 30-day measurement period, fdwer than one in fiveleads remain “alive” and pursued by sales agents. Around 88 percent of all leads received are abandoned within the first month; 92 percent are abandoned within the first seven days; and a staggering 94 percent of all leads generated by a broker are abandoned within 72 hours.

Whether the lead comes in by phone, e-mail or in-person does not significantly affect these statistics. Clearly, many companies’ prospecting practices remain in the “cherry picking” methodologies more suited to the boom years that a slower marketplace.

With respect to the second metric, the total number of dead leads is significant because it directly affects the lost marketing revenue and potential earnings for a company.

For example, if a company generates 100 leads a month (a very small number given calls, e-mails and walk-ins), and 88 are abandoned, the significance becomes clear when multiplied by the cost to generate each lead.

On average, the cost to generate a lead runs between $40 and $200 depending upon the size and complexity of a company’s marketing strategy. Larger organizations usually employ larger Web, print and direct-marketing budgets, so the higher number is relatively easy to come by. Yet even smaller companies find themselves easily throwing away between $3,500 and $5,000 per month in marketing expenses when seen through the metric of abandoned leads. Some companies even find themselves in a position to convincingly argue they stop marketing altogether, rather than lose more marketing dollars.

Getting Traction

Essentially, it would only take about one to two more deals monthly to make up for this “lost” marketing dollar. And while break-even isn’t a strategy for growth, it would at least hold companies steady as they work athrough a troubled market. This leads us to our third leads management metric: the average time between lead receipt and lead abandonment.

While the ratio and quantity of lost leads is shocking, perhaps the timeframe during which the leads are usually abandoned should be most concerning. Nearly all abandoned leads are thrown away within three days of initial inquiry by a consumer. Again, method of inquiry only marginally affected the numbers, although walk-ins and phone calls fared slightly better than e-mail inquiries.

We presume this is because it’s easier to delete an e-mail than it is to walk away from a handshake or a phone call. But the numbers indicate that, whatever the method, the average lead incubation period is barely a week, and rarely beyond a month. Companies are creating only short-term potential sales, and virtually no medium- to long-term sales pipelines.

Ironically, companies are fully aware that the market is slower than average; yet their prospecting stamina remains locked in a “quick deal” mode more suited to a hotter market. In fact, while most real estate professionals can instantly quote the average days on market for listings, they rarely work buyer leads for the same amount of time. This represents a significant disconnect between listing and prospecting practices within a company’s sales force.

In fact, companies that create strategies to monitor and reassign their abandoned leads find that between 17-25 percent of them turn into sales within the following 12 months. Whereas it would only take one to two deals a month to cover marketing expenses, companies are clearly throwing away significantly more revenue. Even a fractional recovery of abandoned leads – even 5 percent — could yield dozens of more deals annually.