In February 2016, Keller Williams' co-founder Gary Keller famously quipped in his Vision Speech from the Family Reunion stage that any agent advertising on Zillow should operate by the 5x ROI rule. The rule simply stated that any marketing investment should yield at least a 500% ROI, for the marketing allocation to be considered successful.
While ROI for paid marketing can vary by channel, time of year, and the operational rigor to convert inbound leads, having a baseline to measure success of any marketing effort is a powerful way to assess the performance of paid marketing, helping redirect future marketing dollars to the highest ROI channels. But, if measuring advertising ROI is a ubiquitous activity amongst real estate agents in the 2020’s, then why is this effort not applied during the holiday season?
A Referral Strategy for the Holiday Season
When it comes to designing a referral-generation strategy during the holiday season, too often agents scramble to assemble a plan to engage their client base for repeat or referral business, if any plan at all. The exercise is even more tenuous for tenured agents, boasting hundreds or thousands of past clients. Do I buy a small gift for hundreds, or a large gift for a select few? How can I reach the masses in my database effectively, but also recognize my A-Tier clients properly? These are all great questions and the reason why October is the perfect time to assemble a referral generation strategy for this coming holiday season!
For this exercise, let’s first get our math straight. If we assume you invest $7,500 into this year’s holiday referral generation strategy, you should expect $37,500 in returns by using the 5x ROI model. If your average sales price is $350,000 and your commission percentage is 2.5%, then one referral will net you $8,750 in gross commissions.
Now, let’s assume you have a 70/30 commission split with your brokerage, your net income on each closing is $6,125. This means, in order for your holiday referral generation strategy to succeed, you need to net at least four new clients from your efforts. So, how am I going to allocate my $7,500 most effectively to my client base in order to generate four new referrals, you ask? How can I ensure I’ll get at least four new clients from my effort?
In this five-part series we’ll unpack the 4 ‘P’s to generate referrals this holiday season, by starting with the Referral Generation Matrix, before diving into the best practices for each of the 4 ‘P’s in the weeks ahead (Party, Pop-By's, Philanthropy, and Posts).
In our next five installments, we’ll unpack the keys to success leading client parties, pop-by's, philanthropy efforts, and creating awareness to your entire client base with targeted social media posts.
Come back next week when we discuss in more detail ‘P’ #1, how to generate two referrals from 30 clients attending a client appreciation party with a budget of $3,000.
