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  • Writer's pictureShawn Patrick Moloney

Return on Investment in Marketing

Marketing must be look at as an investment that demands returns.

When talking about marketing there is one acronym that is the most misunderstood acronym in the book and that is ROI or for those who do not know that one "Return On Investment". Too often when people talk about marketing they talk about the costs and mention things like “it is too expensive”. If you are looking at marketing as a cost it is time to listen up. Why would you ever look at marketing as a cost unless you did not understand what a return on investment was? I have one key phrase I use when thinking about marketing "ROI or DIE" .

Figuring out if you have a return is where keeping detailed records of everything comes into place. Some of the records you would want to keep are the total spend, the number of leads, the number of conversions, and then the average earnings per new gained client. The best way to keep all these is by using an advanced CRM system or to work with a marketing company that tracks these records and gives you on demand reports. You should be checking these reports on the regular and if you have a team each member should be tracked individually to ensure you are not wasting money, time, or leads on someone who is not producing. 

Think like this, if I spend $500 a month on leads which buys me 10 new leads which converts to one new customer that spends on average $300,000 on a home then the commission equals $7500 then this example has a 15x return on investment. Now that you know that you should continue to ramp this marketing up as fast as possible and sustainable all while watching your numbers. 

On the contrary if you are spending $2000 a month getting 10 leads which lead to less than one client a year you may want to stop advertising with them. This program would be running at a deficit therefore it would not be successful. 

In the future when you are buying advertising it is crucial that you understand what ROI means and how it can work for you. Every company has different margins they must work on and the math will tell you there will be an ROI. For a broker buying leads for a real estate agent they need to equate in the split they are taking with the agent to ensure the numbers are correct. If you find an advertising program that is working, learn to shift money towards it until you see ROI drop and be willing to change course quickly since there is nothing worse than wasting ad dollars.


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