You're listening to the “REI Marketing Nerds” podcast, the leading resource for real estate investors who want to dominate their market online. Dan Barrett is the founder of AdWords Nerds, a high-tech digital agency, focusing exclusively on helping real estate investors like you get more leads and deals online, outsmart your competition, and live a freer, more awesome life. And, now, your host, Dan Barrett.
Dan: All right, hello, and welcome to this week's episode of the REI Marketing Nerds podcast. As always, this is Daniel Barrett here from AdWordsNerds.com. Look, if you need help with your online marketing strategy for motivated-seller leads and deals, you know where to go. It's AdWordsNerds.com. We would love to have you. [01:03.3]
Now, this week, we are talking about a little something I call the “REI Lead-Gen Strategy Matrix.” The REI Lead-Gen Strategy Matrix. Okay, it doesn't exactly roll off the tongue. I am not the best at naming things, I admit it, but this is a very, very handy little tool.
Now, a little bit of background on this. I am in the process of writing what I'm calling the ultimate guide to PPC for real estate investors. It is very, very long. Last time I checked in, it was close to 13,000 words and going strong. It is a very, very deep dive into the world of online lead generation for real estate investors and I'm very excited about it. It's in the copy-editing stage right now, so when it is ready, I will certainly let you know. [02:03.2]
But as a part of that process, writing that article, I came up with this idea for the Lead-Gen Strategy Matrix, and basically the sort of role that this matrix plays is to help an investor place their various strategies, channels, any kind of marketing tactic that you're using on this grid.
Now, you can imagine it's a two-by-two grid, so there are four blocks here, and on the bottom axis, the sort of horizontal axis we have close percentage. All the way over on the left, we have strategies that are low close percentage, and all the way over on the right, we have strategies that are high close percentage. Then on the vertical axis, we have lead volume. Up at the top, we have high lead-volume strategies, and at the bottom, we have low lead-volume. [03:00.1]
The reason that this matrix is useful is that it helps us conceptualize the different trade-offs that marketing channels and strategies present, and this is really important because every single marketing strategy, whether it's direct mail or bandit signs, or text messaging or SEO or Google Ads, every single marketing strategy presents to us a unique set of trade-offs right?
Every marketing strategy has some things that it does and provides extremely well and some things that it does and provides less well, and understanding those trade-offs is going to help us make better decisions about where we put our marketing dollars, but also what we do when we need to optimize that marketing channel. I'll give you some examples. [03:58.3]
Let's take direct mail, right? Because direct mail is the sort of classic marketing channel. Now, I put direct mail basically in the dead center of the strategy matrix. It is sort of middle volume and middle close percentage, right? Typically, the close percentage of direct mail and, look, everybody, every investor is going to vary quite a bit here and your close percentage can be very different from somebody else’s, depending on your market and how you follow up and all that stuff.
But on average, I would say, direct mail close percentage is roughly one out of 32, 1 out of 40, right? Generally we need about 30 leads, 40 leads in order to close the deal, and look, obviously the list that you said, all this stuff affects that number, but just as a rule of thumb, that's a pretty good one. That's right in the middle in terms of close percentage. [04:57.3]
Now, in terms of volume, if you have a mail piece that has a decent response rate, which is somewhere below 1% I think is typical, and your mailing a relatively large list, you can get a pretty good volume from a given direct-mail campaign, right? It's this kind of nice mix between volume and close rate. It's right in the center of the lead matrix or the lead strategy matrix.
Now, let's take Facebook ads as a counter-example. Facebook ads are very high-volume on average, particularly if you are doing the kind of Facebook ad where you have a lead form directly on the ad. They don't even need to fill it out. They just click a button and Facebook automatically fills in their information.
Those types of ads and those types of campaigns can be extremely high-volume. It's very easy on Facebook to get in front of a huge audience of people. If you're targeting a sizable market, that's going to happen very quickly. Lots of people tend to fill these out sometimes by accident, right, so it's a high-volume channel. [06:08.3]
But it is also a very low-close-percentage channel and it's very common for someone to need 60 to 70 of these leads in order to close a traditional flip or wholesale deal. Obviously, if you're an investor that's also an agent or you're working with an agent or a realtor or something, that can change that equation quite a bit, but you’re generally looking at a low-close-percentage, high-volume channel.
Now, let's take something like bandit signs. Okay, bandit signs are really interesting, right? Bandit signs are sort of in the low-close-percentage realm because I think a lot of people call the number on a bandit sign because they're curious, but there's also kind of a self-selection process, like I’ve never called the number on a bandit sign. I don't know about you, but I'm just not in the market to sell my house to an investor, so I've never done that. There's kind of a self-selection mechanism that happens with bandit signs. They're kind of in the low close percentage, sort of below direct mail, but not as bad as something like Facebook ads. [07:22.0]
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Now, what is the volume? Volume very much depends on where you put it, but I'd put it in the lower-volume kind of area. But, again, it depends. How many did you put up? Where did you put them? So, it's sort of floating in that low-volume, low-close-percentage area rather than Facebook, which is high volume, low close percentage, right, or direct mail, which is kind of right in the middle. [08:14.4]
Now, let's take something like SEO, search engine optimization. I want to rank my site very well in Google. Now, depending on where you are ranking, that could be a low-volume or a high-volume channel, right? If you are ranked number 10 for a given keyword in your market, that's a low-volume channel. Generally, you're not going to get a whole lot of clicks. You've got to get a certain number of clicks just to get a lead, so those would be pretty low volume.
Now, if you expand that across many different keywords because you really work on your SEO and you think it's important and you invest in it, or if you get a keyword that's extremely highly ranked, so you rank number one in your market, all of a sudden, now that's a high-volume channel. You can generate dozens of leads a month from that channel. [09:06.8]
Now, the close percentage on SEO is generally high. It is significantly higher than Facebook ads, not as high as Google Ads, which we'll get to in a minute, but significantly higher than Facebook ads. So, you have a relatively high-close-percentage channel that can vary between low volume and high volume over time, depending on how you rank, depending on the size of your market.
Now let's think about Google Ads. How does Google Ads fit in here? Google Ads can be lowest volume or highest volume depending on your market and your budget. SEO is dependent on your market and how you rank; Google Ads is largely dependent on your market and your budget, the higher the budget, the bigger the market, the higher the volume. Generally, it's going to be highish volume to lowish volume, but not particularly bad in any direction. [10:09.2]
Now, in terms of the close rate, that's going to have one of the highest close rates, anywhere from one out of six to one out of 12—and, in fact, one out of 12 with our clients at AdWords Nerds. It's roughly one out of 12 across the country, which is a very good close rate on average.
Now, why is that? It’s because of our ability to target specific keywords and really optimize around that, but then even within Google Ads, depending on the strategy that you are using, for example, if you are using a broader keyword strategy that might increase the volume and lower the close percentage. If I'm using an all exact match strategy, that's going to increase my close percentage, but it's going to lower my volume. [10:57.0]
The reason I'm going through this and the reason I'm giving you this kind of matrix idea is that it's important to understand that, as we move down or up the spectrum line on either close percentage or volume, we are also affecting the other axis. In this case, if we go up in lead volume, we are generally lowering our close percentage. If we raise our close percentage, then generally we are lowering our volume.
Now, why is this the case? Leave aside everything you can do to affect the close percentage on the backend. Obviously, you can increase your close percentage by getting better at sales and by having better follow-up and all that. Let's just leave that to the side. Let's just talk about what we do in our ad channel. If I want to raise my close percentage in an advertising or marketing channel, the way I do that is by more tightly focusing on just the most motivated sellers, however I'm defining that, right? [12:08.5]
In Google Ads, that might be going after just a couple of keywords in exact-match format, the most restrictive possible way I have of targeting something. If it's direct mail, they might be building a list of people that have zoning violations and they have ag, and they have all these different lists and you're stacking these lists on top of each other to get a small group of highly-motivated people.
In every marketing channel, the way we raise the close rate is by focusing, focusing, focusing our targeting. But when you focus your targeting, what you are doing is cutting out larger sections of the market. The real estate market, in general, is, as the majority, not motivated sellers. Motivated sellers are a tiny percentage of that larger housing market, and so when we go after the most motivated people, we shrink the percentage of the housing market that we are getting in front of and we shrink our volume. [13:16.4]
The converse is also true. If I broaden my targeting, I broaden my volume, I start to bring in bigger swabs of the real estate market that's going to get me more leads. It's going to bring in more people. It's probably going to lower my cost per lead, but now I'm getting more people that want retail and I'm getting more people that don't have any equity, and I'm getting more people whose houses don't exist or whatever, whatever the thing is, right? I'm getting more people in my lead pipeline that I won't be able to close and, therefore, my close percentage will go down. [13:58.0]
The reason that this mental model and this kind of REI Lead-Gen Strategy Matrix that we've developed is so important as to understand these trade-offs are inherent in every single marketing channel, marketing strategy and marketing tactic. There is no way to avoid the trade-off. There's always going to be a trade-off.
This kind of is important when we get into optimization of our marketing strategies, because, of course, you can spend a lot of time trying to improve the lead quality in a high volume marketing channel, like Facebook ads, for example, and, of course, that's important and you should do that, but past a certain point, there is a really stark set of diminishing returns, because if we make our Facebook ad channel as restrictive in its targeting, as for example, our Google Ads campaign, we are neither going to get the volume that we are getting before, nor are we ever going to approach the quality that we get in another marketing channel. [15:06.6]
Similarly, if I'm doing a really restrictive Google Ads campaign that's all focused on exact-match keywords, really, really tightly segmented, and that's how I'm getting my close rate up, if I start to broaden that targeting to improve the volume, I'm going to lose the close percentage that was the single greatest strength of the campaign to begin with.
So, it's not that you can't improve the balance between these trade-offs. You absolutely can. You absolutely can, right? The important thing to remember is that there is always going to be a trade-off and you want to have a portfolio of marketing strategies that balance these things in a way that matches your unique risk tolerance, your budget, the market you're trying to get in front of the kinds of deals you want to do and so on. There is no one perfect strategy. What there is is the right set of strategies for you right now, and if you can keep that in mind, you're going to make better marketing decisions and get better results over time. [16:16.4]
I hope that makes sense. I hope this was useful. As always, I would love for you to join our Facebook group. That's at AdWordsNerds.com/group. I am in there every single day, posting content, doing live videos, sharing information. There's a bunch of great investors in there. It's a wonderful community. Please join us. It's totally free. Go to AdWordsNerds.com/group and request to join. I will add you myself and I will love to see you in there.
As always, this is Daniel Barrett from AdWordsNerds.com, signing off. Thank you so much for being here and I’ll see you next time. Cheers. [16:52.7]
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