Today’s webinar with real estate and technology gurus, Inman News, was a great opportunity to discuss the concept of client lifetime value with our friends in the real estate industry. Our team has developed a quick and easy way to calculate this crucial number and we are excited to share it with you!
What is Customer Lifetime Value?
Customer lifetime value is defined the total amount of money coming from a customer over the entire period of your relationship with that customer. Many times in life, it can be tempting to go for something that will benefit you instantly rather than wait for something that could be of more value to you in the long run. Instant gratification has become ingrained in our culture. So many things can be done with just a click of a button that we often forget that patience is indeed a virtue. We’ve found that this rings true for real estate as well. When calculating the worth of a potential buyer, the results may not be what you are expecting.
Clients Not Houses
On the surface, it may seem like your 50 year old client selling the half a million dollar home is the one that will be more valuable to you as an agent. This may be true—in the short run. In reality, your 30-year-old client going after a house with a smaller price tag may be worth more to you over time. Your younger client is not only more likely to buy or sell a home again in the future, but they also may be better connected in the community and thus more likely to give you a referral. Rather than basing clients’ worth off of a one-time commission, successful real estate agents consider the revenue they can generate from one client over time, and market their services accordingly.
The question now is how do you begin more of these lifelong relationships? The answer: awareness. We’ve discussed brand awareness before, but it cannot be talked about enough. Potential clients trust a face they recognize. If you’re not recognized, you’re not going to be chosen by the home buyer. If you’re not investing in your marketing, you’re not going to see the return. In our webinar, Jed Carlson, CEO of AdWerx, discussed why awareness marketing is especially important to the real estate industry.
Looking at these statistics, the importance of awareness marketing becomes startlingly apparent. Agents essentially have a ‘sensitive period’ of just 2 weeks to make an impression on prospective clients before they reach the critical moment of contacting the agent they’re likely to hire. According to the data, there’s no better place to make that impression than online.
In the past, people have used social media to build this awareness online
. However, according to co host Laura Monroe of Inman News, now that Facebook has essentially become a pay-to-play platform, social media has become more effective at building relationships with and retaining your former clients rather than client acquisition. Instead, both Laura and Jed recommend retargeting advertising for driving awareness today. Being one of the early real estate agents to utilize this technology not only will help increase awareness, but it will also show potential clients that you’re knowledgeable of sophisticated marketing techniques.
Lifetime Value is Your Marketing Map
By knowing your average client lifetime value, you’ll know exactly how much you can spend to acquire new clients, unlocking marketing options you may have never considered before. Think of it as your road map to marketing success. When you know just how much you can spend, you’ll spend it confident that it will pay off. As mentioned above, we’ve constructed a spreadsheet to help you work out your marketing map. The Lifetime Value Calculator simple to use, and can be customized for your specific market and client base, and can even help you value an individual client.