Working your database may not yield the number of transactions you planned. Here’s what you can do about it.
You’ve likely heard of the Golden Rule of the database. The Golden Rule states that an agent, if they work their database correctly, will transact as many units as approximately 10% of the size of their database. Meaning that if an agent has 100 names, numbers, home addresses, and email addresses, then they should expect to close about ten deals from that group of 100. Some will be from the actual people in your database, and some will be referrals from those people.
If an agent truly puts effort towards that group (calls, texts, emails, letters, etc.), then, after a few years, they should be able to achieve the 10% rule. Now, take the database from the size of 100 to the capacity of 1,000, and you’ll close 100 deals a year from it!
Here’s the challenge, I believe that the coveted 10% rule is changing and not in our favor. I can see a day where the new Golden Rule becomes the 7% or 8% rule. Here’s why:
1. Technology. If technology continues to improve, the number of referrals from your database will decline. According to the 2018 National Association of Realtors® Profile of Home Buyers & Sellers, 55% of home buyers took to the internet BEFORE reaching out to an agent. In 2011, that number was only 45%, thus reducing the number of calls from a client in our databases by about 20%! This happens because it’s easier and more convenient for consumers to click on a link or swipe on photos to get more information on a property, thus reducing the need to call their agent.
We’ve all been there: “Oh my gosh Jeff, I am so sorry, I know we’ve used you for years, and we tell everyone about you, it just happened so fast. We made an offer with the listing agent because there were multiple offers.” Or, “We can’t list our home with you because the listing agent gave us such a deep discount to list with them!” If you’re full time in the business, you’ve experienced something similar a time or two. This scenario all started because technology got in the way.
2. i-Buyers. As i-Buyers continue to enter different markets, the business agents receive from their database will decline. It’s pretty simple math. They can sell with you and get 98% or 97% percent of their asking price, which you would probably claim is market value or close to it or i-Buyers that come in at 88 to 92% of the value. Back out the commission, and sellers potentially end up within just a few points of what a full-service brokerage could net them. How does this affect repeat and referral business? The answer is simple: Many consumers will, out of curiosity, reach out to one of these institutions (or a real estate team or brokerage offering them) just to see what they could get in an instant offer. The next thing you know, they are signing paperwork to sell their home to them, thus reducing the number of calls from a consumer to a real estate professional.
3. DIY’ers are increasing. Take a look back over the last ten years, in nearly every industry; there’s been this sentiment of “I can do this on my own.” Some would suggest that technology makes it easier, especially in our industry, think fsbo.com, Zillow’s Make me Move, YouTube videos. But, also, today’s consumer is savvier than they’ve ever been.
A savvy, tech-enabled consumer can now take matters into their own hands, and complete tasks that they would never have considered doing on their own, such as selling a home or going straight to the listing agent. Who makes up the majority of DIYers? According to most reports, including one from The Home Depot and Forbes, it’s Millennials.
4. Millennials. Despite reports saying that Millennials aren’t buying homes and they’re still living in their parent’s basements, this generational group will present some real issues for loyalty from our database. According to NAR, Millennials make up the largest generation of home buyers today, sitting at 37% of all homes purchased in 2018. What does this have to do with negatively affecting the return on our database? This group already trusts apps and online processes for buying and selling merchandise. It’s only a matter of time before they trust the latest home selling or home buying app (and this is already happening). We hope to have some data to prove this once we get into 2020. A 28-year-old who once may have taken their parents’ advice when choosing a real estate agent may now rely on online agent reviews. A certain percentage will click on links to services that will assist them in buying or selling in non-conventional ways.
5. Online Reviews. Many consumers today are using sites like Homelight and Angie’s List to check out the reviews on an agent they used to see if it’s safe to use them again. During this process, they fill out a form and start receiving solicitations from every agent in town, asking if they’d like to meet. Thus, potentially costing you a sale from your database.
6. Customer Experience. Today’s customer expects a great experience. According to a 2018 survey from Gladly, the consumer experience is affecting a consumer’s recommendation of the service provider now more than ever. We had a challenge in our business four years back. We were closing about 650 transactions as a team after closing around 500 the year before. The problem was not that our company was growing too quickly. The challenge was that, as we were growing, our profits were shrinking. Because of this, I brought in a consultant to evaluate our business. She discovered that we were a transactional company, meaning our focus was on driving leads and driving sales, not on the customer experience. I learned that customer service is what they pay us for and what they expect. The customer experience is what leads to repeat and referral business.
7. TCPA & DNC Laws. Although the Do-Not-Call laws are over a decade old, we’re just starting to hear of agents and brokers being targeted by law firms that specialize in seeking out individuals on the DNC list who have been contacted by real estate professionals. Based on my research, what seems to be heavily scrutinized right now is the use of multi-line dialers, mass texting services, and direct-to-voicemail services to those with a phone number registered with the FTC. The increased awareness of these laws is causing agents and brokerages to be more cautious when using these services to reach out to their databases. Why is this affecting the database formula? The term work your database has long meant calling, seeing, and adding value. If the laws change the way we reach out, then it will change the ratio of contacts to appointments set.
If you don’t make changes now, your database business will decline as time advances. So, how can you maintain and increase your current level of database business? Here’s how to start: Write on a whiteboard or an easel: “What can I do, change or implement so that the people in my database feel obligated to use my services and refer me to others?”
Jeff Glover started his career in retail sales at the age of 16. After becoming a top 150 salesperson for Circuit City nationwide, at the age of 19, Jeff decided to enter real estate. In 2009, Jeff started Jeff Glover & Associates, Realtors. That team is now composed of 25 agents selling over 1,000 homes a year. Jeff is also the Operating Partner of multiple Keller Williams Realty offices and has just over 500 agents in his brokerages. His coaching and training organization, Glover U, hosts over 50 events per year.
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