The key to sales is traffic, and the key to building traffic is marketing.
Before the housing downturn, builders operated quite effectively with marketing and sales budgets that ranged between 5% and 8% of their gross revenues. But since then, challenging sales and a growing use of the Internet have changed that rule-of-thumb equation.
Marketing’s role is to deliver warm bodies. But in the today’s market, most people — as much as 90%, according to marketing statistics — begin their new-home shopping online.
If you’re like many builders, you typically spend between 1% and 3% on collateral materials, newspaper and magazine advertising, direct mail, model homes, Realtor® co-ops, sales commissions and sales management to generate traffic. I recommend that you spend at least 50% of that overall budget on your website, Internet opportunities and search engine optimization (SEO) in order to boost your online visibility.
A simple Google search for “home builders Baltimore, Md.” conducted on June 15 brought up 597,000 results. Effective SEO will place your website near the top of those results and make you much easier to find.
Optimize Your Website
Simply stated, SEO is a series of online processes — public relations, e-blasts, copywriting, back linking, blogging, social media, etc. — that can help bring your website up in a search engine’s organic results.
A builder can purchase a simple, beginning SEO campaign for as little as $400 per month and realize results in six to 12 months. A more comprehensive campaign can cost upwards of $2,500 a month.
If your website is more than three years old, it’s time to create a new one or seriously freshen it up, so budget for SEO, refreshing your website and portals and other online marketing to boost your Internet presence.
Where finances allow, build a model with a sales center in your community. It’s your most effective, emotion evoking closing tool.
Again, budget percentages vary depending on your volume, but if you hope to average one-and-a-half to two home sales a month, include 1.5% to 2% in your budget for a model and sales center. Understand that your model and sales center will only appear fresh for about 18 months and then begin to lose its effectiveness, so don’t rely on it for three years — and wonder why something isn’t clicking.
Realtor® Co-ops Matter
Real estate agents typically are involved in as many as 80% of all home sales in a given market. In my opinion, every builder should co-op with Realtors® at the local going rate — generally 2% to 3% of the home’s contract price.
The number of cooperative sales will vary — from 20% of your total sales in rural areas to up to 80% in urban centers. So, budget for your co-op sales as accurately as you can because if you underestimate them your overall budget will take a huge hit.
When budgeting for sales commissions and sales management, your market sets the pay scales. But builders have some leverage because many salespeople are out of work. You should budget enough to hire of a salesperson with the level of experience and expertise that you want.
Collateral Materials Are Still Important
Since most prospective buyers narrow their choices through online research before physically visiting a community, collateral material has less of an impact on their decision-making than in the past — but not too much less.
By the time prospective buyers visit your sales center or mode,l they more than likely have already visited your website several times and narrowed their choices to a handful of builders or communities. Consequently, collateral brochures should reflect your website and include information directing people back to it.
When budgeting for brochures, only budget enough to design, create and print about 6-8 months’ worth of the handouts. Because you should continually update your website to keep it fresh, a brochure reflecting your website will have to keep pace with it.
These constraints on the viability of your brochures make your sales center point-of-purchase displays that much more important to your marketing.
I believe you should invest more money in your displays than in your printed materials. You want to make sure that prospects who are still considering you — after eliminating most of your competition — see displays and product materials as soon as they walk through your door that validate their decision to visit your model.
There is no room for cheesy marketing here. This is where you close the deal. Consumers expect vibrant imagery, so budget enough to purchase a few high-quality displays to help make it happen.
Brian Flook, MIRM, is president of Power Marketing & Advertising, Inc., an advertising, marketing and sales consulting firm that has helped create new-home marketing budgets for home builders and the real estate industry. He also is an industry speaker and trainer who has been featured at the NAHB International Builders' Show since 1996. For more information, visit www.power-marketing.com; or email Flook, or call him at 301-416-7861.
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