Frequently we receive marketing related questions in the NATIONAL ASSOCIATION OF REALTORS® Library such as “What percent of the total budget should be allocated to marketing?” or “To which channels should those marketing dollars be directed?”, “What sources are good for market research?” and “How do I develop a marketing plan?” To answer these and other marketing-related
questions, this two-part article series will unveil the ideas, resources, and solutions offered by students and faculty of REALTOR® University’s Master of Real Estate program, starting with the development of a marketing budget.
The Marketing Budget
Real Trends publishes useful data on marketing budget allocations in its annual Brokerage Performance Report. The most recent edition offers the mean average percent of Gross Commission Income per sales office, dedicated to marketing efforts, for all regions, at 2.8% in 2011; a slight downtick from the 2010 number of 2.9%. Some regional differences exist with marketing expenditures, with the Northeast spending the most at 3.6% and the West spending the least at 1.8% (Real Trends, 2012, p. 29).
With a percentage of Gross Commission Income in mind for allocation toward marketing efforts, the next challenge is in determining which marketing channels should receive a piece of the budget. The answer very likely depends on your niche market, based off consumer interests and the manner in which your markets consume information. An annual review of your closed sales will offer some insight. Ideally, your records show how your clients found you. A few resources in the NAR Library offer examples of client tracking sheets where each time you close a sale, you fill out a form with details on where the client found you. This information can provide indicators as to where your marketing dollars yielded the highest return on investment.
Market Segmentation: Primary Sources
What about prospective clients in market segments you have not yet identified? Seasoned real estate professionals will offer that many factors play in to a successful marketing plan and budget. Some dedicate a portion of their marketing budget to professional networking memberships and conferences. These professionals find that referrals support a significant portion of their business. Others work to establish their own community think-tanks composed of venerable local professionals—accountants, lawyers, investors, local government leaders, etc.—to keep a pulse on their community’s economy, sentiment, interests, and motivations. Perhaps the attorney in your group noticed some recent regulatory changes that will call for more appraisals in the future, denoting an opportunity for a new business venture, or perhaps the accountant sees more effective purchasing power coming from a new market segment.
Another option is to establish a focus group. Community “think-tanks” and community investor groups are both tangential to the concept of the focus group. For the marketing dilettante: a focus group is a group of individuals representative of your target market gathered to engage in a conversation you facilitate through asking open-ended questions (Throupe, 2011, p. 303-304). Perhaps you want to learn more about the Millennials in your market. You could pose questions such as: “One a scale of one to ten, with one being least important and ten being most important: how important is home-ownership to you?” or “What are your home ownership goals in the next 1-4 years?” Obviously, be aware of federal laws regarding discrimination and be sure your focus groups are not only representative of your target market segment, but are also in compliance with the federal anti-discrimination laws and other applicable federal, state, and local laws.
Another route for gathering market information is “farming.” Farming can entail door-to-door or over-the-phone conversations, where a professional administers one-on-one qualitative and quantitative surveys. Chris Grover’s Sales and Marketing 101 for Real Estate Professionals (available for checkout in the NAR Library’s collection) offers ideas for survey questions. If pursuing this method of market research, be sure you understand federal, state, and local solicitation laws, such as the Do Not Call Registry, to ensure your farming process is in compliance with the law (for more information on this topic, see the NAR’s Field Guide to Do-not-call and Do-not-fax Laws).
Data garnered via the aforementioned processes is known as “primary” data—it is data generated through your own individual efforts. Though valuable, this data is often costly in the time required for collection. Many professionals opt to use a combination of primary and secondary data for just this reason.
Market Segmentation: Secondary Sources
Secondary data entails the application of data gathered by outside sources—such as government agencies, local chambers of commerce, title insurance companies, multiple listing services, professional associations and networks, not-for-profit research institutions, universities, news sources, journals, and trade publications. A recent scholarly discussion in a REALTOR® University Master of Real Estate course offers excellent insight into the real estate market research process. Some of the sources mentioned include:
||Type of Data
||For facts and figures on specific geographic areas.
|U.S. Bureau of Labor Statistics’ Occupational Outlook Handbook
||For unemployment rates, labor force data, industry trends, and other labor force demographics.
|U.S. Bureau of the Census’ American Housing Survey
||For national and metropolitan housing data, such as household characteristics, costs, size, source of down payment, and much more.
|Local chamber of commerce
||For economic analysis data.
|County recorder of deeds office
||For location-specific information about real estate activity.
|Local department of traffic office
||For information about traffic—counts and summaries.
|Economic studies from local economic development firms or by local government offices.
||For a variety of demographic, appraisal, and economic information on a community or neighborhood.
|Municipal and county planning offices
||For information about site planning applications, zoning changes, upcoming project types (i.e. commercial, residential, mixed-use).
|State, county, and municipal economic development offices
||For labor rates, local employment information, labor industries projections.
|NAR’s REALTORS® Property Resource (RPR)
||To pull market comps and look at BPOs.
|National, state, and local REALTOR® association surveys
||For statistics on where clients found their agent, what types of homes are selling, and client demographics.
|State data centers (listed in our Directory of Real Estate Research Centers Field Guide)
||Many states have online data centers, usually funded through the state’s government. Data includes population, employment, and demographic data, estimates and projections, research briefs on migration, cost of living, and much more.
|Title insurance companies
||For data on a particular property, details of property transfer activity for a given time period by geographic area, and market comparables.
|NAR’s Local Market Reports
||For economic performance by major metropolitan area, including labor statistics, mortgage and foreclosure activity, and housing prices.
|NAR’s Relocation Reports
||Offers county-by-county migration reports, to express the migrate flows within the United States. Includes demographic summaries of homeownership rates and types of home mortgages.
|NAR’s Annual Profile of Home Buyers and Sellers
||For national home buyer and seller trends.
|Pew Internet and American Life Project
||For a diversity of research reports on American behaviors, particularly with regards to technology use.
||For a diversity of research reports covering the economy and demographics in the United States.
||Population, economic, and financial research nationally and often by geographic region.
After garnering both primary and secondary data, the next step is to incorporate the data in to your marketing plan, which is covered in the next article in this series, accessible here.
Grover, C. (2007). Sales and marketing 101 for real estate professionals. Chicago, IL: Dearborn Financial Publishing, Inc.
Harmon, L. C. & Harmon, K. M. (2008). Marketing residential properties: The science and the magic. Chicago, IL: Institute of Real Estate Management. See pages 156-160.
O’Connor, T. & Pupa, N. G. (Eds.). (2011). Principles of real estate management. Chicago, IL: Institute of Real Estate Management. See page 223.
Throupe, R. (2011). The use of focus groups for property valuation research. The Appraisal Journal, 79.4: 301-313.