Real Estate Advertising. The Return On Investment Of Real Estate Pay-Per-Click Ads.
Terrapad
by LumenSpei
Let’s discuss the ROI you can expect from PPC, the factors that impact your expenses, and how much commission you can earn. Keep reading to find out how PPC can significantly increase your revenue.
Where else can you spend $12 to find a potential home buyer or seller?
It’s important to remember that your CPL relies on various factors such as your market, competition, and website conversion rate. So stay ambitious and work towards optimizing these factors to reduce your CPL.
Here’s an example for an agent who wants to generate 1 new lead per day:
Lead volume * expected cost per lead * 30.4 days
1 lead per day * $12 cost per lead * 30.4 days = $364.8 per month or an annual budget of $4,377.60.
Other Expenses
Since your PPC campaigns are linked to landing pages and your CRM, you may want to include your CRM costs as part of your PPC expenses.
The setup fee for your Terrapad CRM is $497 with a monthly package fee of $497 for your marketing services. That’s a total annual cost of $6,261.
Total investment
$4,377 annual PPC budget + $4,994 CRM expenses = $9,371
On average, agents see a lead-to-sale conversion rate of 1-3%. Of course, this figure can increase with a diligent nurturing strategy, compelling branding, and strong testimonials.
The average home price in Canada is $750,000 and agent will typically receive between 2-4% in commission of the home’s final purchase price. Our example agent has a 60/40 split with their brokerage.
Formulas:
Expected sales = annual lead volume target * lead-to-sale conversion rate
Income per sale = side commission * commission split * average home price
Expected GCI = expected sales * income per sale
Math:
365 annual lead target * 2% conversion rate = 7.3 expected sales
3% side commission * 60% commission split *$750,000 average home price = $13,500 per sale
7.3 expected sales * $13,500 per sale = $98,550 GCI
ROI is a metric that calculates how much profit you make in comparison to the amount of money you initially invested.
In order to achieve a 100% ROI, you would need to double your initial investment. For instance, if you invested $1,000 in PPC ads and earned $2,000 from the campaign, your ROI would be 100%.
Essentially, for every dollar you spent on PPC ads, you earned a dollar in profit.
To calculate your ROI, use this formula:
ROI = (GCI – total PPC investment) / total PPC investment * 100%
Let’s calculate our example agent’s ROI.
(98,550 GCI – $9,371 PPC investment) / $9,371 PPC investment * 100 = 952% ROI
In order to reduce your cost per lead, it is essential to focus on two main factors: your cost per click (CPC) and website conversion rate.
To lower your CPC, it is important to pay close attention to your PPC ads by improving your quality score, running relevant ads, optimizing keywords to match your target audience’s search queries, and allowing your campaign to run for at least six months.
Your website should be user-friendly and relevant to your target audience’s search intent. It’s also crucial to have an efficient lead capture mechanism in place.
ROI with $12 CPL: 952%
ROI with $10 CPL: 1040%
It is essential to understand that generating a higher number of leads is directly proportional to the success of your PPC campaign. If your current cost per lead (CPL) is reasonable, it is advisable to allocate more budget towards the campaign to increase lead volume.
However, it is important to keep in mind that generating more leads also means investing additional time in nurturing them. While setting your lead target, ensure that you have the necessary capacity to manage a higher volume of leads.
30 leads/mo = 952% ROI
60 leads/mo = 1,334 % ROI
As you can see, you don’t have to have a ridiculous budget or generate hundreds of leads in order to benefit from PPC ads – it all comes down to converting leads to closed deals.
Let’s compare the returns of an agent with a 1%, 2%, and 3% conversion rate, using the same figures from our example agent.
1% conversion rate = $49,275 returns
2% conversion rate = $89,550 returns
3% conversion rate = $147,825 returns
It’s evident that agents don’t need a large budget or a multitude of leads to reap the rewards of PPC ads. The key factor lies in the ability to successfully convert leads into closed deals. It is uncommon for ad-generated leads to become clients immediately, as they usually require multiple follow-up emails to get a response.
Many agents tend to give up on their follow-up plan if they fail to establish contact after the initial attempt or if the leads require more attention than referrals. So how does a 1% agent become a 3% agent?
It’s simple: by having a slick follow-up strategy in place.
PPC should not be viewed as a quick-fix solution as it can take up to 6 months for the campaign to collect sufficient data and deliver desired outcomes.
However, investing in PPC for a longer period can offer better returns on investment as it helps enhance the quality score, which is crucial for providing relevant information to search engine users.
This, in turn, lowers PPC costs and leads to maximizing your profits. It is imperative to maintain a strong dedication towards improving the quality score for long-term results.
No marketing strategy has guaranteed results, but with a fully optimized campaign and strong follow-up strategy, we’re confident you’ll be as big of a PPC fan as us.
Do you want to get the best ROI from your PPC campaign? Book a free 1:1 consultation today to discuss how you can use PPC to reach new customers and improve your bottom line.