English
Cost of Success: Predicted and Unpredicted Prospects
Introduction
Understanding the costs associated with achieving success is crucial. This chapter analyzes these costs, focusing on lead generation costs, dividing them into “Met” and “Haven’t Met” categories. It explores the scientific principles supporting this strategy, provides examples, and uses mathematical formulas to estimate costs.
Theoretical Framework: Dividing potential clientsโ and Its Importance
Dividing potential clients into “Met” and “Haven’t Met” is based on the degreeโ of relationship and prior interaction. This division allows for more effective marketing strategy and budget allocation.
- Met: Individuals with whom you already have a relationship, such as past clients, friends, professional network members, or those who have interacted with your brand. Marketing to these clients is more cost-effective due to pre-existing trust and familiarity.
- Haven’t Met: Individuals with whom you have not interacted, potentially from a targeted geographic area (Farm Area) or a specific demographic. Marketing to these clients requires greater effort and higher costs due to the need to build awareness and trust from scratch.
Scientific Principle: This division is based on relationship marketingโโ principles, focusing on building long-term relationships, and the Hierarchy of Effects theory. Marketing to “Met” clients aims to quickly move from liking to purchase, while marketing to “Haven’t Met” clients aims to build awareness and knowledge first.
Measuring the Cost of Success: Cost Analysis for Each Client Category
The following table summarizes the costs associated with each category of potential clients, based on data from “The Millionaire Real Estate Agent” book:
| Item | Met | Havenโt Met |
|---|---|---|
| numberโ of people to reach for a big goal (320 deals) | 1,920 | 16,000 |
| Annual touches | 33 | 12 (direct mail) |
| Number of people to reach per deal | 12 (every 12 people leads to 2 deals) | 50 (every 50 people leads to 1 deal) |
| Touches required per deal | 396 (12 people ร 33 touches) | 600 (50 people ร 12 touches) |
| Average cost per touch | $0.50 | $0.50 |
| Cost per deal | $198 (396 touches ร $0.50) / 2 = $99 (or $198 in worst case) | $300 (600 touches ร $0.50) (or $600 in worst case) |
| Total cost to achieve goal (320 deals) | $31,680 (320 deals ร $99) (or $63,360 in worst case) | $96,000 (320 deals ร $300) (or $192,000 in worst case) |
Mathematical Formula:
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Cost of Reaching Met Clients (Cost_Met):
Cost_Met = (Number_of_Sales * (Contacts_per_Sale_Met * Touches_per_Contact_Met * Cost_per_Touch)) / Sales_per_Contacts_MetWhere:
Number_of_Sales: Target number of deals.Contacts_per_Sale_Met: Number of met contacts required per sale.Touches_per_Contact_Met: Number of touches per met contact.Cost_per_Touch: Cost per touch.Sales_per_Contacts_Met: Number of sales per met contact.
-
Cost of Reaching Haven’t Met Clients (Cost_Haven’t_Met):
Cost_Haven't_Met = Number_of_Sales * Contacts_per_Sale_Haven't_Met * Touches_per_Contact_Haven't_Met * Cost_per_TouchWhere:
Contacts_per_Sale_Haven't_Met: Number of haven’t met contacts required per sale.Touches_per_Contact_Haven't_Met: Number of touches per haven’t met contact.
Results Analysis: The table and equations show that acquiring a “Haven’t Met” client is much more expensive than acquiring a “Met” client. This emphasizes the importance of investing in and maintaining strong relationships with existing clients.
Practical Applications and Related Experiences
- Case Study: An agent targeting 100 deals annually needs:
- (100 * 12)/2 = 600 Met clients at a total cost of (100*99)= $9,900.
- (100 * 50) = 5000 Haven’t Met clients at a total cost of (100*300)= $30,000.
- Total Cost: 9,900 + 30,000 = $39,900.
- Experimentation and Testing: Agents should track their actual Cost per Touch and analyze the ROI of each marketing strategy. Data analysis tools can identify the most effective channels and adjust the budget accordingly.
- Customizing Communication Strategies: Met clients may respond better to personalโ contact, while Haven’t Met clients may require broader strategies like online ads, direct mail, and local event participation.
Cost Management and ROI Improvement
- Budgeting: Lead generation costs should constitute approximately 10% of total income.
- Focus on Effectiveness: Instead of just increasing the number of touches, focus on the quality of communication. Personalized messages, valuable information, and appropriate timing can make a big difference.
- Leveraging Technology: Using CRM tools can help track interactions, analyze data, and personalize messages.
- Building Relationships: Investing in strong relationships with existing clients can lead to increased referrals and repeat business, reducing reliance on Haven’t Met clients.
Conclusion
Understanding the cost of success, especially lead generation costs, is essential for achieving the Millionaire Real Estate Agent goals. By dividing potential clients into “Met” and “Haven’t Met” and analyzing the costs associated with each category, agents can allocate marketing strategies more effectively and improve ROI. Flexibility, performanceโ improvement based on experience, and a focus on building strong client relationships are keys to achieving sustainable success.
Chapter Summary
Introduction: This chapter from “The Art of Achieving Goals: Millionaire Agent Guide” analyzes the costsโ of acquiring leads, distinguishing between “Met Database” (existing relationships) and “Haven’t Met Database” (new contacts), and provides a quantitative model for cost estimation.
Key Points:
- Customer Types:
- Met Database: Existing relationships; marketing focuses on strengthening relationships through frequent communication (33 timesโ annually).
- Haven’t Met Database: Potential customers with no priorโ contact; requires direct marketing strategies (12 timesโ annually).
- Cost Measurement: The chapter presents a model for calculating the cost of acquiring leads from each category, considering the average cost per “touch.”
- Met Database:
- Marketing to 12 people 33 times per year results in 2 sales (one referral, one repeat).
- 396 touchesโ (12 x 33) = 2 sales.
- At $0.5 per touch, the cost is $198 per 2 sales, or $99 per sale (worst case: $198).
- To achieve 320 sales, 1920 people are needed in the Met Database.
- Total cost: $31,680 annually (worst case: $63,360).
- Haven’t Met Database:
- Marketing to 50 people 12 times per year results in 1 sale.
- 600 touches (50 x 12) = 1 sale.
- At $0.5 per touch, the cost is $300 per sale (worst case: $600).
- To achieve 320 sales, 16000โ people are needed in the Haven’t Met Database.
- Total cost: $96,000 annually (worst case: $192,000).
- Budget Allocation: Emphasizes allocating about 10% of total income to marketing and lead acquisition.
- Cost Tracking: Encourages tracking the actual cost per touch to improve budget accuracy.
Conclusions:
- Acquiring Met Database leads is much less expensive than Haven’t Met Database leads.
- Real estate agents should focus on building and maintaining Met Databases.
- Financial planning basedโ on quantitative analysis of lead acquisition costs is necessary for long-term success.
Implications:
- Resource Allocation: Agents can use this information to allocate marketing budgets effectively, focusingโ on high-return activities.
- Marketing Strategy Improvement: Data can be analyzed to identify the most effective marketing strategies for each lead category.
- Realistic Goal Setting: Analyses help set realistic goals based on estimated costs.
- Continuous Measurement and Improvement: Costs and marketing results should be tracked continuously.
