Prospecting Essentials: Building Your Real Estate Database

Prospecting Essentials: Building Your Real Estate data❓base

This chapter delves into the scientific principles and practical methods of building a robust real estate database, a cornerstone of successful farming and lead generation. We’ll explore theories, experiments, formulas, and tangible strategies to help you cultivate a thriving contact network.

I. The Foundation: Understanding Database Dynamics

A. The Database as a Complex System:

*   A real estate database can be viewed as a complex adaptive system. This means its effectiveness isn't solely based on the number of contacts, but also on the relationships between those contacts, the information known about them, and your ability to adapt your strategies based on database performance.
*   **Theory: Social Network Analysis (SNA)**  SNA is a powerful tool for understanding the structure and dynamics of your database. It focuses on mapping and measuring relationships between individuals ("nodes") in a network.  Key SNA metrics include:
    *   **Degree Centrality:** The number of direct connections a person has. High degree centrality indicates influence.
    *   **Betweenness Centrality:**  The number of times a person lies on the shortest path between two other people. High betweenness centrality means the person is a key connector.
    *   **Closeness Centrality:** The average distance from a person to all other people in the network. High closeness centrality means the person can quickly reach others.
*   **Application:** By applying SNA principles to your database, you can identify key influencers (high degree centrality), potential connectors (high betweenness centrality), and those who might be difficult to reach (low closeness centrality). This helps tailor your prospecting approach.

B. Information Entropy and Data Quality:

*   **Concept:** Entropy, borrowed from thermodynamics, measures disorder or randomness. In a database, high entropy means incomplete, inaccurate, or outdated data. This reduces the database's value.
*   **Formula:** While a precise entropy calculation for a real estate database is complex, a simplified approximation can be used to illustrate the concept. We can define a variable `p_i` as the proportion of records with a particular attribute completed (e.g., percentage of contacts with a valid email address). The entropy `H` is then calculated as:

    ```
    H = - Σ (p_i * log2(p_i))
    ```
    Where the summation is over all relevant database attributes.
    *   Higher entropy `H` indicates lower data quality.  For example, if you have 10 attributes, each with a proportion of completion around 0.9, the database has low entropy. If the proportions fluctuate wildly or are all low, the database has higher entropy.
*   **Application:** Regularly clean and update your database to reduce entropy. This involves verifying contact information, correcting errors, and adding missing data. The cleaner the data, the better your prospecting results will be.

II. Prospecting and the Growth Equation

A. Prospecting as a Rate Process:

*   **Concept:**  Prospecting is a process with a rate, defined by the number of new contacts added to your database per unit time (e.g., contacts per day, week, or month).
*   **Formula:** Let `N(t)` be the number of contacts in your database at time `t`. We can model the growth of your database with a simple differential equation:

    ```
    dN/dt = r * P(t) - d * N(t)
    ```

    Where:
    *   `dN/dt` is the rate of change in the number of contacts.
    *   `r` is the average rate of converting prospecting activities into new contacts.
    *   `P(t)` is the amount of time spent prospecting at time `t`.
    *   `d` is the rate of contact decay (rate at which contacts become outdated or irrelevant).
    *   `N(t)` is the current database size.
*   **Interpretation:** This equation illustrates the importance of consistent prospecting (`P(t)`) and minimizing contact decay (`d`). The higher the conversion rate (`r`), the faster your database grows.

B. Experiment: Optimizing prospecting channels❓

*   **Objective:** Determine the most effective prospecting channels for adding new contacts to your database.
*   **Method:** Divide your prospecting efforts between different channels (e.g., cold calling, open houses, online lead generation) and track the number of new contacts gained from each channel over a set period (e.g., one month). Calculate the *Contact Acquisition Cost* (CAC) for each channel:

    ```
    CAC = Total cost of channel / Number of new contacts acquired through channel
    ```
*   **Analysis:** Compare the CAC for each channel.  The channel with the lowest CAC is the most cost-effective.  Consider factors beyond just cost, such as the quality of the contacts acquired (e.g., conversion rate to leads). This is similar to A/B testing, where different versions of a webpage or ad are compared to see which performs better.
*   **Application:** Focus your prospecting efforts on the most effective and efficient channels to maximize database growth.

III. Marketing and the “Warming” Effect

A. Marketing as a Catalyst for Prospecting:

*   As outlined in the provided text, marketing can significantly "warm up" cold calls and visits. This aligns with the *Mere-Exposure Effect* in psychology, which suggests that people tend to develop a preference for things merely because they are familiar with them.
*   **Experiment: Measuring Marketing's Impact on Prospecting Conversion**
     * **Objective:** Determine the impact of marketing on the success rate of prospecting calls
     * **Method:** Divide prospecting calls into two groups: (1) those to whom a postcard or other marketing material was recently sent ("warm" calls) and (2) those to whom no marketing material was recently sent ("cold" calls). For each group, track the *Conversion Rate to a Meaningful Conversation (CRMC)*. A meaningful conversation is defined as one that last longer than one minute and where real estate interests are discussed.
    *   `CRMC = (Number of meaningful conversations/ Total number of calls) *100 `
    * **Analysis:** Compare the CRMC for warm and cold calls. A higher CRMC for warm calls indicates that marketing is increasing prospecting effectiveness. Also track which kind of marketing has the best CRMC.
*   **Application:** Integrate your marketing and prospecting efforts. Use marketing to create familiarity and provide a reason to call, increasing the likelihood of a positive interaction.

B. Database Segmentation for Targeted Marketing:
* Concept: Not all contacts are equal. Segmenting your database means grouping contacts based on specific criteria (e.g., demographics, interests, buying stage). This allows for highly targeted marketing, increasing its effectiveness.
* Theory: The Elaboration Likelihood Model (ELM): This model suggests that persuasion occurs through two routes:
* Central Route: Careful and thoughtful consideration of information. Used when the recipient is motivated and able to process the information.
* Peripheral Route: Persuasion based on superficial cues, such as source credibility or attractiveness. Used when the recipient is not motivated or able to process the information.
* Application: Use database segmentation to ensure your marketing messages are relevant and engaging to each segment. This increases the likelihood that contacts will carefully consider your message (central route) rather than relying on superficial cues (peripheral route). Example: Sending a marketing letter targeted at home sellers will be ineffective if sent to someone who has already bought and sold a property through you.

IV. Data Management and Continuous Improvement

* **A. The Importance of Data Integrity**:
    *  Clean and up-to-date data forms the basis of any successful database. This means regularly verifying information, correcting errors, and removing outdated or invalid entries.
* **B. Contact Tracking Software Systems**:
    * These systems have become invaluable in managing large databases efficiently. Their features include sorting and filtering functions along with report generating capabilities, which allow for quick identification of your top performing leads.
* **C. Key Performance Indicators (KPIs) for Database Health:**

    *   Monitor KPIs to track database performance and identify areas for improvement. Examples include:
        *   **Database Size:** The total number of contacts.
        *   **Growth Rate:** The rate at which new contacts are being added.
        *   **Contact Decay Rate:** The rate at which contacts are becoming outdated or irrelevant.
        *   **Conversion Rate:** The percentage of contacts that convert into leads, appointments, or closed deals.
        *   **Engagement Rate:** The percentage of contacts who are actively engaging with your marketing efforts (e.g., opening emails, clicking links).
    *   **Application:** Use KPIs to monitor database health and identify areas for improvement. Adjust your prospecting and marketing strategies based on KPI trends.

V. Ethical Considerations

* **A. Data Privacy Regulations**: It's critical to adhere to all applicable data privacy laws such as GDPR (General Data Protection Regulation) and CCPA (California Consumer Privacy Act). Get explicit consent before collecting and using personal data.
* **B. Do Not Call Compliance**: Maintain compliance with Do Not Call (DNC) regulations. Regularly scrub your database against the DNC registry to avoid making unsolicited calls to consumers who have opted out.
* **C. Transparency and Opt-Out Options**: Always be transparent about how you collect and use personal data. Provide clear and easy-to-use opt-out options in all marketing communications.

By understanding and applying these scientific principles, you can transform your real estate database from a simple contact list into a powerful engine for lead generation and business growth.
```

Chapter Summary

```text
Write a detailed scientific summary in English for a chapter entitled “Prospecting Essentials: Building Your Real Estate Database”
in a training course entitled “Mastering Real Estate Farming: Cultivating Leads and Building Relationships” about the topic “Prospecting Essentials: Building Your Real Estate Database”.
The summary should summarize the main scientific points, conclusions,
and implications of the topic. The summary should be accurate and concise.

       File content PDF (relevant part):

LEAD GENERATION: PROSPECTING ED 1 REV 2– © 2015 KELLER WILLIAMS REALTY INC. 17
Power Session 2 Prospecting
The Lead Generation Puzzle

Prospecting Reinforces marketing❓

Prospecting can be easier when led by marketing. Marketing can provide the reason for your call or visit, and in fact, prospecting after marketing can dramatically increase the odds of getting business. It can “warm” up a purely “cold” call. For example, after mailing an inexpensive postcard to a neighborhood announcing a home that was recently listed, you could call or visit residents and open the conversation with:

AGENT: “Good day, my name is and I’m in real estate. Did you receive the postcard I sent regarding your neighbor’s home that is for sale? Do you know anyone who might be interested in this home? It would be my pleasure to provide the answer to any of your real estate questions.”

Marketing Supports Prospecting

Marketing validates you—it creates recognition and reputation. People may see your signs or fliers before they meet you and feel like they already “know” you. Therefore, you want your marketing of yourself (your branding) to call
attention to you and attract people to you. People will form impressions of you
quickly, so your marketing should represent who you are and the professionalism and customer value you bring to every aspect of your business.

A great example of how marketing can really work is the branding of The McKissack Team in Denton, Texas. Pictures of Jimmy and Linda McKissack featured them giving a “thumbs-up.” After a while, random strangers in the grocery store, video rental store, or doctor’s waiting room began giving them the thumbs-up. It took a few times for Jimmy and Linda to connect the dots and realize their brand marketing was a success. You will learn more about all aspects of marketing in Lead Generation 36:12:3 Power Session 3: Marketing.

18 LEAD GENERATION: PROSPECTING ED 1 REV 2– © 2015 KELLER WILLIAMS REALTY INC.
Prospecting Power Session 2
The Lead Generation Puzzle

Cost versus Time/Effort of Prospecting and Marketing

Cost Versus Time/Effort

Prospecting Marketing

Cost Minimal Could be unaffordable

Time/Effort Maximum Minimal

Prospecting takes more of your time and effort, but can cost little to nothing because it involves making phone calls and visiting people. Marketing, on the other hand, can reach more people in less time, but there is a cost component, which can be high depending on quality and quantity of materials, as well as how often they are distributed.

Don’t fall for the myth “I don’t have the money to lead generate.” Invest your time in prospecting and lead with revenue. You can start prospecting today with a list of people and your phone.

LEAD GENERATION: PROSPECTING ED 1 REV 2– © 2015 KELLER WILLIAMS REALTY INC. 19
Power Session 2 Prospecting
The Lead Generation Puzzle

Exercise Assess Yourself: Where are you now with prospecting and marketing? Directions: Answer the following questions and fill out the grid.
1. How much time each day, week, month, or year do you devote to
prospecting?

How much money do you spend on a daily, weekly, monthly, or yearly basis on marketing?

Prospecting Versus Marketing

Daily Weekly Monthly Yearly

Amount of Time
Devoted to Prospecting

Amount of Money spent on Marketing

  Mins          Mins          Mins             Mins

    Hrs            Hrs            Hrs               Hrs

$ $ $ $

Is your lead generation program prospecting based?  Yes  No

Time: 5 minutes (10 minutes with facilitated discussion)

20 LEAD GENERATION: PROSPECTING ED 1 REV 2– © 2015 KELLER WILLIAMS REALTY INC.
Prospecting Power Session 2

Prospecting:
The Critical
Puzzle Piece

Myths and Truths about Prospecting

Hopefully, your interest is piqued and you are curious to tap into the power of prospecting. Let’s begin with some myths that may be preventing you from reaping the benefits that come from prospecting.

In The Power of One, you learned a basic lead generation myth that if you do a good job, people will just come to you. Your reputation is an important foundation for your business and, certainly, some people will be attracted to you and find you because of your reputation and your marketing efforts. However, not enough will and not soon enough to build or sustain your business. This is a passive approach that may be unreliable, no matter how strong your reputation.

Myth 1

Prospecting = Cold Calling = Rejection

Truth

Prospecting = Meeting People and Building
Purposeful Business Relationships = A Strong Real Estate Business

“You can be the brightest, smartest,
most well-educated real estate person there is, but if nobody calls you, it just does
not matter.”

GENE RIVERS

THE RIVERS TEAM

TALLAHASSEE, FLORIDA

On a KWRI MAPS free coaching call on prospecting, an informal poll was taken of the 162 people on the call. The poll revealed that approximately 78 percent of them prospect less than one hour per day. One reason they gave was they didn’t know what to say. The other reason was that they see prospecting as cold calling.

LEAD GENERATION: PROSPECTING ED 1 REV 2– © 2015 KELLER WILLIAMS REALTY INC. 21
Power Session 2 Prospecting
Prospecting: The Critical Puzzle Piece

Most people forget that prospecting has eleven letters and, instead, treat it like a four-letter word. For many real estate agents, the mere mention of the word prospecting conjures images of sitting at a telephone and calling complete strangers for hours on end, only to face rejection, insults, and slammed receivers. With this kind of thinking, would you think that you would enjoy prospecting? Of course not.

Adopt a new mindset about prospecting. See it in a new light and get excited about doing it at the highest level. Nikki Ubaldini, KWU Master Faculty Instructor, puts it best. “When I teach lead generation,” she notes, “I say that the P word, prospecting, is not a dirty word. It’s not just picking up the phone. It’s getting involved in networking groups and in volunteer situations. It’s making a point to meet people every single day.”

Prospecting is more than phone calling strangers. Sure, cold calling FSBOs and expired listings can be a successful form of prospecting, but you will learn other effective ways of prospecting in upcoming Power Sessions, like holding open houses, hosting seminars, knocking on doors in a neighborhood, and visiting past customers.

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Prospecting Power Session 2
Prospecting: The Critical Puzzle Piece

Myth 2

Prospecting means contacting people you don’t know.

Truth

Prospecting means contacting people you know as well as those you don’t know.

Most people have a limiting belief that prospecting is only about calling strangers. In fact, a prospecting component is included in all Keller Williams recommended action plans for Mets (8 x 8, and 33 Touch.) As part of each plan, and to achieve maximum results, you are expected to call and/or visit those on your action plans a certain number of times in a given period. Therefore, prospecting is a critical element in building and growing relationships with those you know—past customers, Allied Resources, and Core Advocates. Action plans and the different❓ categories of people you know are defined in The Millionaire Real Estate Agent and are further discussed in Power Session 3: Marketing, and Power Session 4: Leveraging a Powerful Contact Database.

There are many examples of very successful agents who, in the beginning, grew the number of Mets in their database to a sustainable level, and now only prospect to their Mets. For example, Dick Dillingham, a very successful agent
in Plano, Texas, and Dean of Keller Williams University – Faculty, grew his database of Mets from 300 to more than 3,000. He decided to focus only on Mets and generate business from those he already knew. In the growth phase of your career, it is recommended you build your database by prospecting to those you don’t know as well as those you already know.

Be like Forrest Gump. Have blind faith. Do it like you don’t know any better.

LEAD GENERATION: PROSPECTING ED 1 REV 2– © 2015 KELLER WILLIAMS REALTY INC. 23
Power Session 2 Prospecting
Prospecting: The Critical Puzzle Piece

Myth 3

Prospecting is what you do to launch your business. Only new agents have to prospect.

Truth

Prospecting is what you do to keep your real estate business running and growing. You should never stop prospecting.

You never stop prospecting because you always need new leads coming into your business. It keeps your skills sharp and your awareness of the market high. You are always looking to add people to your Met database. (Refer to Power Session 4: Leveraging a Powerful Contact Database) At the start of this course, you read about Bill Watson and his relentless, consistent prospecting—Bill
Watson’s Perfect Day. You’ll recall Bill’s commitment to prospecting, “I can’t
ever stop. It’s just what I do.”

Prospecting Statistics

According to the “National Association of Realtors Profile of Home Buyers
and Sellers,” only 22 percent of sellers and 12 percent of buyers already have an
agent they will use. That means there’s plenty of business for you to go after.

The prospecting activities you choose will affect how people choose you. For example, prospecting to people you don’t know (FSBOs, expired listings, visitor to open houses, etc.) will yield some fraction of the overall total buyers and sellers in the market. However, many more buyers and sellers who have done business with you in the past, or who know you through your network (your Mets), will choose to do business with you again, and may refer others to do business with you. These are all viable prospecting options for you.

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Prospecting Power Session 2
Prospecting: The Critical Puzzle Piece

Take a look at more statistics on how buyers and sellers choose an agent from
“The National Association of Realtors Profile of Home Buyers and Sellers.”

How People Choose an Agent

Buyers Sellers

Use the agent who contacted them
Use the agent referred to them by friend, relative, or neighbor
Use the same agent they used before

4% 4%

40% 38%

12% 22%

Now let’s look at the exact same statistics defined in a different and more powerful way—that is, related to prospecting. Based on who you prospect, and how often, people will end up choosing you as their agent.

How People Choose YOU Based on Your Prospecting

Prospecting To: Buyers Sellers

Haven’t Mets
(You contact people you don’t know)
Mets
(You contact people you know and ask them to refer you)
Past Customers
(You contact them and ask them for repeat business)

4% 4%

40% 38%

12% 22%

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Power Session 2 Prospecting
Prospecting: The Critical Puzzle Piece

Five Benefits of Prospecting

Prospecting is an investment and commitment to your business. Smokey Garrett, owner of the Garrett and Nguyen Realty Group in Arlington, Texas, reflects on the importance of prospecting: “Even if you have a closing and you make a lot of money, it’s not from anything you did that day. It’s from the investment in prospecting. I feel better at the end of the day when I’ve made my contacts, because my job is to make contacts and to generate a certain number of leads.”

Prospecting is critical to your business for the following reasons.

Prospecting:

Is inexpensive and yields immediate results
Puts you in control of filling your pipeline of leads
Increases your confidence and skill
Yields quantity leads which yield quality leads
Keeps you in direct contact with the market and protects against market shifts

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Prospecting Power Session 2
Prospecting: The Critical Puzzle Piece

Prospecting is inexpensive and yields immediate results

As we have discussed, lead generation through prospecting means calling or interacting with people face-to-face. Sure, some costs are associated with these techniques—phone service, gas for your car, etc.—but these are minimal compared to the cost of maintaining❓ an effective marketing-based lead generation program. Your time has a value attached to it as well, but prospecting remains one of the most dollar-productive activities a real estate agent can engage in.

In addition, marketing alone is typically a sit-and-wait game. With prospecting, when you reach someone over the phone or you meet with them in person, you immediately get a sense from them if they are interested in the service you can provide. The people you reach will have a conversation with you, answer your questions, or ask you not to contact them again. Either way, you have taken the opportunity to make a connection and gather information for your database. You will know immediately if this contact is interested in real estate services from you now, or you will have a sense about their potential as future business.

Prospecting puts you in control of filling your pipeline of leads

The very nature of prospecting is about starting and building relationships, converting Haven’t Mets to Mets, and cultivating Mets for present or future business.

What are your monthly and annual production goals? Do you know how many leads you will need in your pipeline to meet those production goals? (Refer to Power Session 11: Living Your Goals for more direction on goal setting.) When you get into the habit of setting production goals and tracking your prospecting activities and conversion rates, you will know when you need to ramp up your prospecting. Prospecting puts you are in control of your pipeline. With marketing, you have to wait to assess the effectiveness of your efforts, and you don’t know the size of your pipeline of potential business.

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Power Session 2 Prospecting
Prospecting: The Critical Puzzle Piece

Prospecting increases your confidence and skill

Because prospecting is a contact sport, so to speak, you regularly have the opportunity to hone your people skills and your art of persuasion. You are able to practice and perfect your scripts and dialogues. You’re able to get your own groove and tap into your strengths. You will also easily identify where you can improve your techniques through further training and practice. You will undoubtedly make some mistakes along the way, but with mistakes comes progress.

mokey Garrett, knows the value of time on the task. “When I started out I didn’t know what I was doing. I didn’t know what I was saying. But I don’t think you can really become successful in this industry
without just going and doing it. No matter how many scripts you
practice and how many things you do, it is not going to replace you being at that door or you being on that phone and communicating with the customers.” He continues, “I wasn’t very good at first, but I was motivated to succeed. I didn’t wait until I knew how to call on people; I just did it and made mistakes, and learned from them.”

Jama Fontaine, of Jama Fontaine & Associates in Albuquerque, New Mexico, was rookie of the year her first year even though she didn’t know anyone in her new city. She began her business prospecting through open houses of other agents’ listings. She discusses confidence: “A lot of people that I ended up doing business with my first year were shocked when they found out that I was rookie of the year because they thought I had been in business for a long time. That just comes from confidence.”

Do you recall the lesson of the clay pots told in The Millionaire Real Estate Agent? As the story goes, a ceramics teacher divided his class into two groups. One
was to spend the semester creating one pot of superior quality, and they would
be graded solely on quality. The other group was to produce a large quantity of pots, and they would be graded on the total weight of the pots they created. As it turned out, the group that made the large quantity of pots ended up with the best quality pots as well. Why is this? Because they learned from mistakes and improved their production skills and methods with each pot.

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Prospecting Power Session 2
Prospecting: The Critical Puzzle Piece

Prospecting yields quantity leads which yield quality leads

The story of the clay pots illustrates that art and skill are developed through practice, but it also validates that quantity leads to quality. Consistent prospecting to reach a large population of potential business can lead to better quality leads. And quality leads are ones that have a higher likelihood of turning into closed transactions.

Bill Watson has this advice about the quality of leads: “If you’re a real prospector, if you are talking to 20, 30, 40, or 50 people a day, you don’t need to worry about weak leads. If you are not prospecting every day, you grasp on to whatever you possibly think is a lead because you’re attached to it. You can’t be attached to it if you’re going to be successful. You have to be prospecting
enough so that if the lead is a weak lead, you can disregard it because you know
you are going to have better quality leads as a result of your prospecting.”

Prospecting keeps you in direct contact with the market and protects against market shifts

The reason that agents will hang on to a customer who is worthless is because they have a scarcity
of prospects from a

lack of prospecting.

Worrying about what your real estate market is up to and where it’s headed? If you’re prospecting every day, you’ll be one of the first to know, and it won’t matter.

There will always be people buying and selling, or those who will do so in the near future. And with prospecting, you’re always in direct contact with these people, answering their questions about the market and assuring them that you have services to help them. This direct contact with buyers and sellers also yield invaluable intelligence on current market conditions. Prospecting agents are often the first to know the market is shifting and can act accordingly.

Top-producing real estate agents do not overly worry about inevitable market shifts, and in fact, they actually even see the opportunity in them—an opportunity to gain market share.

Prospecting Essentials: Building Your Real Estate Database