Lars Heddenborg argues paid leads are too expensive now, so real estate agents should focus on referrals instead. A dentist grew from 60 to 1,600 Google reviews by aggressively asking clients, which turned each client into 2-3 referrals.
Are you noticing that lead costs are going up or going down? I don't know if it's just me, but ever since I got into the business, there are these lead aggregators and referral sources that are doing everything they can to go after every piece of our commission check. And today, I want to teach you how to stop the insanity and how to turn every client you work with into two to three more clients like clockwork. I'm Lars Heddenborg, founder, Real Estate B School, and I want to dive into a process that I learned early on in my real estate journey as I saw lead sources rising in terms of what they charge for leads, and the conversion rates were going down and everything was going sideways, but they were still charging more money. So I decided to model what other industries were doing in terms of just providing a service to clients that was referral worthy and then tracking, you know, how many referrals I can generate from every client that I was working with. That is the game that I want you to start playing in your real estate business. So I don't really care what you're doing to generate leads today, but the goal is to turn every one of those leads into, of course, conversations and set appointments. And you're meeting with would be clients. And you're, you're presenting your services and you're getting them to be loyal to you, whether it's a buyer, agent, or being their seller's agent, and then getting them closed, but getting them to a point in the process where throughout the process, you are in the beginning making a promise, and then you're fulfilling that promise. And as a byproduct of fulfilling that promise, they are giving you referrals along the way. Now, there's a slightly more involved process that goes into this, but the general idea that I want you to understand is that if you're paying for leads, you are playing their game. You know, whether it's Zillow or Ideal Agent or homelight or realtor.com, whatever the lead source is, you are letting that lead aggregator get in between you and the ultimate client, which is that buyer or seller prospect. And so the only way to fight that fight, because you can't fight it based on money, they just charge what they want to charge. Take Zillow, for example. They started out in my market at around $40 a lead, and we were really good at lead conversion. So we could take that $40 lead and on average turn 1 out of 15 or 20 of them into a closed transaction. So that's like 5 to 7% conversion rate. So if 100 Zillow leads came in, we could turn 5 to 7 of them into transactions. So here's what happened with that single lead source. That lead went from $40 a lead to $160 a lead. So it went a four times increase, but the lead quality went down. So it went from like five to seven out of a hundred that we can convert from lead into closing to like two to three. So we're paying four times the lead cost and the quality of the leads is going down by a factor of two to three times. So I don't even know what that math is, but it's not going in the right direction. So let's do the math real quick. If we paid $40 per lead and it took 20 of them, right? One out of 20, so about $800 to take a Zillow lead. The cost per closing of a Zillow closing, if the lead cost went up four times, so that's 800 goes to 3200, and it converted half as much, then it went to 6400. So that $800 closing from Zillow turned into $6400. Right. And I don't know if that math, math is exactly right, but the math did not go in the right direction. So I decided, and I was inspired by an experience I had with my dentist, of all places, where it was the kind of place where you go through the process and you know, you know, it's different. They give you a tour of the office, they show you the different departments of this dentist office. You know, you get your teeth cleaned and they schedule your appointment and print out that little reminder card and then they get you to the front desk. And when I got to the front desk, the lady at the front desk said, you know, how was your experience today? Was it a five star experience? And I said, yeah, it was great. And she said, you know, have you left us a five star review online yet? And I said, no, I hadn't. And she grabbed her phone, I don't have my phone on me. But she grabbed her phone and she said, well, take out your phone and, and you know, open up a browser. And she kind of like modeled what to do. And all of a sudden I was leaving a five star review and I said, what? Why, why is this happening? I asked her two questions. I said, hey, listen, why do you think ownership of this dentist's office is doing, is asking you to do this and do you get paid a bonus for soliciting? Or getting these referrals or testimonials rather online reviews. And, and she said the owners told her that, you know, the ways that they were generating business had gone through the roof. And I knew the owners of this office because they were on the same radio station that I was on and I was noticing that radio was doing the same thing that Zillow leads were doing. The prices to be on air were increasing and the effectiveness was going down even more dramatically than these online home search leads. So she said, so the owner said that, you know, mass media and print advertising and, you know, paying for leads online was going down dramatically and that their best source of business was online reviews. Social proof. And I instantly had this moment where we hadn't focused on social proof as a real estate business. I went right back to the office, I grabbed our operations manager and our closing coordinator. I said, hey, listen, we are implementing this today. We had less than 60 reviews on Google. That was just naturally people would go and review us. And it wasn't more than three years later where we had 1600 reviews on Google for our services. And now regularly we get folks calling or going to our website and the lead source is organic search. So it didn't cost us any money to get, you know, to use social proof as a lead gen leverage, but just a little bit of process, a little bit of forethought, realizing that that client in the car or that seller's house that you have listed, they are the source of the next two to three deals and work with them in such a way where you're making these bold promises in the beginning and then you're following through on those promises so that the natural byproduct are referrals, 2, 3, 4 pieces of business from that 1, 2 piece of business. So that is the secret to staying in business and not only surviving, you know, the shift that we're going to be going through, but thriving and kicking the crap out of this shift and taking your unfair share of the market as most agents are running for the hills, you know, getting out of the business, you will be growing your business over the next one, two and three years. So if you're at the point in your business growth journey where you know that you need help, but you just don't know how to go about it, I'm asking you to consider becoming our next case study. Just go to rebs case study program.com that's R E B S, which is real estate, B school case study program.com and we'll see you on the inside. Be good.
