Retaining Existing Customers Is Cheaper Than Acquiring New Ones
Gary Keller, co-founder of Keller Williams Realty, raises an interesting question: We know that, across the country, home buyers and sellers report a high degree of satisfaction with their agents. In the most recent Profile of Home Buyers and Sellers,produced by the National Association of Realtors®, 88% of buyers reported that they would probably use the same agent again (actually, 73% said they definitely would). Similarly, 84% of sellers reported that they would use the same agent again. (These numbers are consistent with Profiles over the past years.) Yet, this year, as with past years, only 12% of buyers and 25% of sellers actually engaged the agent with whom they had worked previously. “What,” asks Gary Keller, “is up with that?”
Much of the difference between principals’ stated intentions and their actual actions can, so to speak, be explained “naturally”. First of all, there seems to be a fairly robust turn-over rate in the real estate business. Some of those would-be repeat agents may have left the business. Also, sellers frequently moved a considerable distance away. It wouldn’t be feasible for them to hire the same agent for a subsequent transaction.
Still, that doesn’t seem sufficient to explain the divergence between expressed satisfaction levels and actual repeat business. And, anyway, we, like Gary Keller, know the answer. People use a different agent because their previous agent – with whom they were quite satisfied – didn’t keep in touch.
Real estate agents are certainly not alone in not paying sufficient attention to their existing customer base. Business consultants and advisory firms all around the country make a nice living by, among other things, pointing out to their clients how important it is to realize the value of an existing customer base. Teresa Harris, of Second Opinion Marketing, writes, “Failing to have a marketing focus on your existing customers is a massive mistake.” Marketing Metrics says that the probability of selling to an existing customer is 60-70%. The probability of selling to a new one: 5-20%. And Karl Stark and Bill Stewart of Avondale, an advisory firm to growing companies, say “Growing businesses tend to spend so much of their time and money acquiring new customers that they often overlook their best source of growth: retaining and growing their existing customer base.”
Not only is retaining existing customers important to any business, the consensus among business advisors is that it is also a lot cheaper. Of course the costs, and the way of making assessments, are going to vary widely over different types of businesses. Nonetheless, it appears that the most commonly-used estimate is that the cost of acquiring a new customer is 6 to 7 times greater than the cost of keeping an existing one. (One who is also a likely referral source.)
Real estate agents should think about such things. We all know agents who spend hundreds – some who spend thousands – of dollars each month in the quest to acquire new customers. Yet, in my experience at least, there are few who will spend even 15% of their marketing budget on retaining the existing customer base.
To be sure, as Teresa Harris says, “It goes without saying that the types of marketing activity that you’d use to attract customers could be very different to the tools you would use to serve existing customers.” Most agents’ web presence is probably designed to attract new business; whereas keeping in touch and showing appreciation call for different types of activity. Designing such a program calls for imagination and consideration. It isn’t just sending out cards at Christmas.
So, yes, it takes some time, money, and energy for a real estate agent to keep in touch with an existing customer base. But doing so has its rewards; not only in repeat business and referrals, but also in finding out that those people who appreciated you, still do.
Author: Bob Hunt – RealtyTimes.com
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