REALTOR® Magazine Online: How Much Should You Spend on Advertising?

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GET THE MOST FROM YOUR ADVERTISING DOLLAR

How Much Should You Spend on Advertising?

Different experts advise different formulas for determining advertising spending. Keep in mind that these figures are for all advertising, not just property advertising.

Allocate between 30 and 35 percent of your gross commissions to advertising, says real estate author William Pivar.
Allocate 15 percent of annual overhead to advertising, says Joan McLellan Tayler, author of From Ads to Riches.
Allocate 20 percent of gross revenues, less commissions, to advertising, says Hal Douthit, creator of the “Computer Adwriting” software program.
Allocate 2.9 percent of your gross sales if you want to be average. This is the amount that the average real estate salesperson or manager spends on advertising, according to the National Association of America’s 2002 Newspaper Advertising Planbook.

Budgeting Tips for Advertising

Allocate the biggest portions of your annual advertising budget to the months in which you generated the most sales the previous year. —Courtesy of the Newspaper Association of America
Use tracking analysis to determine the cost per contact for each advertising medium you use. Calculate that figure by dividing the cost of the ad by the number of responses.
Buy advertising in quantity to obtain discounts. If you don’t have enough listings to qualify for a discount, pool your ads with others from your company for the maximum reduction.
Contract for at least six months of advertising to obtain frequency results. You can change the ads if you continue to buy the same amount of space over that period.

TIP: Never put classified ads on an unlimited run. If the property sells and you forget to cancel, you will still have to pay.

For the Broker: Tips for Distributing Advertising Dollars to Associates

Determine how much you will spend for advertising. Start with an annual budget, but don’t necessarily divide that number by 12. Instead, allocate more money to months with the highest sales activity. For instance, if your sales last November accounted for 10 percent of your total sales last year, you would allocate 10 percent of your annual advertising budget, or $2,000, to advertising the next November.Put aside one-quarter of your month’s allocation for company and institutional advertising. This money is also a backup in case a salesperson has a legitimate need for more funds. Broker share: $2,000 X .25% = $500
Divide the remaining three-quarters of the funds equally among the current listings on a set day each month. Make each salesperson submit active exclusive listings to you before you budget. Associates share ($1,500) X 6 listings = $250 per listing this month.
Once the money is set; it’s set. Do not deduct money for listings that sell in less than a month or that expire during the month. If salespeople have money remaining for one of these reasons, they may use it to promote other properties or for general farming and personal marketing.
Debit the money allocated to each salesperson as ads are turned in.
Require that all monies be spent within the month, although be willing to make exceptions for farming expenditures.
Set aside a certain amount of money for new sales associates to promote themselves during their first three months with the company.

Adapted from“Setting Up Your Agents’ Ad Budget Control,” by Mary Beth Dunn,The Real Estate Professional,March/April 1996

Tips to Track Your Ads

Insert codes into all classified and display ads to help in tracking response rates.
Train office salespeople to ask callers where they heard about the property and keep notes in a log.
In tracking responses, ask callers what about the ad attracted their attention and keep notes in a log.
Create an ad schedule book to keep copies of all ads that run with the issue date, content of the issue (e.g., special homes supplement, real estate guide, decorating section), and the location of the ad in the publication. See if you can determine any other factors that help produce a significantly higher response than average to an ad.
Consider installing a separate phone line and using that number only for ads and yard signs, suggests real estate author Joan McLellan Tayler. It will help make tracking responses much easier.

Getting The Most From Your Advertising Dollar , next page >

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