Turning Cold Leads to Cold Cash – The Basics of Lead Conversion

Lead Conversion is What Makes Lead Generation Worth Doing

After several years of selling real estate, I got more into the management and training side of things. I worked for a large franchise that made themselves famous for training. They wanted to be known as a training company. Although there were many great courses and materials available to me regarding lead generation I noticed that NONE of them discussed lead conversion. When I brought this to the powers that be, I was told that “Lead generation is the fuel that powers your real estate business. The more leads you capture, the more closing you will have.” There was even a kind of famous graphic that made its way through the industry to illustrate the point. Perhaps you’ve seen it.

Here is the graphics I was talking about. The concept was that if you always focus on lead generation and pour those leads into the funnel, you will fill the funnel to the brim and then they will come out the bottom in the form of closed business.

Here’s the problem… It doesn’t work like that! I mean, yes, obviously if you capture a ton of leads you will do more business, that’s just simple math. We all know real estate is a numbers game, but this image makes it seem like every lead you put in the funnel will eventually drip out the other end, and somehow it’s supposed to happen without doing anything to convert those leads! The truth is that if you don’t convert the leads you capture, very little will actually drip out the bottom, costing you a lot of time and money.

This website is designed to save you time while earning you more money. If you’re going to make that happen you nare going to need to forget all about this funnel and work your leads!

I find the “Lead Funnel” concept overly simplified and the lack of depth in the concept is costing lead generators a lot of time and money. It’s not as simple as “capture lead, make sale” Heck, that’s the exact same pitch a lot of the internet lead generation companies use to sell you an absurd amount of leads that you don’t stand a chance of being able to properly work to convert.

I prefer to take a deeper look at lead conversion, starting with the definition of a lead, expectations, refining those expectations and discussing a strategy to get more sales from less leads. Let’s begin…

What Is a Lead?

I have already answered this in basic terms. My definition of a lead is someone who said or did something to indicate they may be looking to use your product or services, but you don’t know how serious they are since you haven’t had a conversation regarding their wants and needs. In fact, you may not have even spoken to them yet. I call leads “Haven’t Mets” A friend of mine calls them “Suspects” because he “suspects they may be looking to buy or sell a home, but he’s not sure yet and needs to investigate”. Call it what you will, but remember the keys to being a lead are they did something to indicate they MAY want your product/service AND you don’t know yet because you haven’t talked to them. At this point, we really don’t know what we have. Like my old friend says, we need to investigate…. or as a lead generator would say, we have to CONVERT the lead and find out.

What Does Converting a Lead Mean?

I want to get this out right now because it’s what this whole post is going to be building up to. To me, the definition of lead conversion is getting the lead to answer the question “Can I be your real estate agent?” I don’t care if the answer is yes or no because as soon as you get either answer, you have SUCCESSFULLY converted the lead. You have to make it your personal goal to get a yes or a no out of every lead you capture. If you can’t get the yes or the no, you have to at least go through the whole strategy I will lay out below. Remember, the more you hear “no”, the more you will hear “yes.” In a previous post, I described a friend of mine who had 12,000 leads in his database. My friend was quite proud of that number until I did a little math and made him realize that by not converting any of those 12,000 leads he lost almost a million dollars worth of Gross Commission Income that he could have gained if he got a yes or a no from them instead of just letting them sit in his database in the “lead” group. If 99% of them said no and only 1% said yes… an extra million dollars! Think about that if you still aren’t convinced of how important lead conversion is!

What are the Parts of a Sale?

A lot of trainers, productivity people and especially salespeople like to say there are 3 parts to making a sale:

1. Capture the lead.
2. Put the lead under contract.
3. Sell them your product/service

The truth of the matter is there are 4 steps and the “forgotten” second step is the most important and the most difficult to accomplish. I have a strong feeling that’s why a lot of productivity trainers leave it out of their presentations and I’m certain it’s why internet lead salespeople don’t mention it at all.

1. Capture the lead
2. Convert the lead from “haven’t met” to “met” (Convert them from lead to prospect) After all, how can you put a person under contract if you’ve never had some form of a conversation with them?
3. Sign the contract to represent them
4. Make the sale (Have the closing)

Step 2 is to convert the lead from “haven’t met” to “met”. This is the hard part. I hate to say this to people who struggle to capture leads, because capturing leads is actually the easy part. Lead conversion, on the other hand, requires a lot of time, patience, and consistency.

This is why the people out there selling you the “latest and greatest” real estate tools to make you rich don’t ever want the conversation to turn to lead conversion. That’s where the real work is! They would much rather you believe it’s as simple as “get lead, make sale.”

No one wants to think about conversion, so everyone just pretends it doesn’t exist. The problem is that it does exist and it’s the main reason why so many people who are using $$$ to capture the leads for them are ultimately going out of business. They don’t spend the time required to convert those leads into prospects.

In fact, here’s one of the wildest stories that demonstrates just how much power and sway internet leads have over us. I have a really good friend on the East Coast. He’s quite possibly the best real estate agent I’ve ever met and he has absolutely disrupted his entire market by outperforming and out-thinking the competition. He is a hard worker and expects excellence from his entire team.

He was buying a lot of internet leads. I mean several thousand dollars a month of internet leads. He was also tracking his leads (red light/green light spending) and he noticed that the leads were not making him money but costing him money. He got the sales rep on the phone and (here’s where the crazy part comes in) this amazingly smart real estate agent was convinced by the internet lead company’s sales rep that he simply wasn’t buying enough leads, so they were in the process of talking him into spending an extra $8,000 a month!!!!! Thankfully, I talked him out of it, but think about what was about to happen. The person that I truly believe is the best real estate agent I know was believing the best way to fix a problem with an underperforming product was to actually spend MORE MONEY on the underperforming product! I pointed this out to him and said the problem here isn’t more leads. Buying more leads was probably the exact opposite of what had to happen.

I explain the leads themselves and the amount of leads are not the problem here. The problem is that he had so many leads coming in that his agents didn’t care if the lead they were assigned didn’t respond because there were more leads right behind it so they just tossed it and moved on to the next one. I told him the solution was training and accountability focused on LEAD CONVERSION and I helped him find a coach who would do group training to help his agents appreciate the leads they were given.

After getting them trained on how to both appreciate and set realistic expectation for leads, he implemented a system (similar to the one I’m going to show in below) and even went a step further than that.

He implemented an annual trip for his top lead converters. An all-expense trip to a different island every year, and let me tell you… the lead conversion went up and his lead generation spend went way down. Suddenly, people were having to work their leads because there were less of them coming in and he made more sales with less leads.

What’s the Difference Between a Lead and a Prospect?

In my world, there are 2 types of people… “Mets” and “Haven’t Mets” There are also 2 types of leads… “Hand Wavers” and “Targeted Leads we get “top of mind” from (our Sphere of Influence). These are people we have targeted for the soul purpose of achieving “top of mind” and they did NOTHING to indicate they are looking to buy or sell a home. This is easier to see in the chart below.

The first column shows “hand Wavers” and “Targets”. We are not going to worry about the “targets” in this post since that group of people generates mostly referral leads, and those are way too easy to convert to need the strategies below. We are going to focus on the “Hand Waver” row… If you look across that row, you will see the “Haven’t Mets” are called “leads” and the “mets” are called “prospects”. Using some logical thinking, we can read that row from left to right like this…

We receive a “Hand Waver Target” (“click here if you forgot what a “Hand Waver”lead is) and since we do not know this person yet, the are a “haven’t met” and our job is to CONVERT them to a “met” or a “prospect”. There is the conversion process I discussed above. Receive the lead (all leads are “haven’t mets”) and convert them into a “prospect” (a met) OR delete them because they told you “NO”.

The chart above is discussed in much more detail in some of the courses on this website, but for now I just want to make sure we all understand this:

Lead Conversion is Converting the Lead (a “Haven’t Met”) into a Prospect (a “Met”)

Why Is Lead Conversion So Hard?

The good news is that lead conversion isn’t hard. It’s frustrating, it’s time consuming, you have to hear the word “no” a LOT, you have to have patience, you have to make a lot of phone calls but it isn’t hard.

First of all, we need to understand that a lead is nothing more than someone who MIGHT want to use our services or buy our product. In the real estate industry only about 50% of captured leads actually buy or sell a home. When you factor in that most leads are captured an insanely high amount of times, the competition to capture the lead is much higher than you would expect. Let’s go on the low side (it’s nearly impossible to know how many leads were actually captured since most of the internet lead companies would never want that number to get out) and say they are only captured four times each.

If I have 100 leads, half of them are never going to buy a house, so that leaves us with 50. Out of the next 50, 65% of those are using a Realtor that was referred to them (“click here” for more info on referrals). That leaves 17 leads for you and those other 3 agents to compete over. If you split them evenly, that gives you 4 leads to work with. Let me simply this. For every 100 leads you capture or purchase, only 4 of them are fair game..

At this point, you may be thinking that’s not too bad! For 100 leads, I get 4 sales and that will make me profitable and put me in the upper tier of internet lead converters! Well, we’re not done with the analysis yet.

According to National Association of Realtor stats, the amount of time it takes a lead who is first “captured” on a website is anywhere between 6 – 18 months away from buying a home. Here is where the 4 potential sales dries up to 0 to 1 sale. We are not willing to wait it out for that lead to be ready. If we don’t hear from them in 1 or 2 attempts, we simply drop them into an email drip campaign and move on to the next lead. This is why lead conversion numbers are so depressingly low. We don’t have a system to stay in touch for as long as it takes or until we hear the word “NO”.

Is It OK to Delete a Lead?

YES!!!!!! But… only after you have worked that lead until they tell you to go away by saying “no” or by not responding to your attempts to talk to them throughout the 3 time frames I describe below. I dislike when I read some training material or listen to a trainer who says “never delete a lead”. I think they say this because it makes them feel like a tough, gritty salesperson, but it tells me immediately that person has never been a good lead converter because that is probably the worst advice to give a true lead converter!

Imagine keeping people who didn’t answer you for 18 months and people who straight up told you “no” or “go away” in your database. You would have a mess on your hands. You wouldn’t know which leads are which, which ones you converted and which ones are still in the process. It would become so messy that it will make you visit your “leads” section of your database less and less until you end up like my friend with 12,000 missed opportunities in there. I’m going to say this LOUD AND PROUD:

There is no reason to keep people who you converted to a “NO” in your database. DELETE THEM!

How Do I Convert Leads Effectively?

Ahhhh… finally we get to the question you’re probably looking to have answered most. “That’s great, Greg, but how do we do it? How do we come up with a system to keep track of these leads and set realistic expectations?”

Keeping in mind that the sole purpose of lead conversion is to get a “yes” or a “no”, you need to have a consistent and systematic strategy to accomplish this difficult task. I break my strategy down to the 3 time frames in the conversion process. I describe how I handle each of them below.

1. The first 5 minutes
   • We all know the best time to get in touch with a lead is within the first 5 minutes of when they reach out to you. It stands to reason that within 5 minutes they are still focused on looking at houses and are most willing to talk to you.
2. The next 5 days
   • This is what I call “The Uncomfortable Phase.” It’s uncomfortable because it’s when we have to push a bit. My systems and strategies are notoriously not pushy, but these 5 days require a bit of push. Let me explain why. When you capture the lead you have no idea if they are looking to buy right away or a year from now. The only way you’re going to find out is by talking to the lead and finding out their time frame. If the time frame is soon, you need to know right away or you would lose out on the sale to someone else who did a better job of pushing and they converted the person first. For that reason, you need to be a little extra bold during these 5 days. People that worked with me while I was chasing leads will remember my “Lead Binder” It was a 3 ring binder filled with my lead sheets. It was a sheet that listed all the information I had on the leads and a checklist of everything I needed to do for the next 5 days to try to convert that lead. It was broken up day by day and each day had different “touches” at different times of the day to help me get the conversion before my competition did. I got up every morning, opened my binder and went page by page doing whatever was due that day for each lead. For example, if I was on day 3 with a lead I would know it because days 1 and 2 would already be checked off and on day 3 I would call the lead and try to find them on social media. Once I did those 2 things, I would check them off and move onto the next page. Once I finished all 5 items without making significant contact, I would simply move them to the 3rd stage….
3. The next 18 months
   • Welcome to the waiting game. If the previous 5 days didn’t result in a substantial conversation with the lead you can assume (correctly or not) that they probably aren’t in a rush and now the lead conversion focus shifts from a sprint to a marathon. My goal now is to make contact and be around when the lead is ready to buy a home. I do not, however, want to continue to push and annoy the lead. I firmly believe there is no benefit to antagonizing a potential client for months and months before they are ready just because they “had the nerve” to ask a question or sign up on a website or walk into an open house. Please hear this loud and clear: “Just because a person had a question about a house does not mean that they are now obligated to buy a home on your time frame.” They are going to buy on their time frame, not yours.
     
     With that said, my strategy for the 3rd time frame is to back off from the daily touches of the 2nd time frame and move it to monthly. I have developed a script that I use for all of my buyer leads. (“Click here” to find the “lead conversion script”) I will call them once a month and leave them a message. It’s the same message every month and the script has been carefully worded to not upset or offend a buyer who may be several months from buying a home. I do not ask the buyer to call me back. I simply make an offer to call me if they have any questions or saw a home they would like to go in to see. I also tell them I will try them again “in a few weeks”.
     
     I do this EVERY 4 weeks until 1 of 3 things happen:
   • • 18 months go by and I still haven’t made any progress with this person. If I reach this point, I will delete the person from my database and stop calling. My experience in lead conversion tells me that if I get that far into it, they are probably part of the 50% who weren’t going to buy a home anyway. And if I’m wrong, and they do end up buying a house, that’s fine. You can’t win them all. I believe if we add up the time spent calling month after month for an unlimited amount of time, it’s in my best interest to cut it off at 18 months because the 1 or 2 leads ever that will buy from me after those 18 months isn’t enough to justify all the time I spend on all the others who never buy from me. Sometimes you just need to know when to cut your losses and move on. Like David Knox, a legendary real estate trainer, always says “Just let go!”
     • The person calls me up (or answers one of my calls) and tells me they are all set and don’t need my help. At this point, I will also delete the person from my database and stop calling.
     • The person answers my call or calls me up and tells me they have a question or would like to see a house. At this point, I have successfully turned this lead into a prospect.

If you are able to work all 3 of the time frames discussed above and get any of the 3 results at the end of the section on “The next 18 months” then you should congratulate yourself because regardless of which of those 3 results you got, you were successful in doing something most people never accomplish on cold leads… You converted it.

Lead Conversion is NOT just getting a “yes”. Lead Conversion is getting an answer, regardless of if that answer is “yes” or “no”