RealEstate Investing:Quick Answer Series: What Do You Think of “Sphere of Influence” Marketing?

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It’s a great supplement to your regular marketing so long as it’s free.  As a stand-alone marketing technique, it is destined to fail, and if executed perfectly will yield you maybe a deal a month.  Statistically, it can never make you a top producing agent, and here’s why.

Hundreds of studies have been conducted on social networks.  One of the most popular was by famous author and columnist, Malcolm Gladwell.  In his best selling book, The Tipping Point, he explains that our social networks increase in size as we age, and that the average number of acquaintances at age 40-50 is 39.

Now let’s imagine that in your typical network of 39 people who know you, love you, and would do business with you, that 5% of them will either buy or sell a home this year.  That’s the national average.  That means that if you were to get all of their business, it would amount to only 2 deals per year.

“But,” you may be thinking, “what about the people they know?”  If all of them know 39 people, and they trusted their mutual friends enough to get you all that business, we are talking about a total potential of 76 transactions.  But let’s be honest here.  Of the total of 1520 people in this network, there are 5 other agents.  Now divide the total potential business by all six of you and there is a statistical maximum potential business of only 12.6 transactions in a year.

Now the tough question:  Just how much of that business do you really expect to get?  All of it?!  Get real!  You’d be doing well to get just the first level business.  Anything beyond that should be considered gravy.  OK.  So now that we’ve determined the size of the pie, now let’s look at getting your slice of it.

The most popular methods of staying in touch with your sphere of influence is by direct mailing them a newsletter, and by calling them monthly.  If the mailing costs you per piece (very conservative considering the postage, and the cost of the newsletter), that’s .  Suppose you plan on making 0,000 this year.  Your time cost is per hour.  Now if you are very efficient, you can produce the newsletter and do the mailing in one day.  That’s another 0.

Now suppose you were to get all 12.6 potential deals this year.  Your cost is 9 times 12 or ,268, divided by 12.6 for a cost of 8 per lead.  The reality is you can never really hope to get all that first and second level business.  It just can’t happen!  It’s not possible.

“OK, but what if I save the money and just call them?”  Good question.  An average call of 20 minutes staying in touch, times 39 people in your first level network, let’s see… that’s 13 hours per month assuming everyone is home the first call, and you are never interrupted.  Do the math.  That’s right — ,800 a year divided by 12.6 for a cost of a staggering 9 a lead!

Come on!  It would probably be cheaper to just write your name and phone number on bills and hand them out!  All I’m saying is don’t stand by your mailbox waiting for my newsletter.  It’s not coming.  And that’s my quick answer.