Do you know the difference between lead generation and advertising?
If you’re spending ANY money on marketing on a regular basis, you should definitely understand this difference, so that you can understand which is the best investment for your business.
From my perspective, there are a select few loan officers that should be spending any money on advertising.
So what is advertising?
Think of advertising as brand promotion. Any time the primary purpose of your campaign is just to show some piece of marketing to a large amount of people, whether it’s information about you, your company, or your products/programs, you’re advertising.
Why wouldn’t a loan officer want to do this?
Let’s first dive into what lead generation means…
Lead generation is also known as direct response marketing. Why? Because the purpose of the marketing is to invoke a RIGHT NOW action. Most of the time, this is filling out a lead form and submitting their information to you.
Great, so we know the definition of both lead generation and advertising, but what’s the difference and why does it matter to a loan officer?
Think of advertising as your TV commercials, print ads, and billboards. The purpose of these is to imprint a message into a prospect’s mind, in hopes that it leads to some sort of action in the future.
If you invest in a billboard for your mortgage business, you’re hoping that someone will see that billboard often enough that the next time that person needs a mortgage or know someone who does, they think of you.
The same thing applies if you pay to “sponsor” a post on Facebook without a direct call to action or a reason for someone to provide you their information. You’re basically investing in the prospect of your advertisement resonating enough for someone to swim through the hundreds of loan officers in your market, to get to you.
Unfortunately, this is what MOST loan officers are doing with their marketing dollars in some way shape or form.
But what is it that most loan officers are looking for out of their marketing dollars?
A quantifiable, scalable return on investment, right?
How do you quantify your return on investment on advertising as an individual LO? It’s not very easy, I’ll tell you that right now.
However, if you know that for every $15 you spend on marketing, you receive a completed lead form with a name, email address, and phone number, your business can get really exciting.
Let’s say you convert 3% of the leads you get, an average conversion rate for a decent lead source.
To generate 100 leads, you need to spend $1500. But if you’re converting at 3%, that $1500 just amounted to 3 deals, or $500 per closed deal.
Not too bad right?
Not all lead generation is created equal, but the point of this post is not to talk about different lead sources, so let’s just say you only converted 1% of your $15 leads or you converted 3% but they cost you $45 per lead.
For $4500 you have 3 closed transactions or $1500 per closed loan.
Knowing these details, you can now make an educated decision about where to spend your marketing dollars. If your margins are thinner than you want, then you need to improve your conversion or decrease your cost per lead.
Pretty straight forward, right?
Now let’s look at the flip side again.
Let’s say you spend a total of $2000 in marketing a month.
$500 on Google driving traffic to the homepage of your website.
$1000 on Facebook boosting your business page posts to potential leads and realtors.
$500 on a direct mail campaign introducing yourself/your brand to entire neighborhoods at a time.
How are you going to quantify your results? You know you’ve received a couple contact me forms on your website, but they didn’t turn into any deals.
You’ve got lots of likes on your business page on Facebook and the posts you release get great engagement, but how do you assess the value of those engagements and likes without closing deals directly from the source?
You get calls here and there from people you’ve never met saying they received your mail and want to know where rates are, and you use the opportunity to build a relationship but again, you just keep telling yourself the value is in branding.
Guys, if you’re a loan officer investing in advertising, you better have a huge footprint in your market and no time to work leads because otherwise, you’re doing it wrong.
Every loan officer I’ve ever met spends money on marketing to get more deals, and every one I’ve talked to would prefer those deals sooner rather than later.
If that’s the case for you, then stop spending money on advertising and START spending your money on lead generation.
Thanks for reading, and I’ll see you at the top!
P.S. If you’re currently investing in advertising, and just realized you should be investing in lead generation, we’ve got you covered. Check out the rest of our site and when you’re ready, schedule a live demo and we’ll show you exactly, with quantifiable results, how we can help you explode your mortgage production in 2019.