Sales Volume Source Pie ChartA recent survey of over 120 broker-owners and senior leaders at some of the top real estate firms in the U.S. and Canada revealed an apparent disconnect between revenue goals and business strategies. According to the survey, 85% of brokerages focus their marketing investments on lead generation activities– despite the fact that nearly two-thirds of sales are the result of repeat clients and past client referrals. Clearly, agents and brokers are spending too much time and money marketing on portals when long-view strategies produce a better return-on-investment. While lead generation is an undeniably important tactic for targeting specific market segments, cultivating and fostering person-to-person relationships still offers the best value proposition for both brokerages and agents.

Online lead generation can be influential for reaching first-time homebuyers, who are typically technology natives born after 1980. In fact, 95% of Millennials use the internet during their home search, according to a recent report from the National Association of REALTORS. From a broker or agent perspective, capturing this pool of potentials via online advertising and outreach seems like low-hanging fruit. However, while online marketing casts a wide net for connecting with younger first-time buyers, this strategy yields only 15% of closed sales transactions. That’s simply not enough to grow a real estate business year-over-year—unless, perhaps, relationships with this class of consumers are cultivated over the long term.

Given that the highest percentage of sales are the result of referrals and repeat business, it makes better business sense for brokers and agents to spend the bulk of their marketing dollars maintaining consistent touch-points with clients throughout their consumer lifecycle. Yet, brokers are under-investing in growth-oriented technologies that can advance the most profitable customer-for-life relationships. While individual agents may pay out of their own pocket to access Customer Relationship Management (CRM) technologies, only 28% of brokerages provide this tool. So, instead of prioritizing marketing investments toward relationship-building, brokers are losing a valuable opportunity for increasing sales by gambling on lead generation through portal outreach.

With the value of long-term client relationships so appreciable, agent retention is similarly key to driving revenue growth. Research by the WAV Group shows that the number of contacts an agent contributes to a CRM expands significantly as their career matures. In fact, the most accomplished agents have 500+ contacts and those with the largest sphere of influence have been with their firm for over seven years, positioning them to achieve the highest volume of sales. Despite this, the median tenure for agents with their current firm decreased from five years in 2014 to three years in 2015. With each year of reduced tenure, the firm diminishes repeat client and referrals outreach capacity. Since client acquisition costs five times more than client retention, investments in developing agents’ skill set and loyalty to their firm delivers better value than portal marketing.

Taking the long view when making growth investment decisions instead of diverting too much energy and capital on portal lead generation affords the best prospect of producing steady and sustainable business growth.