Beyond the emotional hit — this kind of rejection feels personal — you’re up against cumulative financial cuts over time as buyers and sellers you once had on your A list take their business (and referrals) elsewhere.
The real estate industry remains hyper-focused on lead generation, yet no one addresses how to reduce one of the most expensive costs in the business — attrition of past clients.
How much does client attrition cost?
Attrition is expensive. Losing one out of five potential referral resources each year means that you must replace 20 percent of your existing sources of business over the next year.
That translates to a 100 percent turnover in just five years.
In contrast, cutting your attrition rate reduces the amount of new lead generation you must do from cold prospecting activities.
Let’s say the average client knows 12 real estate licensees and usually hires the one they have seen the most recently. If you’re not in front of your clients face-to-face regularly, the probability is high they will hire someone else.
To evaluate the cost of attrition to your business, what percentage of your past clients haven’t heard from you during the last year?
Somewhere between 10 percent and 15 percent of that number will transact in the next 12 months. If you did 20 transactions last year and averaged $5,000 in net commission and you haven’t contacted those past clients, the loss of two transactions (10 percent) would be a $10,000 loss to your business. And three transactions (15 percent) would be a $15,000 loss.
By the same token, check your appointment calendar and your database for additional names of those who normally send you referrals.
What percentage sent you a referral in the past 12 months? What percentage did not? How many of those individuals have you dropped from your referral database? Each of these represents an area where you are bleeding dollars through attrition.
To reduce the attrition in your business, follow these five simple steps.
1. Keep in regular contact with clients at least nine times a year
The latest National Association of Realtors’ Profile of Home Buyers and Sellers underlines how important staying in regular contact with past clients is: 42 percent of buyers used an agent who was referred to them by a friend, neighbor or relative, and 11 percent used an agent they had worked with in the past; 64 percent of sellers used an agent who was referred to them by a friend, neighbor or relative or used an agent they had previously worked with.
Furthermore, 72 percent of the sellers and nearly 70 percent of the buyers interviewed only one agent during their home search.
You can stay in regular contact with past clients by using the social media, sending them video emails where they “see” you face-to-face, having coffee or lunch together, conducting client appreciation events and delivering an “equity checkup” that updates them on their home’s value at least twice per year.
2. Stay in touch even if they move outside your service area
People who move away often move back. Even if they don’t, they still have friends and neighbors who could be a source of referral business.
Also, you can earn a referral fee if your past client moves anywhere in the U.S. Merely refer them to your company’s national relocation program or to Referral Exchange.
3. Has a past referral source dried up?
If someone has sent you referrals in the past and has stopped referring business to you, it’s important to determine if that person was dissatisfied with how you handled their referral or their last transaction.
Critically examining the causes of attrition and taking specific steps to remedy the problems cited by past customers/clients can literally make you tens of thousands of dollars.
4. Stay top-of-mind
Often our best sources of referrals simply forget to make the referral.
To counteract this, make sure anyone who sends you a referral receives a thank-you note plus a small token of your appreciation (flowers, brownies or tickets to sporting events or movies) as soon as you receive the referral.
Do this, regardless of whether the referral decides to do business with you. Keep the person who made the referral apprised of your progress, and send them an additional thank you note/gift when the referral closes the transaction.
5. Be proactive about complaints
If someone is unhappy with your services, even if it isn’t your fault, never apologize. Instead say, “It was never my intention to disappoint you or to make you angry. What can I do to fix it?”
Americans rate individuals or products that have problems more highly when the problem is solved as opposed to when everything works perfectly.
So, here’s the bottom line: reducing attrition yields the same results as generating new clients. Putting it a little differently, reducing attrition means closing more business with less effort.