Strategies for Reducing Acquisition Costs for Residential Developers: The Power of Referrals

Residential developers understand the pain of high acquisition costs all too well. Acquisition costs directly eat into profit margins, potentially straining cash flows and undermining growth. But did you know that the cost of acquiring a new customer can be five times more than retaining an existing one? With this statistic in mind, it’s clear that strategies to reduce acquisition costs should rank high on a developer’s priority list. 

Successful reduction of costs is a long game. Building an online presence and building customer loyalty are two ways you can ensure long-term success and consistently increase margins. 

“The goal should be reaching a point where your reputation is driving demand for your product and marketing is simply in maintenance-mode” 

Here are five effective strategies to help you navigate through the labyrinth of acquisition costs and reach the end point of demand always exceeding supply. Let’s delve into them:

1. Efficient Marketing Strategy:

A well-crafted marketing strategy is an essential component to minimizing acquisition costs. With the proliferation of online platforms, residential developers can benefit greatly from focusing on digital marketing efforts. SEO optimized websites, engaging social media content, and a consistent blogging schedule can ensure higher visibility and organic traffic, helping you attract potential buyers at lower costs.

This can be costly to outsource and having to hire an internal marketing team may or may not be in your budget, but you can start small but focus on a single channel. The first step is always getting the foundation down, which is a strong website. From there, short-term results you can look at online marketing of your product through search engines and social media. The longer-term approach is often the best one through which would be a focus on developing your own engine through SEO on your site. 

Here’s some starting points for that:

Actionable Steps:

1. Perform an SEO audit of your website to ensure it's easily discoverable by search engines.
2. Create a content calendar for regular blog posts and social media updates.
3. Engage with your audience through social media, answer their queries, and appreciate their comments.
4. Use Google Analytics to monitor your website's traffic and make necessary adjustments.

2. Utilize CRM Systems:

Customer Relationship Management (CRM) systems are key to improving efficiency. A good CRM system helps you manage customer data, monitor leads, follow up effectively, and foster strong relationships. Automated follow-ups save time and money, improving your chances of conversion.

So many large builders are lacking the infrastructure to effectively manage their clients. Your past client base is your best resource for new business and this is often overlooked. Spreadsheets just don’t cut it. 

A CRM system allows residential builders to store comprehensive customer data, including contact details, purchase history, and preferences. When launching a new project, builders can use this data to identify past customers likely interested in their new offerings. For instance, families who previously expressed interest in upgrading or expanding may be prime targets for a high-end townhome development. The builder can then send these customers personalized emails about the new project, or have their sales team personally reach out, setting reminders for follow-ups and viewing invitations.

Actionable Steps:

1. Choose a CRM system that suits your needs. Options range from simple, inexpensive solutions to more complex, feature-rich systems.
2. Train your team on how to effectively use the CRM to its full potential.
3. Implement a routine of updating and reviewing customer data.
4. Automate follow-ups and personalized messages to keep your clients engaged.

3. Accumulate and Leverage Online Reviews:

Online reviews are a treasure trove of customer insight and a powerful tool for attracting new business. According to 2023 study 95% of consumers read online reviews¹, and 79% trust online reviews² as much as personal recommendations. Furthermore, Google considers reviews in its search algorithm, meaning more reviews can boost your SEO ranking, making you more visible to potential customers. 

Actionable Steps:

• Set up a Google My Business profile. This free tool allows you to manage your online presence across Google, including Search and Maps. Once set up, customers can easily leave reviews, and prospects can find you more readily.
• Encourage your customers to leave reviews. This could be done through a follow-up email after a sale, or through incentives. Remember, more reviews can lead to better visibility and credibility. 
• Respond to all reviews – positive or negative. This interaction shows potential customers that you value feedback and have a commitment to customer service.
• Share positive reviews on your website and social media. This not only bolsters your online reputation but also encourages others to leave reviews.
• Leverage Locorum to collect reviews. Locorum can connect Google reviews to your landing pages, enhancing your online reputation and making it easier for happy clients to leave positive reviews.

4. Building Loyalty through Gifting:

It may seem counterintuitive to spend money on gifts to save money, but hear us out. The key lies in a recent report from Sendoso³ that found 83% of customers reported feeling closer to the company after receiving a gift. If driving referrals, leaving a great impression and building loyalty is a goal - gifting is definitely part of the answer. A happy customer is likely to refer others, and that’s where the real savings kick in.

Further to that, they found 35% of customers were more open to receiving communication from a business who gave them a gift - meaning they’re more likely to engage with future marketing. 

We see this on Locorum as well, our Gift Rewards feature is one of the best tools to engage customers in your referral program. Maybe the easiest way to gift, taking just 60 seconds on the platform and resulting in an automatic add to your referral program. 

Actionable Steps:

• Plan a gifting program that aligns with your budget and customer demographics.
• Consider using Locorum's client gifting and loyalty program to manage and automate this process.
• Monitor the response to your gifting program and adjust as necessary based on feedback and results.
• Regularly communicate with customers who have received gifts to foster relationships and encourage referrals.
• Consider continued gifting to maintain relationships using home anniversaries, birthdays and other occasions to engage with your customers

5. Harness the Power of Referrals:

Referrals are often the most cost-effective way to acquire new customers. A recent study by Wharton Business School4 set out to discover if referral programs increase profits and found that customers acquired through referrals have a 25% higher lifetime value. This doesn’t include the savings in acquisition, Forbes reports more than 50% of companies save money on acquisition when launching a referral program5.

That’s why we built Locorum. Most of us rely heavily on referrals to grow but it’s a tough channel to manage as it’s historically been mostly offline organic. We’re here to change that. Locorum's platform makes it easy to set up a referral program, incentivize customers to bring in new leads, and track every referral efficiently.

Actionable Steps:

• Use Locorum to set up a referral program tailored to your business.
• Locorum will recommend a personalized marketing strategy to promote your referral program, including email content, social media posts, and other methods tailored to your business.
• Use our automation tools to encourage customers to join the referral program and provide them with easy-to-follow instructions on how to refer others.
• Regularly review and adjust your referral program with your program manager based on results and feedback.

Following these strategies and executing the associated actionable steps can significantly help in reducing customer acquisition costs and securing the long-term success of your residential development business. The real estate market is dynamic, and with the right tools and tactics, you can ensure that your business remains competitive and cost-effective. With Locorum, you can take a step further in ensuring the growth of your business, by cultivating loyal customers and leveraging the power of referrals.

Sources:
¹Global Newswire https://www.globenewswire.com/news-release/2022/01/13/2366090/0/en/Brand-Rated-Nine-out-of-ten-customers-read-reviews-before-buying-a-product.html

 ²2020 BrightLocal survey https://www.brightlocal.com/research/local-consumer-review-survey-2020/

³https://sendoso.com/blog/new-data-reveals-gifting-unlocks-customer-loyalty/

4https://faculty.wharton.upenn.edu/wp-content/uploads/2013/05/Schmitt_Skiera_VandenBulte_2013_Referrral_Programs_2.pdf

5https://www.forbes.com/sites/steliefti/2019/06/07/why-referrals-are-the-most-valuable-form-of-marketing-and-how-to-get-more/?sh=d9ece6611616