Unravel the mystery of marketing's return on investment.

By Pat Curry

Depending on whom you ask, measuring the return on investment (ROI) of a marketing campaign is either a simple statistical process or a quest akin to finding the Holy Grail. Real estate marketing consultant Janis Ehlers of The Ehlers Group in Fort Lauderdale, Fla., says it boils down to the tool being used. Advertising is fairly easy. You put in an ad, and calls go up or they don't. Events can be a whole other ball game.

Rajiv Grover would ask what objective an event was designed to meet. Grover, the marketing department chair of the Terry College of Business at the University of Georgia, says the biggest obstacle to measuring marketing ROI is not having a clear goal in the first place.

If your goal is to create awareness, advertising campaigns tend to be most effective, he says, with before-and-after studies to measure the impact. If you want action, go for sales events and promotions and measure traffic and sales.

"You just need to have very finely defined objectives," Grover says. "All it requires is a thinking through. Then, jumping to which variable to measure isn't too difficult." Meticulous Data Collection Daryl Spradley, a marketing consultant in Maitland, Fla., says the foundation to quantifying marketing ROI is good record-keeping on traffic, how it was generated, and on closings.

"We could have half a dozen marketing campaigns on different media," he says. "I want to know which one produced the person writing the check."

The value of customer prospect registration cards is marginal, Spradley believes, because half of the sales center visitors won't fill them out, and those that do tend to check the first box they see so they can get into the models. So, he relies on data from post-purchase buyer surveys that rank the importance of various marketing tools.

Lani Kahn Drody, senior vice president of Lowell Homes in Miami, says she takes a somewhat intuitive approach to marketing ROI, visiting each sales office at least weekly to review activity with the staff.

"We don't get into a constant analysis of numbers and statistics," Drody says. "It's more of a constant dialog. We find out A, if our ad drawing hits the right demographic; B, if we are qualifying our prospects adequately; and C, what kind of traffic builders are working, like featuring a free pool or designs by a nationally recognized architect."

To accurately quantify marketing ROI, Drody says builders need to factor in the home buyer's typically long decision-making process.

"A lot of builders are very knee-jerky," she says. "They'll say, 'We ran an ad, and it didn't work.' Builders have to be very careful of that. They need to give the advertising due time to work."

Ehlers notes that though customers often don't differentiate between a newspaper ad, an article, and a listing on a locator map, the impact varies significantly.

"I've had situations where people say, 'You're in the paper all the time,'" she says. "We're not. But newspaper articles have a 70 percent higher retention rate than an ad. There's an impact there; there's credibility."

Yet, Spradley says that while marketing is part of every builder's budget, only the enough to accurately assess what produces results. He recommends line item budgets for each type of expenditure to track results based on the standard formula of ROI equals gross revenue divided by marketing expenses.

"This is an expensive deal," he says. "Rather than just throw money to the wind, you have to throw it in the right direction. That's the purpose of running ROI on marketing."