Sales & Marketing
How to build a real estate marketing budget backwards
A marketing budget set as a percentage of projected revenue is a number with no relationship to what generating those sales actually costs.
- Published
- Author
- The Genesis Sales & Marketing Desk
- Reading time
- 8 min
The short answer
Build a marketing budget backwards from the absorption plan: how many bookings per month are required, what the funnel conversion rates are, how many qualified visits that implies, and what those visits cost by channel. A percentage-of-revenue budget is arbitrary; a bottom-up budget states what the plan requires and exposes when the plan is unaffordable.
Why the percentage approach fails
The common method is to set marketing spend as a percentage of projected sales value. It is easy to approve and it has no connection to the cost of actually generating those sales.
Two projects with identical revenue can require very different marketing budgets. A project in a deep, competitive market with many comparable options needs more demand generation per booking than one in a supply-constrained micro-market with a waiting list. A project with a weak developer brand needs more than one with strong credibility. A project with an unclear positioning needs more than one with an obvious buyer.
A percentage ignores all of this, which means it is either generous or inadequate and nobody knows which until the campaign is running.
The bottom-up method
The alternative starts from the absorption plan and works backwards through the funnel.
Begin with the required bookings per month. Apply the visit-to-booking conversion rate — from your own historical data if available, from comparable projects if not — to get required qualified site visits. Apply the enquiry-to-visit rate to get required qualified enquiries. Then apply expected cost per qualified enquiry by channel, weighted by the mix.
This produces a number that means something: the cost of generating the demand the plan requires. It also produces something more valuable, which is the ability to see when the plan is unaffordable — when the marketing cost per booking is a large enough share of the unit realisation that the project's economics do not work.
That is an uncomfortable output and it is precisely the one worth having before the launch rather than in month eight.
| Step | Input | Source |
|---|---|---|
| Required bookings per month | From the absorption plan | Financial plan and phasing |
| Visit-to-booking rate | Conversion percentage | Own history, or comparable projects |
| Required qualified visits | Bookings ÷ conversion | Calculated |
| Enquiry-to-visit rate | Conversion percentage | Own history, or benchmark |
| Required qualified enquiries | Visits ÷ conversion | Calculated |
| Cost per qualified enquiry | By channel | Test campaigns, or comparable data |
| Channel mix weighting | Percentage by channel | Go-to-market plan |
| Budget | Weighted cost × volume | Calculated |
Channel partner payouts belong in the same calculation
Developers frequently treat channel partner commission as a separate line from marketing, which distorts the comparison between channels.
From a cost-per-booking perspective they are the same thing: money spent to generate a sale. A booking sourced through a channel partner costs the commission; a booking sourced through paid media costs the media spend that produced it. Comparing them on a common basis is the only way to allocate sensibly between them.
When developers do this comparison honestly, the usual finding is that channel partners are efficient on a cost-per-booking basis and that the case for heavy media spend is strongest where it generates demand the partners cannot reach — a different audience rather than the same one at higher cost.
Sequence the spend, do not spread it
A final and common error is to spread the budget evenly across the sell-out period. Demand generation is not linear in value: spend during a launch window, when inventory is fresh, the ladder is intact and the sales machine is fully staffed, converts better than the same spend in month twenty against picked-over inventory.
Equally, spending heavily before the site is ready wastes the pipeline it creates. The sequencing principle is to build the pipeline before the launch, concentrate weight during the window, then settle to a sustainable run rate calibrated to the remaining inventory.
Budget should also be held back deliberately. A project that has spent its entire budget by month ten has no capacity to respond when a competitor launches next door in month twelve.
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This article is general commentary for information only. It is not legal, tax or investment advice, and statutory positions referred to should be confirmed with qualified advisers for your circumstances.