The "Vendor-Paid" Model in Australia - What’s the Big Idea?
Could Vendor-Paid Advertising be a blueprint for real estate success in any region? We unpack the pros and cons for brokerages, agents and their sellers…
VPA: Paving the way for other regions?
The "seller-paid" advertising model, also known as the “vendor-paid” model in the Australia and New Zealand real estate markets, refers to a common practice where the property owner agrees to cover marketing costs or fees.
Why is this significant? Because elsewhere around the world, especially in the United States and Europe, the entire marketing campaign (and subsequent costs) involved in the selling of a property falls to the responsibility of the real estate agent or brokerage. In this more widespread, global model, the whole point is that sellers entrust their agents to ensure that their home gets sold at optimal market price.
It differs from place to place
In Norway, while a lot of the marketing is paid for by sellers, portal listing pricing is not included. In Sweden on the other hand, sellers shell out for the portal listing but usually nothing else. In the UK, homeowners have shown some resistance to listings that have marketing packs attached to them, despite it being the standard before.
What an agent might be willing to spend on marketing usually depends on the price of the listing, and a basic advertising or marketing package (portal placement/For Sale boards, photo or marketing incentive fees, etc.) is usually included in an agent’s commission fee. Agents are required by UK law to tell clients exactly what is included in the fee so clients are still free to shop around and compare.
However, this might change as modern-day marketing campaigns are becoming more bespoke and intuitive, often with many digital components, which could potentially lead to more sellers willing to partially, or fully, underwrite the cost of some pricier marketing tools that agents could utilize to maximize the sale.
Making every cent count
The vendor paid advertising (VPA) model means that while property owners in Australia/ New Zealand also entrust their real estate agents to sell their house at the optimal market price–using whatever marketing tools it takes to get there–it’s the vendor who foots the bill. Be it a dedicated website, online or newspaper ad campaign, or a billboard poster, the agent makes their recommendations based on the property, the market, the local area and other variables, and the vendor pays.
Typically, consumers around the world are often inclined to trust an individual rather than an organization, so agents usually have free reign to focus on, and market, their personal brand.
However, in Australia and New Zealand, vendor-paid advertising is taken seriously, with most agents agreeing that VPA is not a vehicle for agents to “self-promote or try to impress each other”, and that it should be used for its intended purpose. That means stretching every cent of a client’s hard-earned money towards achieving the end goal for clients, not agents.
What could agents around the world learn (or even emulate) from this model in order to boost business?
- It maximizes property exposure as agents are simultaneously marketing consultants
They advise on how vendor budgets can be best spent, as well as guide clients as to which tools (whether digital or traditional), might be most effective in reaching target audiences. VPA-driven marketing campaigns have been proven to boost enquiries, increase ‘open house’ attendance and generate more buyer competition that, in turn, spikes up the sale price of the property.
- It attracts more qualified buyers and raises the quality of listings
Because VPA increases exposure, there is a heightened awareness that drives more qualified buyers, while also increasing the likelihood of reaching maximum sale price.
For example, many agents illustrate that VPA is an investment when it comes to social media advertising, as the dedicated budget allows them to nurture buyers with more effective and targeted campaigns, often yielding better results than passive methods of advertising (such as large real estate portals).
Vendors usually only work with one real estate agent, with whom they may have an exclusive mandate citing 30 or 60 days duration, as well as some degree of collaboration when it comes to choosing marketing materials and type of campaign.
- It generates better results
Statistics confirm that effective marketing campaigns result in better outcomes for both agents and vendors.
For one thing, VPA provides measurability of interest. Because agents are able to cut through to interested buyers and avoid the cost of advertising to non-specific audiences, they’re able to provide impactful, detailed reports that show the vendor campaign outcomes and even return on their investment.
- It encourages increased marketing budget
Motivated vendors who want to sell at maximum profit in minimum time are more prone to pour money into agent’s marketing campaigns so as to differentiate themselves with spectacular high-quality photos, videos, descriptions and marketing tactics.
- A unique level of trust even if a sale isn’t made
Vendors won’t blame agents if their property doesn’t sell, but understand there may be alternative reasons outside of marketing efforts (whether it’s a small budget or issues with the property itself etc) that are responsible for lack of success.
A marketing model where the house is the hero, not the agent
It’s true that some agents bemoan the fact that there are indeed a small number of fellow agents who do try to hijack vendor budgets to self-promote their own brand and out-promote others, with one real estate professional cautioning that “Australia was now the world’s most expensive market to run an internet campaign”.
However, for the most part, most of Australia and New Zealand’s real estate agents who rely on the VPA model consider it a privilege, not a right, particularly as Australia is one of only two countries globally where VPA is regularly charged and so the model should be ‘viewed as sacrosanct’.
It leaves agents elsewhere curious as to what VPA might look like for them, with the model encouraging many benefits and equality for both agents and vendors, and making budgets of any size work that much harder to result in quality, effective marketing campaigns.
Additional Reading
For more on delivering great customer service, see our recent post on how to ensure your marketing choices are bringing return on investment.