Tuesday, January 19, 2010
Saturday, October 31, 2009
So what aspects of Google Comparison Ads do I think are so great?
- The way that quotes are delivered is different from anything else I have ever seen. As one changes one’s quote criteria, the quotes presented to me change on-the-fly. For instance, if I change my credit rating from “Very good” to “Poor”, in less than a second the list of quotes that I am eligible for changes.
- The interface is extremely well thought out. Everything I need is on one page. The left hand quarter of the page is my form and the right hand three quarters is the mortgage results. In other words, to get what I am looking for I can stay on the same page. If I want a Purchase quote versus a Refi, I check a radio button and the form updates. I am not pushed to a new page. In fact, there are only two times that I am presented with a new page in the entire process. First, if I ask to see the “Loan details”, which is another extremely clear and well-designed page that makes it clear to me what the mortgage involves. Second, if I am eligible for more than 10 mortgage products, like in search, the results will be displayed on multiple pages. Although the user decides how the results are sorted i.e. by APR, Interest Rate, Monthly Payment, Lender fees or Name.
- The “help” provided is comprehensive and intuitive. If I want to do a refi and I’m unsure of the value of my home I simply click on a “Get a quick estimate” link which pops up an ajax bi-modal window on my screen in which I can enter my Street address and Zip code and get an instantaneous estimate and range on the value of my home. For my home the estimate seemed very accurate, more so than Zillow’s.
- There are two choices for getting in contact with a lender. You can call them directly or you can fill out your info in a two-field pop up box and they will contact you. This choice is important to most consumers; as is the fact that they are not passing information to companies that they don’t know; unlike the case for most of today's lead providers.
OK, so this is an incredibly slick product but what does it mean? I believe that the outstanding execution of this product has a few implications:
- As I’ve said before. Google Adwords is now a less viable option for mortgage lead providers. Most lead providers will not want to advertise next to a service that is superior to theirs.
- Mortgage brokers are going to struggle in a world where consumers can get instantaneous mortgage quotes online. Assuming that all of the lenders jump on this bandwagon, which I think they will need to, then I believe consumers will gravitate to this way of finding a lender versus going through a broker.
- In the long term this cannot be great news for mortgage pricing and product eligibility engines, especially the ones that focus on auto-quoting for brokers like Moretech and LoanSifter. Once Comparison Ads gets momentum, most lenders will quickly realize that to be successful they will need to provide real-time feeds of their mortgage rates. That will likely spawn other applications for the data. I think there is a business model associated with getting real-time quotes on your iPhone that someone should be developing, if Google isn’t already.
- As many have said, this might not stop at mortgage. Whether it is Google or someone else; this type of service and the way it has been executed could and probably should become the dominant method by which consumers connect with most financial services.
- Prices will come down. As we’ve seen for consumer goods when they are available on the Internet, the retail costs are lower and competition is much more fierce on price. As a consequence once lenders are stripped of some of the broker network I think the costs of mortgages (and other financial products) will come down considerably.
What google is doing as many people have commented is not completely new. It is an evolution of LendingTree’s model, has similarities to products that Bankrate offers and is going after exactly the same opportunity that Zillow’s mortgage marketplace is pursuing. However, I still think that Google’s product will be more successful and disruptive than many industry insiders would like to admit. Google may not have the first mover advantage here however time and again the company that wins in a new business category is the one who has first executer advantage. LendingTree, Bankrate and Zillow all have fantastic products, however Google’s first iteration seems to me executionally close to perfection.
Thursday, October 29, 2009
Google now competes with other lead providers for lead buyers' share of wallet in mortgage. Some people have speculated that they are biting the hand that feeds them by competing with the likes of LendingTree (one of their big adwords buyers); others that this legitimizes the lead sector and grows the pie for everyone. One thing is for sure, with the traffic that Google gets and the high intent levels that Google visitors who enter search queries around the term "mortgage" have, the lead industry probably just changed forever!
So what does the Comparison Ads products do? Looking at the details of the post it looks like when a Google user enters a query about mortgages, the first thing that happens is that the top sponsored link that appears is one form Google asking whether or not you want to compare mortgage quotes. Notably when I enter a query it does not give me this option so I assume Google are only offering the option to a percentage of the users who are searching for a mortgage.
If one then clicks on the "Compare rates" button on Google's interface one is moved to a screen with a set of options on the left hand side to identify your situation so that a quote can be generated. If the image on Google's blog is accurate then it looks like there is no submit buttons so that suggests that the quote becomes more accurate in real-time as you enter more information. No one else currently does that that I know so this is quite a nice feature. The other thing that is notable is that for each quote provided the consumer is given the option to "Request quote" or call a number for the provider. This is exactly the functionality I referred to just yesterday in my post on Consumer Initiated Contact leads and lends much more credence to my belief that this is the model of the future for lead providers. I assume that the "Request quote" sends the data that you have entered to the lender, although it does not appear to have any identifying information, which make the data rather useless... In summary it's pretty hard to figure out exactly how the Comparison Ads really works because the screen shots appear to be "illustrative". No doubt full details will be provided pretty soon.
As both Leadcritic and Techcrunch point out, whatever the functionality, this is a body-blow to some lead providers. You can argue that Google is wielding monopolistic power or you can see it as Google providing what the consumer really wants. I do think that it will be hard for certain lead providers to compete with Google. If a lead provider relies upon search for the majority of their leads and is unable to quickly switch to other forms of traffic generation, then this will be a problem for them -I'm sure Bing will follow suit pretty quick as what is being offered is quite similar to farecast in travel and perhaps even dazed and confused Yahoo! will enter this market too. I think search is soon to be a non-viable option for lead providers.
That said, this seems like quite a different product from LendingTree's in that with LendingTree you complete a massive form in order to get what is (or should be) a pretty firm quote. Google's form seems very short and thus the accuracy of the quote generated may be far from perfect. It is also unlikely to have quite the same impact on lead providers who generate their leads in the plethora of ways that don't involve search.
My personal view is that if Google's foray into the lead industry is successful then consumers and lead buyers will be the big winners. I think it will force the lead industry to try harder, innovate more and become more transparent in order to compete. While uncomfortable for many current lead providers, I don't think that this is a "bad" thing for the industry.
Wednesday, October 28, 2009
Thursday, October 22, 2009
I'm looking forward to a great event and no-doubt a relatively quick sellout like last year.
That Zillow now has the confidence to charge for their leads reflects the steady growth of their free service over the past year or so. They have now served up nearly 9 million quotes and serve just under 5,600 companies. Not bad from a standing start in March 2008.
Of course cynics will argue that giving away leads free, which is what they have done until now, makes it easy to grow quickly. In fact Lead Critic makes a good argument around the point that now that they will charge for their leads they are just like any other lead provider and will likely fade away. I don’t think that is true but I do think that Zillow is about to undergo a world of pain that it probably has not fully anticipated.
I continue to believe that Zillow has the most revolutionary lead generation service of any lead provider. It is consumer versus buyer-centric because it gives control to the consumer with respect to when they are contacted and by whom. I believe that that is the future (and soon becoming the present) of lead generation. That the service is no longer completely free does not detract from this fact.
There are other reasons that I am glad that Zillow is now going to charge for their leads. The successful users of Zillow leads already pay something for the leads effectively anyway because they use lead management platforms like Leads360 alongside auto-pricing software. So charging for leads will bring some more seriousness to the use of the Zillow Mortgage Marketplace (ZMM) by lenders. More importantly however, I think that charging will push Zillow to make their service much better than it is today as well as reducing their cycle time on new innovations. Not because they will have the funds to make these changes now (I believe the VCs took care of that problem already) but because their customers will demand more of them now that they are truly fully paying customers.
And that is where the world of pain that I referred to will come from. Take Zillow's pricing model for instance. I actually spent some time with key members of the ZMM product team last week discussing their new variable pricing model. I won’t describe it in detail as I don’t think they have publicly released the full details of it yet. What I can say is that it somewhat loosely prices leads based on demand. However, they haven’t taken the google adwords pricing model but a dynamic pricing model that is, as far as I know, completely unproven. I think they’ll learn a lot from the process but it will be a very painful for Zillow. Dynamic pricing models are very difficult to get right and I personally think that the model they are going to market with won't be optimal for either the buyer or the seller. However by not taking the easy approach the ultimate outcome could well be that after some serious tweaking that Zillow ends up with something that is superior to the pricing models that currently exist for leads (or indeed CPC ads).
So the fact that Zillow will now charge for leads for me is a positive and inevitable sign of progress. I still think they will continue to change the face of the lead industry but from December onwards they are going to have to try even harder as they do so.
Monday, October 19, 2009
Forrester recently released an interesting report on B2B lead management. It got me thinking about how different B2B lead management is from B2C lead management and whether or not the two technologies will at some point converge.
Just so we are straight on definitions; B2B lead management automation software is a technology that helps business that market to other businesses capture, nurture and manage business leads. B2C lead management is the same thing but for companies who manage leads that represent consumers and not businesses. Given that you have two categories of technology doing almost exactly the same thing i.e. managing leads; it surprised me that the technologies are quite different in their approach.
B2C lead management is pretty focused on doing a few things very well:
1. Distributing leads quickly so that the user of the software is the first to contact the lead.
2. Managing the sales process so that the sales person is always aware of which leads they should be contacting next, enforcing continuous call backs until the lead is qualified or rejected.
3. Nurturing the lead with automated emails
4. Solid reporting so that you can compare performance of sales reps and lead sources.
It is an environment that frankly caters to a software buyer that wants a simple but effective sales process and not a great deal more.
B2B lead management isn’t focused or simple. While reading the Forrester report, the first thing that strikes you is that there are a ton of vendors all doing quite different things. Indeed Laura Ramos the report’s author refers to the offerings of these providers as a “cacophony of claims similar in name only”. The report covers 18 companies, none of whom are considered to be clear leaders in the space, although there is a slight tip of the hat to Eloqua, Marketo and Silverpop. On the B2C side, Leads360 clearly dominates a much smaller set of, largely vertically focused, lead management solutions with Leads360 being the only lead management solution that dominates multiple verticals. Similalrly the focus of B2B vendors is different to B2C platforms. It seems that the most significant foci for B2B lead management software providers are;
1. Campaign design: Allowing businesses to create marketing campaigns involving lists, forms and websites
2. Scoring: unlike with the rapidly merging B2C scoring industry that I discussed in a previous post called Lead Scoring: What is All the Fuss About? which involves a heavy reliance on sophisticated predictive modeling; in the B2B category the emphasis is on a more rudimentary way of scoring each lead based on what marketers “think” are behavioral indicators of intent. Such signals of quality might be the value placed on downloading a whitepaper versus completing a form asking for a brochure.
3. Routing: leads are distributed to salespeople primarily based on score versus the multitude of criteria typically used by sophisticated B2C lead buyers. And whereas real-time distribution is key in B2C lead management; B2B routing lives or dies based on the quality of downstream automation into CRMs/Sales Force Automation tools. What is interesting about this is that although the dominant B2C lead management solutions do integrate with CRMs, especially the vertically focused CRMs such as agency management systems in the insurance industry, this is not as important. That is primarily because B2C lead management solutions cover the majority of sales force automation functions that a B2C sales force requires. Since the sale cycle and product/service are typically shorter and simpler respectively; a less sophisticated level of sales force automation is required which is easily handled by one total solution.
4. Lead nurturing: this component of B2B lead management systems is far more evolved than in the B2C industry. On the B2B side lead nurturing not only involves event-triggered emails as in B2C lead management but also covers complex, multi-step nurturing flows based on rules, responses, inactivity, sales events and various rounds of follow-up.
5. Reporting: while reporting is key in both B2C and B2B lead management; B2B reporting is much more focused on the marketing departments needs whereas B2C reporting is more focused on the sales management team.
And at its heart, I think that alongside the intrinsic difference in end customer sophistication, that is where B2C and B2B lead management automation solutions differ most. B2B providers attack the problem from the point of view of a marketer whereas B2C lead management providers look at the solution from the point of view of the sales manager. A B2B customer asks; How can we generate better quality leads? What can we do to align out marketing activity with sales results? How can we reduce our reliance on the sales team by increasing the automation of the nurturing process? On the other hand, the B2C lead management industry emerged with little regards for the needs of the marketing department because lead providers such as LowerMyBills, lendingtree and Quinstreet already had consistent lead quality taken care of. The questions that B2C lead management buyers were trying to answer were; if I am one of six companies receiving this lead, how can my rep be the first to contact the customer? How do I push my sales team to be more aggressive? How do I make sure that my name gets in front of the customer more than my competitors does? How can I avoid paying for leads that I don’t qualify?
The big question is whether the different needs of a marketer and a sales manager should be taken into account in one lead management system. I think that they certainly should. My biggest learning from looking at B2B lead management offerings is that there is a lot more that companies like Leads360 could be doing to appeal to the marketing departments of B2C companies. There is a whole world outside of bought Internet leads that needs addressing for B2C lead management platforms to remain relevant. B2B lead management automation systems however will struggle to more than a tiny niche play without taking on more sales management oriented functionality. What I believe will happen to the successful B2B lead management companies is that they will be gobbled up by the relatively larger sales automation companies (SFAs) so that they can offer the total solution. Will B2B lead management platforms ever enter the space of B2C lead management software? “Never say never” but given the vast difference in the needs of each market I think it’s unlikely for the foreseeable future.
Saturday, October 10, 2009
Startup Building 101 -
Here is the video of his presentation:
Friday, October 9, 2009
Insurance is a great vertical for lead providers and just about the most stable business you could enter. True, margins are not great for insurance agents so the price that they are willing to pay is relatively low, however there are more potential buyers of leads in the insurance industry than in just about any other vertical. Indeed the company I work for, Leads360, has had amazing success in this vertical over the past 9 months and now that we have an insurance lead management product that we have spent the past year perfecting I believe that we have a product that is light years ahead of any other lead management software for insurance companies. It’s great to see that a company that I admire as much as Quinstreet is all in on insurance too.
Saturday, September 26, 2009
Monday, August 31, 2009
It’s hard to believe that just 18 months ago, although by far the largest Lead Management Software system in the market, Leads360 had sustained losses to our customer base due to our overwhelming exposure to mortgage where companies were going out of business left-right-and-center. Our mortgage business has grown a lot since then but more importantly mortgage now makes up much less of our overall revenues because of the dramatic growth of new verticals.
It has certainly been a fairly wild 12 months for everyone, to be growing revenues at 50% in a downturn creates a lot of work but it also creates a perfectly virtuous cycle. The growth has helped us hire new people and due to the recession the people that we have hired have tended to be A+ players, thus fuelling more growth. While I was at Bain we used to often talk to clients about what created an Unstoppable company, what I never knew as a consultant was what it was like to be part of one.
And now it looks like we are poised for even more growth, if most experts' speculation is correct, the lead industry is about to undergo a tectonic shift in importance and size. Being part of a company at the center of this seismic level of activity just gets better and better!
Wednesday, August 19, 2009
There were a few negatives. There were far less exhibitors than at previous shows. I think that is a shame for anyone attending the show who is trying to educate themselves on who the companies to do with business are. I’ll be recommending to my marketing department that we invest in a booth at all future events, although I think LeadsCon could both lower the price for exhibitors and plan a larger space next time. The other mild negative was due to the fact that the event was clearly more successful than Jay was expecting. It meant that the space for the evening’s drinks soiree was way too small for the number of people there. Trying to meet with people in a dark, underground, only mildly air-conditioned bar, packed with heavily perspiring lead people was probably not the intended kick off event.
Here is a detailed overview of each meeting I attended:
Keynote: Crossing the Chasm - The Unprecedented Partnership Between a Lead Gen Company and One of the World’s Premier Brands
Jordan Rohan, Founder & Managing Partner, Clearmeadow Partners
Peter Pham – Billshrink - Chief Executive Officer
Jeff Hopper - T-Mobile - Vice President
I was surprised when I saw that LeadsCon had chosen a panel-style session as the keynote. However, it actually turned out to be pretty fascinating. Partly, this was because the panelists were well-spoken and thoughtful, but also was because we got to learn about Billshrink and its ingenious business model. The point of the discussion was that it was incredible how a 2 year old start-up with 12 employees had convinced a major advertiser to place them in their TV commercials for free. “Crossing the Chasm”, the title of the session is a reference to the book by the same name written by Geoffrey A. Moore. As a side note, it is a seminal work and the only book that was covered in multiple sessions and that wasn’t written by the professor while I was at Harvard Business School. The book describes how most start-ups (particularly high-tech start-ups) do well at getting customers initially, largely driven by the founders immediate sphere of influence like friends and family but then hit a wall or as Moore puts it, they can’t get across the “chasm”. They can’t push beyond friends and family and get mainstream mindshare; eventually most companies that don’t cross that chasm fizzle out. To ruin the punchline of the book for you, the solution to the chasm is to, as my Harvard Professor put it, “build a frikkin’ expensive bridge across it”. Basically you need to abandon your frugal ways and spend as much as you dare and then some on marketing. It is indirectly the single most compelling argument for why venture capitalists are important for start-ups that I have come across. I digress.
Billshrink was founded by the guy who built Yodlee which is the backbone of the internet banking industry; you may know www.mint.com, don’t buy their shares if they go public because mint is just a fancy front-end that sits on top of Yodlee (or at least that’s what one of the early investors in mint told me a few years ago). Billshrink is somewhat similar to mint apart from considerably more useful and broadly appealing in my opinion. What it does is takes sectors with highly complicated pricing structures; cell phones is a classic example; and crunches every possible data point from direct feeds from the company’s, scraping data from online sites and uploading customers bills until it has a model that covers the entire industry. Yodlee then allows users to go online and upload their bill. The system then analyzes the bill against every other pricing plan on the market (apparently there are over a million possible plans in the US for cell phones) and tells you a) if you have the right plan and b) if not which plan and/or network you should be on. They then take money from the lead that they generate in sending that customer to a new provider if that is what they recommend. It’s a very well thought out system that even analyzes when you contract end date is, what early termination and activation fees are so that it can tell you what your best plan is today and what it might be in the future e.g. when your contract is over as well as who you call most and what network they are on. Ingenious! It now makes total sense to me why Matt Coffin, the founder of lowermybills, a guy I have a lot of respect for, was one of the angel investors and why they raised $8M at Series A.
As a consequence of the great business model and seemingly bullet-proof technology, they caught the attention of T-Mobile who's marketing team were contemplating a recession-busting emphasis on price in their marketing since this is an attribute that they beat their competitors on. Apparently, about 70% of the time a user of Billshrink will be recommended T-Mobile as the lowest cost for their needs. The suspicious-minded folks may think that T-Mobile would prevent Billshrink from being completely impartial before putting their url on their prime-time TV commercials. They claim that this hasn’t happened in any shape or form. I believe this to be true; Billshrink would shrink on the vine if it was ever discovered they were less than 100% unbiased. So there you have it, if you want free advertising as a start-up you need to develop an insanely innovatively solution that uniquely showcases an attribute of a major brands product. For the rest of us we will need to continue to pound the streets in Silicon Valley when we need money for our startup ideas.
Brand and Performance - Achieving The Best of Both Worlds
Jere Doyle, President & CEO, Prospectiv
Joe Barone, Media Director, Greater Than One, Inc.
James Keyt, Digital Marketing Services Manager, Unilever
Sal Tripi, Sr. Director of Operations & Compliance, Publishers Clearing House
Although this was an intelligent discussion, it’s a little hard to sum up since the topic was quite broad. Here were my major takeouts:
1. Marketing Performance is super-important and increasingly measurable
2. The big brand companies do a lot of work in the realm of traffic driving (probably as you would expect)
3. Every touch point with the consumer impacts their brand impression. Brand Stewards (as Ogilvy & Mather/WPP guys self-servingly refer to marketing people) have to care about performance marketing
4. For the well-known brands, performance-type advertising doesn’t always have the goal of driving as much traffic to a site as possible. It can be about attracting a particular type of customer and altering their brand perception.
It was the kind of discussion that seems a little obvious when summarized but if nothing else was quite thought-provoking for me as to whether the well-worn wisdom regarding performance marketing being important to all marketers but a little brand dilutive were true. Unfortunately I think the real answer is, it depends, largely upon how good your marketing team is.
Achieving Breakthrough Results
Murthy Nukala, Founder & CEO, Adchemy
Rob Leathern, Chief Executive Officer, CPM Advisors, Inc.
Alan Edgett, Sr. Director, Digital Media Strategy & Innovation, Experian Consumer Direct
Paul McLenaghan, Vice President, Interactive Markets, TARGUSinfo
Scott Spencer, Group Product Manager, DoubleClick Ad Exchange, Google
This session was 75% taken up by a presentation from Murthy Nukala. I am going to try to find a link to the actual presentation (in the meantime here is a presentation from Rob Leathern that he created for the purposes of the conference too). It essentially described the information value chain that occurs between a variety of different groups that enables Adchemy and others to serve up dazzlingly finely-targeted ads to consumers on websites. The reason that this can save you money is that if you can target your ads to precise demographic or psychographic (attitude-based) targets then you can buy less advertising and get better results. It was clever stuff. If I bought leads Adchemy would without doubt be one of the companies I would buy leads from.
Role of Institutional Capital in Shaping Internet Advertising
Bruce Eatroff, Partner, Halyard Capital
Linda Gridley, Gridley & Company, LLC, President & CEO
Matt Blodgett, Principal, North Bridge
Robert Carter, Development Executive, Welsh Carson Anderson
Stowe Tolman Geffs, Managing Director, The Jordan Edmiston Group, Inc.
The title of this session sounds a little dry but for me it was one of the most interesting of the conference. Some of that has to do with the fact that my previous careers have involved stints both as an entrepreneur and as a venture capitalist. However, what was really good was that each major type of institutional capital was represented:
- Boutique Investment Banking by Gridley & Company and The Jordan Edmiston Group
- Private Equity by Halyard Capital and Welsh Carson Anderson
- Venture Capital and “Growth Equity” by North Bridge
Here were my takeouts from the session:
1. Despite the financial bloodbath of the past 12 months we should expect a lot of M&A transactions in the lead gen space over the next 6 months.
2. A lot of the bigger online companies are paying attention to the vertical although traditional media doesn’t seem to have the resources to do anything interesting M&A-wise
3. Suprisingly we should expect several IPOs in the space in the next 12 months, although it may require a few companies to roll-up as you really need to be at at least a $300M market cap to be successful with this in today’s market.
4. VC and PE is starting to flow to the sector
5. What “walks-up” a multiple valuation significantly for any company is the possession of either data or proprietary technology.
That sums up the morning of LeadsCon East. I will give a brief over view of my takeouts from the afternoon sessions in a second post.
Monday, August 17, 2009
The title might sound obvious. Lead management isn’t CRM because it isn’t, right? However, the number of prospects and partners I’ve met who refer to lead management software as a CRM and vice versa suggests that most people are unaware of the fundamental differences between a system like Salesforce.com and one like Leads360.
It is an easy mistake to make. A lot of CRM’s claim to allow users to manage their inbound leads while many Lead Management Systems (LMSs) handle ongoing drip marketing to existing customers. There is definitely an overlap between CRM and LMS, but then there’s an overlap between what a car and a bus do too but few people would mistake the circumstances under which each of these are more appropriate.
The bottom line is that LMSs should be used if you have ANY of the following objectives:
- Your primary goal is to expand your base of new customers
- You devote more than 20% of your marketing budget in generating Internet leads
- You want to enforce robust sales processes at your organization
A CRM on the other hand is the RIGHT tool if:
- You want a system that allows you to interact with and serve existing customers
- Expanding your share of wallet with your current customers is your major focus
What I tell customers is that if they want to gain customers chose a LMS and if they want to keep customers chose a CRM. In other words if both are important, you need to have both. You are fooling yourself if you think you can use either on their own to do both jobs well.
The reason that a good LMS is essential for customer attainment is as follows:
1. Speed to contact is essential
According to a recent MIT study, an Internet lead that is called within 5 minutes of a customer submitting the inquiry is 22 times (not percent) more likely to convert to a customer than one called after just 30 mins. In other words leads go very cold very fast.
A good lead management system is built with speed to contact in mind. Leads are received and distributed with in seconds of leads being submitted, notification systems alert the rep to the new lead and click to dial features enable lightening fast telephone calls so that a sales rep can be on the phone to a prospect before they have even had chance to close their browser window.
2. Sales process really matters
The leading lead management company recently conducted a complex statistical analysis of over ten million internet leads and was able to prove that 43% of a leads likelihood to convert is determined by differences in sales process. The remaining 57% was dictated by the quality of the actual lead.
Lead management systems are finely tuned to mimic the most successful processes you can possibly implement to maximize the chances of converting a lead. For instance, how many calls do your sales reps make before forgetting about a lead. Research shows that 6 call attempts with two left messages is optimal. 93% of leads are contacted during contact attempt 1 through 6. If your sales agents are making 12 calls they are probably focusing on the wrong thing, whereas if they make just two calls your contact rate is going to be fairly awful.
3. Persistence is very important
The majority of leads that are contacted don’t close in the first 30 days. However, most sales reps have a short attention span. If they can’t effect a one or two call close they’re on to the next best thing. A good lead management system drives persistence in the sales process through auto-reminders, prospect nurture emails and email notification systems that tell your rep when one of the automatic emails has been opened. Calling a lead when they open an email is a sure fire way to start off a good conversation.
At the end of the day, many people can’t afford both a Lead Management System and a CRM. You are probably looking at $150-200/user/month for both systems combined. So if you have to chose one, be very careful that you chose the option that is designed to help you achieve your primary task whether that be customer acquisition or customer retention.
This is the first time I’ve blogged from 35K feet, I love Virgin! For those of you who don’t know, LeadsCon East, the sister event to LeadsCon West – the lead industry’s largest trade show, kick’s off today in New York City. I was initially skeptical about the need and relevance of two shows per year but it seems like the event is going to be very well attended. In fact I understand it is completely sold out. It should be a good event, although looking at the attendees list I can see that only about 10% of attendees are potential lead buyers. I definitely hope this improves over time as I’d prefer to drum up business than participate in industry navel-gazing at shows like this. This is the main reason that my lead management company decided not to bring a booth. Everyone in the industry already knows who we are.
My intention is to (semi) live blog from the show to keep you all informed about what is happening if you can’t attend. The agenda involves a drinks soiree this evening followed by the main even tomorrow. Here is the agenda (I have bolded the events which I intend to attend):
9:00am - 9:45am Keynote: Crossing the Chasm - The Unprecedented Partnership Between a Lead Gen Company and One of the World’s Premier Brands
9:45am - 10:30am Brand and Performance - Achieving the Best of Both Worlds
10:30am - 11:15am Achieving Breakthrough Results
11:15am - 12:00 The Role of Institutional Capital in Shaping Internet Advertising
12:30pm - 7:00pm Exhibits
2:00pm - 2:45pm Targeted Marketing - Different Clients. Different Needs.
2:45pm - 3:30pm The Rise of Direct Response and Per Inquiry Advertising
3:45pm - 4:30pm Improving The Conversion Funnel
4:30pm - 5:15pm Instant Contact - Hot Transfers and Beyond
2:00pm - 2:45pm Stories from the Front Line
2:45pm - 3:30pm Ad Exchanges - The Future of Online Media Buying?
3:30pm - 3:45pm Break
3:45pm - 4:30pm Display 2.0 - Bridging The Performance Divide Between Display And Search
4:30pm - 5:15pm Marketing Strategies Showcase
To anyone who’s attending. Do say hi to me, I’d love to meet up. You can reach me at 310 920 zero-one-one-one.
Friday, July 17, 2009
Over the past 3 quarters much of the lead gen industry, especially the tranche of it previously focused upon mortgage, has taken financial solace in the loan modification industry. Not only is it a perfectly counter-cyclical industry to the down-swinging mortgage industry, especially sub-prime mortgage, but it is made up of many individuals who were previously involved in mortgage and that bought mortgage leads. I would not call it a party exactly because who would couch a phenomenon built on the back of consumer misery as such? However, it has helped many of us to grow revenues at a rate that we had probably never seen before. At one point loan modification was my companies biggest growing vertical. And now, it seems, it is close to being at an end.
Two things make me think this:
1. Loan Modification isn’t working for most homeowners.
I recently discovered statistics from a preeminent hedge fund that show that in most cases loan mods have been a dismal failure. In fact of all the mortgages that were modified last year, over half of the mortgages were delinquent again within six months. What was more interesting was that the amount of time it took to go delinquent following a loan modification was also rapidly reducing. That’s not good!
2. Nearly every State Attorney is trying to close down Loan Mod companies
This week the Federal Trade Commission released a new initiative called “Operation Loan Lies” (subtle, isn’t it?!) which is an effort to crack down on loan modifcation companies across the country. The operation is backed by a large number of state attorneys and other government agencies and marks a coordinated effort right off the bat to close down 189 loan modification companies.
I don’t think it’s a shock to many people in this industry that loan modification, on the scale that we have seen it, is receding. Luckily the lead generation industry today is in much better shape than it was 12 months ago when the loan mod boom commenced. For many the green shoots of economic recovery are even beginning to flower and bloom. It is a good time to be part of this industry!
Tuesday, June 30, 2009
Few subjects have given me more heartburn over the past year than data sharing. Not because I oppose sharing data, quite the opposite, but because my company has lots of it, probably more, useful data than any other company in the industry. Everyone, especially lead generators, want to get access to the data and they want to get it in as raw a form as possible. The heartburn comes from managing the diverse interests of my customers, my partners, the company I work for and the industry at large.
To put a little more flesh on the discussion let me explain, for those that don’t know, that I work for Leads360, the market leading software solution for managing leads. We have in our live database many millions of leads and the milestones associated with whether the lead was contacted, if it was qualified and whether it converted or not. Beyond the size of the data set what makes this data very enticing is that it comes from over one thousand lead sources and aggregates the outcomes of leads being worked by over three thousand lead buying companies. No other data set of its kind is as comprehensive. The other thing that you should know is that contractually my company has the right, to share the dataset I mention in aggregate form for commercial purposes.
The dilemma for our company has been several fold. First, who should we share the data with? Leads360’s first duty is to our customers, and so one thing that Leads360 is crystal clear on is that we won’t share customers data, even at a depersonalized level without the data owner’s permission. Beyond that, Leads360 wants to play a role that ensures that our customers continue to be more successful than any lead buyer out there not using our system. To this extent we have a duty to continue to deliver market-leading analytical tools to our client base. However, lead providers are very important partners to Leads360 and they can make very immediate use of any data we could share with them. That being said, if we give data to lead providers will they figure out which leads they can charge our customers more money for or will they use the data to improve the quality of their leads thus benefiting our customers?
Another question we have struggled with is that if we do share data how much should we charge? Leads360 spent thousands of man-hours last year cleaning the data in order to make sure, for example, that one company’s definition of qualification was the same as another’s. It would be commercially naïve not to recoup and profit from that investment in one form or another.
So we have wrestled with all these questions and I think we have a very well thought through strategy for data sharing. Unfortunately, I can’t share every detail yet. What I can say is that Leads360 continues to focus on the needs of our customers. We will bring to market products that simply can’t be replicated by anyone else that continue to make using our product a practical necessity for lead buyers. Beyond that we do want to help lead providers do two things; first we want to provide sufficient data to enable lead providers to coach our clients on how to be more successful with their leads, that is important and helps our customer, our partner and us so it’s a no-brainer. Second, we want to provide our closest partners with the ability to be self-analytical enough to drive towards a better product. That way we ensure that we continue to remain close with the best lead providers and they continue to have an edge by being close and exclusive with us. I am quite excited because over the next few weeks there will be announcements that are much more specific about what we are doing with data. I think it will begin to transform the industry.
Wednesday, June 24, 2009
The lead generation industry is changing. I believe that lead generation companies that ignore this fact or are too arrogant to accept it will either lose market share or simply go out of business within the next two years.
Ever since I first saw Zillow’s Mortgage Marketplace I realized that there was a new breed of lead generator emerging that would turn the industry on its head. Why? Because consumers are just a lot more savvy than they were five years ago. I think they are too suspicious of lead generators. I watched a LendingTree consumer focus group about a year ago where just about everyone on it had had bad experiences with lead providers. They all seemed to recognize that entering their information online could and probably would lead to a barrage of phone calls that they didn’t really want. They wanted answers, quickly, reliably and without having a conversation with anyone but that is the opposite of what they got. That’s what I call a broken model. A model where the consumer knows what they want but can’t get it. Models like this have a habit of imploding messily, ask any executive at a music company..
Zillow answers the fundamental consumer pain point with the lead generation model neatly. With Zillow Mortgage Marketplace consumers enter information about the mortgage they need and the home they are trying to finance just like other mortgage lead generators usually do. However, they do not allow the consumer to enter their personal information like name, email address and telephone number before the lead is submitted. Leads arrive with the lender without any information that allows them to contact the lead. Instead, the lead provider needs to submit back a quote to the consumer for the mortgage that they are looking for. The consumer then typically sifts through several quotes and a short description of each lender before deciding if they want to contact any of them.
This might sound like a cumbersome process for the lender and that was one of my concerns when I first saw the model. However, I quickly realized that the process could actually be easily streamlined by connecting Zillow up with a lead management system and a pricing engines so that a quote could automatically be generated and sent back to the consumer by each lender based on the rates only available to that particular lender. It is a testament to an innovative company that when I emailed this idea to one of Zillow’s product managers I had a team of Zillow folks take a conference call with me a few days later and within a few months they had made the idea a reality. Now when a consumer enters a loan request into Zillow, within a few seconds they receive back several quotes to chose from. I received 22 when I tried it for my own mortgage. From a consumer’s perspective it is a way superior experience than with a normal lead generator.
Something else that stands out about Zillow’s model is that it is free to participate in for both consumer and lender. What I mean by that is that leads are completely free. If I were a lender I would be all over this opportunity because it is clearly unsustainable; no lead provider can provide leads for free forever. However, during the past year Zillow Mortgage Marketplace has generated 373,531 free leads and has 4,855 participating lenders according to the statistics on their website. All of these have been free and I know for sure that at least one (mine) will have turned into a converted loan. In fact, I happen to know that Zillow leads actually convert fairly well across the board especially if you compare the percentage of leads that are contacted that close with other lead providers.
Given that the consumer experience is great, the leads are free and that they actually convert, it is a reasonable question to ask why Zillow has not been more successful than it has been. 373,531 leads is a lot of leads but is dwarfed by the number of leads that the behemoths in the industry like lowermybills and LendingTree produce in a year. I believe there are several answers that include the fact that people tend to be scared of what they don’t know and are confused by the Zillow model as well as the fact that Zillow doesn’t charge anything for leads in my opinion perversely makes potential buyers think that they are not worth bothering with. However, I think the main reason is that Zillow has singularly failed to put their weight into promoting their marketplace. Just about every lender I tell about Zillow leads has never heard of them before. If I were Zillow I would be charging a small amount of money for leads that contact the consumer and using that money to promote the product better among the lending community. I think doing so will make Zillow a force to be reckoned with in the industry.
So if the Zillow model does succeed in the mortgage lead generation industry, does the concept also have the breadth to succeed in other verticals? That would have to be the case if it was truly a concept that had the potential to change the industry. I think the answer is a complicated one. I can think of industries in which the concept is just about perfect and I can think of others where it is considerably less appropriate. For instance, I can imagine that the Zillow model would be perfect for the insurance industry where people are essentially price and feature shopping. However, for the model to work in an industry like education you would have to believe that prospective students are looking to compare colleges on the basis of price and a measurable set of features. To an extent I think they are; you can compare tuition fees, statistics on the percentage of students find work after degree completion and a variety of other metrics; however, in an industry like education I don’t think any of these factors are as important as the subjective selection criteria such as culture and fit. I think lead generation in education will be informed by the Zillow model but not fundamentally transformed. Nevertheless if I am right then the next couple of years will be way more eventful for most lead generators than I think many of them are expecting.
This is interesting for several reasons. First, just a few months ago false rumors were circling in the lead generation industry that Sparkroom was down and out. That is clearly far from the case, the resource changes appear to have been associated with a shift in focus from mortgage to education. Second, the breadth of what Sparkroom is trying to achieve is now a little clearer. It is quite ambitious in scope since if you line up their products it seems like they are aiming to do campaign management, which competes with companies like DataMark, lead validation, which competes with companies with companies like TargusInfo and eBureau, lead analytics which has always been Sparkroom’s core competency and some very basic lead distribution, which arguably could be a minor move towards lead management, which would compete with companies like Leads360.
Monday, June 22, 2009
When I entered the lead generation industry a couple of years ago, all I ever heard about was lead exchanges. Lead providers were building them, independent companies were operating them and even mortgage CRM companies like Ellie Mae were starting to offer them. The smart money seemed to be on lead exchanges being a fundamental force of change in the lead industry. An individual as smart as Lew Ranieri, the inventor of mortgage securitization, even had a personal stake in a lead exchange called Root Markets.
Exchanges are appealing. I used to work at Andersen Consulting in the ‘90s and advised companies about their marketplace and exchange strategies. I even left Andersen Consulting to start an exchange in the soft commodity industry myself. So I am certainly not the least bit immune from “exchangitis”. However, the fact is that exchanges rarely work. The first mega-exchanges like Covisint in the auto industry which sucked up billions of dollars, that it appears would have been better spent on building better cars, failed spectacularly. I simply cannot name a successful business-to-business online exchange. I don't think there are any.
I believe that lead exchanges will fail. There are a variety of reasons that I believe this to be so:
1. The economics of an exchange doesn’t pencil in the lead industry.
An exchange usually makes money by charging money to the buyer, seller or both. What this means is that to justify itself on a cost-basis the lead exchange has to be able to administer the transaction more cheaply than buyer and seller can currently. This can work in an industry with a lot of middle men since you can replace them with an exchange and save money. However, the lead industry doesn’t have too many middle men. Therefore to make a cost efficiency argument a lead exchange needs to be able to take on operational and administrational functions at the lead buying and selling companies far more cheaply than they can do it themselves. Lead generators are not very fat these days so replacing your sales and operational personnel with an exchange is far from easy and very risky. Furthermore, the economies of scale required by an exchange in order to allow them to operate far more efficiently than standalone lead generators are pretty large. To achieve these economies of scale you have to believe that only one or two exchanges will ultimately succeed. However,
2. The Lead Exchange is not a “winner-take-all” industry
A winner-takes-all industry is one that lends itself to monopoly. In the absence of regulation, industry characteristics that make this occur are a) when a platform exists which has significant costs associated with switching from it even when something better comes along (Microsoft might be a good example) b) when there are huge costs associated with market entry and little incentive to be one of two players (railroads are a good example), c) when huge advantages exist from network effects, in other words as the network becomes larger the value to participants becomes exponentially higher (Facebook would fall into this category).
A popular argument by those struck by “Exchangitis” is that a network effect is at play in the lead exchange industry. The more buyers and sellers you get the better off everyone is. The only problem with this argument, if you agree that having many more buyers and sellers is a good thing, is that an exchange rarely succeeds because it possesses just one of the characteristics I mention above; the ones that succeed tend to have 3 or 4 of the factors going their way. If an exchange’s only reason for success is network effects then what I have generally observed happening is that a huge amount of money is consumed trying to get sufficient “traction” i.e. getting enough buyers and sellers to participate at the same time to make the network effects a reality. Sadly I have never seen this strategy work, much to the considerable expense of many reputable venture capital firms.
Given these reasons I am skeptical that a lead exchange will ever be the dominant platform for lead transactions. I do think that certain companies could do some things that would give them a better chance of success but frankly I think the model is ultimately doomed to failure.
Wednesday, June 10, 2009
What defines the culture of sales in your organization more than anything else? Who you hire? How you incent your team? The goals you set? No. No. No. I am convinced the number one defining factor in a sales culture is how opportunities/leads are handed out to sales people. Add to this the fact that it has been proven that 43% of a sales likelihood of closing is determined by the quality of the sales process and the topic of distribution goes from being dull as ditchwater to actually rather important.
Why does distribution define culture?
To explain the impact of distribution let me give you two rather extreme examples of sales organizations with completely differing sales objectives. I’ll finish up with an overview of how I have structured distribution in my sales team and why I have designed it that way.
First of all let’s consider a super-aggressive sales organization run by someone who wants to drive extreme levels of competition between their sales people, let’s call it Super-A Mortgages or SAM for short. The first thing that SAM wants to achieve is to make people fight for more than their fair share of leads. Leads are distributed as soon as they arrive at the company from the lead source and sales people are required to call the lead within 20 minutes of the lead arriving. The sales person is unable to just pretend that they have called the lead because the entire team has a dialer system that automatically logs the calls made and the call durations on each lead.
At SAM, the consequence of not calling the lead in 20 minutes is that your lead is redistributed to someone else. The lead essentially recycles from one sales person to the next until it lands with someone who calls it or it enters the “shark tank” (I’ll explain this concept shortly). At SAM leads rarely get recycled because the sales people are kept super-hungry. The distribution is set up so that each sales person only gets 5 leads distributed to them per day and the day’s lead flow stops completely if any of the leads are redistributed. A lead is redistributed twice before it goes into a queue that salespeople can use pull distribution to take as many leads per day, as they want from. This is called a shark tank, for obvious reasons. Sales sharks swim in the tank all day snapping up any leads that have been neglected.
However at SAM lead redistribution is not confined to new leads that have not been contacted. A rule exists that each lead must be called 10 times at a minimum of once every day and a maximum of twice every day or the lead is redistributed to someone else.
Another feature of SAM’s distribution set up is that it is designed not to distribute leads evenly. SAM’s owner is an arch-capitalist and believes in the survival of the fittest as well as in protecting his marketing investments as best he can. He does this with the help of two metrics; sales executive closing ratios and lead score. SAM’s owner has a model that scores each lead when it arrives at the company based on how similar the lead is to leads that have closed for SAM in the past. He also monitors the percentage of leads that each salesperson receives that they close. SAM’s intelligent distribution system matches the highest scoring leads only with the highest achieving reps and conversely the lower scoring leads with the poorly performing reps. In order to ensure that sales folks don’t get stuck in a vicious or virtuous cycle because of the leads that they are receiving he has a 20% overlap of the scores that are classified as high and low quality leads. Put another way, if you are a low performer and only receive poor leads you will probably stay so. However, if some of the leads you get are as good or better than the worst leads that the good reps are receiving then you can claw your way from being a low to a high performing salesperson.
Many people don’t want to work at companies like SAM. It’s hard, stressful and if you’re not on top of your game can be completely soul-destroying. However, I suspect that some of the best-paid sales people in the world do work at companies with a fairly similar culture to SAMs.
Many companies don’t want to push their salespeople to compete with one another. They want their sales team to be happy and comfortable so that they focus on being as patient and caring to their customers as possible. Our example of the will be the Benevolent Education Company, or BEC for short. BEC also distributes leads as soon as they arrive at the company. However, leads are distributed using a round-robin methodology. This is where leads are distributed completely evenly and fairly so that everyone receives an equal number of leads. To make this even more egalitarian leads are scored and the high scoring leads are distributed by a different lead distribution system to the low scoring leads to make sure everyone receives an equal number of good and bad leads. The owner of BEC doesn’t want reps to suffer at the hands of bad luck.
Sales reps at BEC are distributed 4 leads per day. Once everyone on the team has received 4 leads then new leads start going into a lead queue that sales people can pull from as soon as they have no leads allocated to them that have not been contacted. BEC doesn’t redistribute leads if a rep does not work them quickly; reps are trusted to work diligently without automated inducement.
Working at BEC is relaxed and the atmosphere collegiate.
My Distribution System
I wonder if you can detect from what I’ve written whether the distribution program that I have set up for my sales team is more like SAM’s or BEC’s. Obviously it is somewhere between the two but if I’m honest it is more like BEC’s than SAM’s. My team is encouraged to compete but teamwork and the enjoyment levels of working at Leads360 are emphasized quite highly. The people that I hire have to be able to spend a lot of time explaining a piece of technology that is powerful, feature rich and not trivially priced. I need them to be experts, stay with the company and most of all to spend enough time with each potential customer to get them comfortable with what we have to offer. That doesn’t happen in an environment where leads are continuously snapped away and sales people are directly pitted against one another.
At Leads360 we have a distribution program for each lead source of which there are about 40 or 50 active at any one time (we have a very good and energetic marketing team). We do this to make sure that leads are distributed evenly across sources as some sources are better than others. We do not often use shark tanks but brand new leads are redistributed if they are not called within the first 2 hours of the rep receiving the lead. After the first call the rep must call the lead once every day for 6 working days or the lead is redistributed and reps are expected to leave a voicemail on the first and last call. If the lead is not contacted by the sixth and final call we place the lead in a nurture status which sends automated emails to the customer at regular intervals for the following 30 days. The system works, I want share our closing ratio but I can tell you it is impressively high. I must admit it helps to have the best product on the market but I do believe a lot of our sales success is due to a robust process.
So what kind of culture do you want in your sales team? Does the way you distribute leads currently reflect this culture? If not you are out of synch; getting the goal and the means aligned could well create the boost in sales performance that has likely been evading you. I have never seen a high-performing sales team where the two are not aligned.