Google Unveils Comparison Ads Collaborators

Today is a good day for me. For a long time, my company, Leads360, has been collaborating with Google on their Comparison Ads product. Today we were given permission to announce it.

I understand that there are several companies with announcements like Leads360's pending. In order to go to market in a high quality way Google wanted relationships with pricing engines and lead management platforms. There’s been quite a lot of publicity about Mortech’s pricing engine partnership with Google because of the law suit that allegedly erupted when LendingTree got wind of what Google was doing with their pricing partner (Mortech). I guess Mortech got lucky with free publicity but the truth is that Google seems open to multiple partnerships as I'm guessing may be evidenced by several announcements by Mortech’s competitors today.

So how do Google’s partnerships fit into the Comparison Ads ecosystem? The usefulness of integrations with Lead Management Software like Leads360 are pretty straightforward. Once a lead (or customer initiated contact) is created in Comparison Ads it ian be sent to the mortgage company/bank’s lead management system so that the the lead can be followed up on and managed properly. 

On the pricing side however, the partnerships that Google has in place are a little more difficult to understand. The first thing that is really surprising to some, no doubt, is that as a buyer of Google leads, you do not have to be a customer of any of Google’s pricing engine partners. As a customer of Google Comparison Ads you are not required to pay a cent to any of the pricing engines. Essentially Google is utilizing the pricing engines to validate that mortgage companies are approved to offer the rates they claim that they are e.g. ABC Mortgage Inc. is allowed to sell Wells Fargo mortgages at Wells Fargo wholesale rates. However Google is not, as some people have thought, using pricing engines like Mortech to actually do the number crunching when a customer makes a loan inquiry on the Comparison Ads platform. Clearly Google is far more capable of crunching the data required to do the loan comparison and then presenting back the relevant quotes with the light-speed responsiveness that is seen on Google Comparison Ads platform.

In the long run it remains to be seen which of Google partners will be the big winners. However, Google coming into the market will no doubt attract the larger banks that have, up until now been reluctant to buy Internet leads, to experiment with this important and growing marketing medium. Growth in the universe of lead buyers has to be a good thing for not only lead management software providers but the industry as a whole.  As I said, it’s a good day!

Google Comparison Ads: A product review

After a few minutes of playing around with Google Comparison Ads one thing is very clear. It is the slickest, most user-friendly consumer mortgage-quoting product on the market by a considerable margin. Regardless of whether or not Google has the ability to push more traffic towards their product based on the dominance of their search engine, this would be a winner. It is really that good. Because Google does have a means of directing a large chunk of the Internet’s traffic to this product overnight I believe that this is one of the first products that Google has developed that has revenue potential approaching that of Adwords and Adsense.

So what aspects of Google Comparison Ads do I think are so great?

1. 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.


2. 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.


3. 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.


4. 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:

1. 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.


2. 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.


3. 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.


4. 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.


5. 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.

Google Launches Comparison Ads - BIG News for the Lead Industry

It's official, Google has gone live with their
Comparison Ads product.

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.

Just for CICs – How the Consumer Initiated Contact will come to dominate lead generation.

A standard Internet lead is pretty inefficient. The consumer has no control and usually isn’t sure where their information is going. As a way of finding a provider of a mortgage, degree, insurance policy, debt settlement company however, it is better than the stone age method of finding providers in the yellow pages. As a consumer, being a “lead” requires less effort and thought from the consumer’s perspective than thumbing through a telephone directory and then making multiple calls to providers. The concept of filling in a form with a bit of personal info and then letting the Internet take care of matching you up with companies who want your business and who are prepared to call you multiple times until you decide you have a spare moment to talk to them is appealing. That’s why the Internet lead industry is large and growing. It’s a valuable service… but it’s also an inefficient and highly imperfect one.

I believe that leads are inefficient because they take control out of the hands of the consumer and as a consequence the chances of matching consumers up with companies that are not of interest to the consumer is high. I believe the providers that will succeed in the lead industry are those that allow consumers to do extra qualification steps before being put in touch with a company.

An obvious example of this type of service is Zillow. Zillow allows you to see a bunch of quotes from mortgage lenders before you hand over your personal information to the ones that you, the consumer, want to do business with. The same model would work in education by matching prospective students with courses they are qualified for and meet the criteria they are looking for such as on-campus facilities, availability of tuition scholarships etc. It also works in insurance where most people who complete a lead form only want comparative quotes.

I am convinced that providing a consumer with a set of options and letting them decide who will contact them is the way the Internet lead industry will go. This is plainly a much better consumer experience as well as getting over the issue that people don’t like providing detailed personal information if they don’t feel they have a great deal of control over who gets it.

I am also convinced that consumers want to choose who contacts who. Most consumers would like both the option to call the advertiser and the option to be called by the advertiser. And regardless of whether they contact the lead provider they want the data that they entered on the form to be magically in the hands of the person who answers the phone when they call.

This new model is one based on Consumer Initiated Contacts versus Leads. I believe that it won’t be long before people think of buying CPCICs alongside, and in many cases in preference to, CPCs and CPLs. The technology has evolved to the point where everything I describe above is easy, the consumer demand for this appears to be there, all we need now is for existing lead generators to innovate. If they don’t I believe that new entrants will disrupt the market. My bet is that the latter is much closer than most people think.

LeadsCon Las Vegas: Registration Open

It looks like registration for LeadsCon Las Vegas (the big brother of LeadsCon East) opened today - although the event is not until February 23rd. My opinion is that this is the must-go-to conference of the year for lead buyers, sellers and anyone who operates in the lead ecosystem. Everyone who matters in the lead industry attends so from a business development and sales perspective it's a must; for anyone who is trying to learn about leads or wants to see if they can improve what they currently do it's probably the single best 2-day investment you can make.

I'm looking forward to a great event and no-doubt a relatively quick sellout like last year.

Zillow says "show me the money!"

Zillow formally announced to it’s lender network today that it will start charging for it’s leads as of December. As Lead Critic points out on his blog, this was probably inevitable. Certainly based on a number of conversations I have had with Zillow users they had all anticipated this would happen. However, unlike Lead Critic, I think that Zillow's decision to charge is a good sign.

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.

B2B Lead Management: How does it Differ from B2C Lead Management?

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.

How Mint got minted

Most people will have seen that mint.com recently sold to their rival Intuit for $170M. Not bad for a company built by a PhD drop out in his twenties. Aaron Patzer just gave a really interesting talk on how he built his company. What’s most interesting about his presentation is how closely he looked at the lead generation market in justifying his post-seed round financing. Beyond that it’s a great overview of his journey from nothing to exit, which for the entrepreneurially-minded is always a fascinating topic of discussion.

Here is the presentation he gave:

Startup Building 101 -


Here is the video of his presentation:

Mint CEO Aaron Patzer on Startups from Techcrunch on Vimeo.

Quinstreet heads full force into the Insurance space

Earlier today it was announced that Quinstreet had paid $16M for the domain name and “related assets” of insure.com from Insure.com, Inc. (NSUR). $16M is a big bet on little more than a domain name, especially when you consider the domain was purchased in 2001 for just $1.6M. Nevertheless, I think it’s a great strategy by Quinstreet. Having a flagship domain as you go after a vertical is a clear signal to your buyers that you are fully invested in the success of that line of business.

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.

Lead Scoring - What's All the Fuss About?

I just returned from the TargusInfo Online Lead Quality Summit. Just like last year the buzz was all about lead scoring. TargusInfo claims that they did a survey with their education clients this year asking them whether they intended to score leads and 100% of them said “yes”. So, given the high levels of buzz, who is actually doing scoring and what are the results?

Unfortunately, either no one is talking to keep secret their competitive advantage, or very few companies are actually using scoring. I didn’t find anyone at the conference who could tell me they had done anything more than a little bit of testing with scoring. In fact, I found it completely remarkable that there was a panel called “Lead Scoring: Mend the Leaks in Your Lead Pipeline” on which all 3 panelists were thinking about scoring but had not yet scored a single lead! I am hoping that TargusInfo’s conference dedicated solely to the topic of scoring next year is a little more illuminating.

I do think scoring has huge potential for both lead buyers and lead sellers. One of the bright spots of a good TargusInfo conference for me was Matt McLaughlin from CUNet’s explanation of scoring, verification and validation. It was fairly “101” but the explanation was good and clear so I thought I’d plagiarize his work for the benefit of my readers.

Lead Validation, Verification and Scoring

These services are similar, yet distinct services for lead buyers and sellers that represent a continuum of information depth running from validation (being the simplest form of lead quality signal) to scoring. Here is a basic explanation of each:

Lead Validation: This involves scrubbing individual data points to make sure that they are true i.e. whether the phone number is a valid, in-use phone number, whether the zip is a real zip etc. A lot of lead providers actually use this service to eliminate bad/fake leads.

Lead Verification: This process takes multiple points of information and sees whether they belong to the same person. For example, it will check whether someone called Arthur Smith really lives at 123 Main Street and has a telephone number of (100) 200-3000. Since the information that this analysis is typically based upon is not perfect rather than saying whether a lead is good or bad, verification services will give the lead a rating or mini-score associated with how many of the pieces of information provided could be matched together.

Lead Scoring: People mean a lot of different things when they refer to lead scoring. I’m going to refer to what I think is the most valuable form of lead scoring and therefore the type of lead score that will gain dominance… eventually. That is lead scoring to provide a predictive measure of the outcome of a lead. For example scoring a lead from A+ through E- based on how likely that a lead with the attributes that it has will turn into a converted customer.

How Lead Scoring Works

As Matt McLaughlin pointed out a lead score is the consequence of predictive modeling based on the outcomes of other leads and can be based on 3 types of data:

1. Submitted data

That is basically the data in the lead itself. So with a mortgage lead perhaps you could predict how likely a lead is to convert based on the income, gender, location of the customer or look at factors like whether the lead was sent from a freemail address like hotmail versus a corporate account. You might also want to pull the validation and verification data into the scoring model too. That would certainly lend itself to a more accurate model.

2. Appended data

This is the process of matching a lead with hundreds or thousands of data points about that consumer housed in other databases. For instance if I submitted a lead with my name and address, such databases could tell you that I had recently bought a house in 90404 and have recently spent $X on furniture and had my credit pulled 4 times. A lead scoring company takes into account thousands of data points when they create the model and usually find that less than a hundred data points help to predict how good a lead is. They then use those data points in their algorithm for generating each lead score.

3. Source Information

Source information is the trickiest type of data to decide whether it should be included in a scoring model. Source information describes who generated the lead and under what circumstance. For example, your source information could be that Lowermybills generated the ad from a banner advertisement on a Yahoo! Finance page. Typically however, if you are a buyer of leads, lead sellers won’t share that level of information with you and therefore you’ll only be able to say who sold you the lead.

I have found that the negatives outweigh the benefits of including source information. Knowing who sold the lead and including that in a predictive scoring model usually vastly improves the predictive accuracy of your scoring model. Unfortunately it makes it a very blunt instrument in terms of determining who you should buy leads from and to detect when an individual lead provider’s leads change in quality.

What to measure

When you create a lead score you need to determine what you want to predict. The bias of most users of leads is to want to predict a metric that is most closely associated with profitability or “success”. The problem is that as you go towards indicators of profitability (such as conversion) versus indicators of intent (such as contactability) you have less data points and greater time lags associated with the time it takes to get from lead generation to revenue generation by the lead buyer. Thus a metric associated with profitability may make for a less useful model. The following diagram, based on a slide in Matt McLaughlin’s presentation illustrates this:

The Impact of Scoring

My view is that scoring will have a massive impact on the lead industry over time. It will make it easier to be successful but it will also stretch out pricing. As companies are able to accurately discriminate between lead qualities they will be expected to pay an appropriate price for the lead. For example if I can tell you with 80% confidence that lead will close and I know that your net profit for a conversion is $1,000 eventually that lead’s market price is going to gravitate to close to $800. I personally look forward to that time because it will reduce the amount of time good companies waste working poor leads and will lead to a market where those that win will be the companies that have the best sales process and highest quality sales and customer service teams. That’s a world in which lead management becomes even more important than it is today.

Leads360’s explosive year

Leads360 announced our 4,000th client today. It also coincided with it being a large win in Leads360’s newest vertical. Leads360 is a different company to the one that I joined 18 months ago and it has been exciting to see how the company has rallied around bringing on Jones International University. The level of enthusiasm for what we do and the potential for the education vertical seeps from everyone’s pores.

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!

LeadsCon: An Overview

I decided that live blogging was a little too difficult but here is a summary of the best bits of LeadsCon instead. Overall it was a very strong event. I was surprised because I thought that two shows was overkill. In fact online performance marketing is doing better than most in the economic downturn so the event attracted a large and varied crowd and the content of each of the meetings that I joined was quite enlightening. I really have to commend Jay, the conference’s founder. LeadsCon has become the must-attend event for anyone who is a serious lead buyer or seller. I was particularly pleased that there were more lead buyers there than I noticed at previous shows as well as a lot more venture capital, private equity and investment banking folks. Given the sector’s buoyancy a lot of the finance folks were there trying to fill gaps in their portfolio likely caused by the slow-death of offline media, I suspect. The show’s proximity to the HQ of many finance houses also probably didn’t hurt.

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.

Why Lead Management isn’t Customer Relationship Management

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:

1. Your primary goal is to expand your base of new customers


2. You devote more than 20% of your marketing budget in generating Internet leads


3. You want to enforce robust sales processes at your organization

A CRM on the other hand is the RIGHT tool if:

1. You want a system that allows you to interact with and serve existing customers


2. 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.

LeadsCon East – Live Blogging

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):

General Sessions

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

Performance Track

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

Marketing Track

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.

Is The Loan Modification Industry Dying?

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!

Give me your data! Why data sharing is such a hot topic in the lead industry.

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.

Is Zillow the Future of the Lead Generation Industry?

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. 

NEWS: Sparkroom successfully switches focus to Education and expands offering

I noticed today that Sparkroom has had several significant wins in the education space recently. Premier Education Group, which has 21 privately owned campuses in northeastern states, just signed up for Sparkroom’s Lead Deliver and Lead IQ platforms. In the past few months they also picked up US Education Corporation, a division of Devry Inc.

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.

The fact that Sparkroom has focused on the education vertical makes a lot of sense though. The average lead price and cost per aquistion are higher and the marketing departments far more analytically driven than other heavy lead-using verticals pointing to the fact that there is both the funds to pay for the sophistication that Sparkroom brings plus value placed upon what Sparkroom promises to bring to the table. Given that what Sparkroom has to offer pushes the sophistication of the Lead Gen industry to a higher level I look forward to seeing many more press releases of wins in the education industry over the coming months.

Are Lead Exchanges Doomed?

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.

Lead Distribution: Creating the Right Sales Dynamic

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. 

Dog-Eat-Dog Distribution

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.

Soft-and-Fluffy Distribution

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.

Building a Sales Machine

I am fortunate. I not only have a job but I also have one that I really love doing. I have a pretty unusual role, running both strategy and sales at my company, but it works. It probably makes sense in the context of Leads360 in particular because we produce software designed to make sales teams successful. Me having a deep and direct understanding of the sales process really helps to inform my point of view when I contribute to strategic discussions about our product roadmap. Running the sales team also gives me a great opportunity to experiment.

The sales team at Leads360 then is part conventional sales team and part laboratory. We even have a fulltime MIT graduate helping us with data analytics and continuous operational improvement. It’s an exciting and fast moving environment. I sometimes pity my team who put up with my experiments on a weekly and sometimes daily basis. Whether it is commission structures, goals, metrics, distribution workflow or a combination of all of them the only constant is that everything changes continuously.

We learn a lot from the experiments that we conduct for a number of reasons:

a) Sales is a highly data-rich environment. Testing hypotheses and drawing conclusions is therefore fast and reliable

b) Leads360 produces the software that we use to run the sales process; if there are things that I find work in the sales process we not only enjoy a revenue gain we get to improve our product.

One of the over-riding drivers for this blog is that I want to share the findings that come out of my sales laboratory and in return hear what other sales teams do to improve performance.  I’ll start in my next post with some examples of massive productivity gains that can be created just by tweaking the way leads are distributed.

Lead Gen 2.0 - The future of Lead Generation

Obviously this is just my opinion but at the end of the day that is what a blog is all about. I have some strong impressions on the direction of the industry and firmly believe that a sea-change is underway. I call it Lead Gen 2.0 even though it has nothing much to do with the social-centric, folksonomic drivers of Web 2.0. Sorry, I just don’t think the future of lead gen has anything to do with Twitter or Facebook ;-)

Like all technology revolutions, in my opinion Lead Gen 2.0 will be driven by consumer dissatisfaction with what went before it (Lead Gen 1.0). Consumer pain that has been simmering for some time will lead to a dramatic change in the nature of demand once a set of progressive-thinking industry players figure out how to provide products and services that serve consumers better. That’s how people like Kevin Rose at Digg took on Yahoo! and how Jeremy Stoppleman at Yelp! has taken on CitySearch in the Web 2.0 revolution. They figured out that consumers were tired of being told what to think and do by “big media” and actually prefer to rely more on the wisdom of crowds.

So what is really painful about lead generation from a consumer’s point of view? Gosh, where do I start? Whichever way you dress it up, from a consumer’s point of view the experience of “being a lead” is fairly horrible. A consumer responds to some form of inducement to hand over their information and is then invariably called/pursued by multiple (read: “more than hoped for”) vendors.  I remember completing a loan lead form back in 2006 to see what happened and receiving the attention of 14 mortgage providers. I still receive form letters from some of them!

It isn’t news to anyone who’s honest with themselves in the lead gen industry that consumer pain is high and that the industry needs to move on just to survive. If nothing else, it is becoming increasingly difficult to get consumers who have been burnt in the past to part with their information when they are unsure of who is actually going to call them. So where to next?

I think the answer lies in thinking about what the consumer is actually looking for when they embark on a trip to the Internet for information. In most cases where leads are generated I believe that the consumer set out with the following goals:

1. To compare prices
   
2. To find provider ratings that they trust
   
3. To compare products and service details 

In conjunction with this I believe that control is important. The consumer needs to feel like they are driving the process. Lead Gen does much of this but in a sub-optimal way. You only get to compare a handful of providers and only on their terms i.e. if and when they decide to call you.

Lead Gen 2.0 is about putting more power into the hands of the consumer. It is about letting them qualify sellers before they are put in touch with them. My favorite example of a Lead Gen 2.0 provider is Zillow. Zillow’s Mortgage Marketplace is a great idea, well executed and marks a significant paradigm shift in lead generation.

For those readers who are unaware of exactly what Zillow mortgage marketplace does, let me briefly summarize. The process is as follows:

1. Consumer enters information about the mortgage product they are looking for but DOES NOT provide any personal information
   
2. The inquiry is sent to every Zillow-validated lender
   
3. Most lenders receive the lead into a lead management system, generate an auto-quote based on the rates available to them and send instantaneously send a quote back to Zillow
   
4. Old-school lenders with no auto-quoting capability respond manually to inquiries that pique their interest
   
5. The consumer is presented, within a few seconds, with a list of quotes, the name and contact details of the lenders who provided them and the ability to contact the lender to find out more information.
   
6. To reduce bait and switch situations lenders are rated, eBay-style by consumers who have received quotes from them.
   

This is a consumer-centric service in which everyone wins. Zillow currently charges nothing for inquiries so lenders have access to a remarkably cost-effective marketing channel. Consumers have choice and control, which I would argue is exactly what they are looking for.

In the UK consumers completely reject the notion of providing their information without a clear promise that they will retain control of who they are put in contact with. This is reflected in the services that are popular in the UK. The largest financial product lead generator is MoneySupermarket; this company aggregates and instantaneously displays rates for thousands of service providers before connecting consumers to those companies.

In this new world of lead generation new rules apply. First of all, whereas lead providers used to become successful mainly through expertise in marketing rate arbitrage, they now need to become well-versed in building comprehensive price/rate and product description engines. It also means that there is increasingly less room for many players. There is currently a very long tail of small lead providers. If the prevailing model is one where a large number of competing offers are aggregated and displayed to consumers, this has the characteristics of a winner-takes-all or a few-take-all market. Large, innovative lead generators will dominate and small ones will shrink or serve ever more obscure niches. For many of the current players in the industry, the thought of this outcome is frightening. However, an industry that better serves the consumer is a stronger industry in which brave, innovative and focused organizations prevail. I am looking forward to the challenge!

7. Value-Added Products: Transforming Leads into Customers

We have arrived at the final post in this Leads101 series, as far downstream in the value chain as we will go; the period during which a lead or prospect turns into a revenue generating entity – also know as a customer. What we are really talking about here are the additional pieces of technology that you can use to either close the deal or manage your customer – pricing engines and customer relationship managements systems. Each of which have slightly different flavors in each vertical.

Pricing Engines

Until recently a mortgage broker, insurance agent, personal loan officer or any other individual that offered products with prices that frequently changed would use a physical rate sheet to price loans. In my living memory this was typically a sheet or two of paper with a table of prices on it faxed on a daily or weekly basis by the bank, insurance company etc. The Internet era has changed that. Prices change more frequently and consumers expect more instantaneous gratification necessitating a more automated system of quote delivery.

Many verticals in which there is heavy utilization of Internet leads also rely upon automated pricing solutions in order to help close customers. In most industries these engines come in two different kinds.

1. Auto-pricing

Auto pricing has the ability to take in lead data and return an automated quote or multiple quotes on behalf of the seller, usually by email but sometimes on the a screen subsequent to the one where the consumer has entered their data.

2. Manual pricing

Manual pricing is one that involves a seller making tweaks and adjustments in order to find the best products available for a customer. Typically sellers have access to these pricing engines while they discuss the consumer’s needs over the phone and are able to quote and often lock in a price for a product on the call. This is a very common use in both the mortgage and insurance industries.

Mortgage Pricing Engines

Pricing engines in the mortgage industry compete on a few criteria; the number of lenders that they integrate with, the accuracy of the quotes that they are able to deliver and the user-friendliness of the interface. There are several major players in the market, all of which have great systems for manual pricing, auto-pricing or both. The larger and better ones also integrate with lead management systems to provide a seamless way to receive leads and auto quote on them. The following is a list of the major mortgage pricing solutions, starting with the market leader:

• NYLX
  
• Optimal Blue
  
• LoanSifter
  
• BrokerBuddy
  
• DelMar PriceTrac
  
• Moretech
  
• PriceMyLoan
• Sollen
  
• NetOxygen
  
• Loan-Score

Insurance Pricing Engines

Insurance, in some ways is a little more complicated than the mortgage industry. First of all, there is a significant difference between how one prices policies between each insurance sub-categories (auto, home, health and life). This is a far less evolved space than in the mortgage industry, many of the pricing engine solutions primarily relying upon screen-scraping and document scanning to get insurance rates versus direct feeds from the policy writers. The major solutions in this space are as follows:

Auto/Home

• QuoteBurst
  
• EZLynx
  
• IBQ Systems
  
• Quomation
  

Health/Life

• Quotit
  
• Insurint
  
• Fscrater
  
• eTurboRater
  

Administration Systems

Administration systems cover a large clutch of disparate “back-end” pieces of software that are used to get a lead through an application, conversion and ongoing retention cycle. Every industry that uses leads has it’s own flavor of administration system. In the mortgage industry these are called Loan Origination Systems; in Insurance, Agency Management Systems; In Education, Student Management Systems etc. During the later stages of the sales cycle in organizations that follow robust processes, leads will typically be passed from a lead management system to an administrative system for an application or revenue-generating event/conversion to take place.

Summary

And now that we have covered the entire lead cycle from lead submission to conversion we are at the end of the Leads 101 course. Hopefully it is a useful introduction to the lead industry and levels the playing field in a sector that suffers from significant levels of information opacity.

Hopefully, with collaboration from peers, this board may continue to provide useful information and views for and from lead experts and neophytes alike. My next subject will be about my views about the future direction of the lead industry: stay tuned.

6. Lead Management: If you do nothing else, do this!

If you are buying or generating Internet leads and not using a system other than email to receive and manage those leads then I have some good news for you. There is something that you can do right now that will have an incredible impact on your success with leads. Invest in a lead management system.

Recent research published by lead management software solution provider Leads360 showed that 34% more companies continue buying internet leads for over one year if they use a lead management solution versus receiving leads by email. There could be a number of reasons for this including the fact that if a company invests in technology they are also more likely to be more committed to the marketing channel from the outset. However, more than anything else, I think that this finding shows you something that nearly everyone working in the lead industry has accepted for a long time anecdotally. Lead buyers who use lead management systems are far more successful than ones that don’t.

What does a lead management system do?

There are several different types of lead management solution available (which we will look at later in this post) but at their most simple they all do the following:

1. Receive leads

Integrate with a variety of lead providers and your own website so that leads that are posted by consumers are instantaneously transmitted to your system.

2. Distribute leads

On arrival, the lead can be distributed to one of your sales reps to be worked.

3. Manage Leads

A core function of a lead management solution is to help you organize your leads according to what stage you are at with them and the length of time it has been waiting for an action. A lead management system (LMS) is very similar to a CRM in that respect; except that it handles prospects as opposed to customers. An LMS helps you attract customers whereas a CRM enables you to keep them.

4. Track Leads

In my last post I looked at Lead Analytics. Lead Management systems do most of this analytical heavy lifting for you, providing dashboards and reports that help you to improve both lead buying and your sales processes.

Advanced functionality

While the 4 core functions of a lead management system described above are fundamental to any solution you will find on the market today, there are also a handful of features that the better systems have that can significantly aid in closing more business. These are:

1. Advanced distribution

There are two core distribution methodologies; pull and push. Push is most common and basically distributes the lead to your sales people based on either a “round robin system” (each sales rep in turn gets a new lead) or by some other rules that you have set up. Pull distribution allows you to create a “bucket” of leads that sales people can pull from when they are ready to receive their next new lead. Going into the advantages and disadvantages of the two methodologies is a subject for a future post, however some systems do support both push and pull.

Beyond the actual methodology, systems differ in terms of the configurability of the rules that leads can be distributed by and how quickly a lead can be sent to the sales rep after it arrives in the system. A handful of the better systems support “real-time” push distribution.

2. Dialers

An amazing amount of time is wasted dialing leads. Mis-keying is common and manual dialing is a cumbersome activity that sucks the will to live from many sales reps. Some lead management systems have in built dialer systems that not only reduce the time spent calling leads but also provide the ability to track your sales team’s time on the phone. There are several different types of dialer that lead management systems provide, each of which have different pros and cons; these are:

a) Click-to-Dial

The ability to click on a lead and have a call placed automatically, normally through the sales reps existing headset.

b) Power Dialer

This is very similar to a click to dial system except that it provides the ability for the rep to line up a list of leads for the system to rapidly dial through until a connection is made. The better systems can detect and ignore voicemail.

c) Predictive Dialer

These systems continuously call a list of leads on behalf of a group of sales people and once a live connection is made the customer on the other end is connected with an available sales representative.

3. Third-Party Integrations

This is the subject for my final post in this Leads 101 series. However it is suffice to say that the best lead management systems are integrated with a plethora of third party systems such as pricing engines, credit reporting bureaus, customer management systems etc. The better lead management systems also have ways to easily integrate with any third party systems using technologies called XML or Web Services (that’s probably as technical as I want to get on this blog).

4. Email

One of the more important aspects of good lead management solutions is the ability to send both automated emails and provide templates to your sales reps to send out manually.

5. Appointment and Reminder management

A decent management system will have a Outlook-style calendar that will allow you to set up lead-specific appointments and reminders.

Lead Management Solutions

There are a large number of lead management solution providers, however I will try to give an overview of the most established and well-regarded ones here. The best way to categorize the different lead management solutions is by the core focus of the companies providing them.

Lead Management Specialists

There are a handful of companies that specialize just in lead management. They don’t generate leads, they didn’t start life as a CRM solution or a mortgage-pricing engine. Arguably these companies are the ones with the most sophisticated and feature-rich solutions. The following are the primary solutions in descending order of size:

• Leads360
  
• LeadMailbox
  
• LeadROI
  
• IcoSales

Lead Provider Solutions

Some lead providers offer their own basic lead management systems. They are almost always free but the downside is that they are also tied to just one lead provider. It is bad practice to single source leads. However, if this option appeals to you I is worth checking with your lead provider to see if they do have such a system that you can use.

Pricing Engine Solutions

Some of the companies that offer either mortgage or insurance pricing engines provide integrated lead management solutions. If you operate in one of these industries then these systems are worthy of consideration. Do bear in mind you are first and foremost buying a pricing system and not a lead management system in this case though so you will lose out on the deeper, more robust functionality offered by a lead management provider.

CRMs

Most customer relationship management solutions have a lead management module or integrate with 3^rd party applications that provide lead management capabilities. The pros of these systems are that if you truly need a high quality CRM then this ensures you have a tightly integrated lead management system. The cons are that CRMs are much more expensive and difficult to configure and set up than lead management systems are.

How much does a Lead Management System Cost?

Obviously this depends upon what you want. The lead providers often provide free systems and Leads360 has even released a product called Leads360 Express that starts out free for a limited number of users. More typically however, you should expect to pay somewhere between $30 and $80 per month per user on most systems depending on their feature richness. Some systems charge per lead which works out cheap if you don’t buy many leads but can really expand quickly if you increase the volume of leads you buy. The bottom line of course is, as with everything, you get what you pay for but if you are buying leads I can guarantee that the investment you’ll make in any lead management solution will be an ROI positive one.

5. Lead Analytics: If you can’t measure it, “it” doesn’t exist!

I live by data. The people who work for me often get frustrated because I refuse to accept anecdotes. Alongside leadership, good use of data, for me, is the most critical component to running a successful business. I was once in a meeting with Paul Otellini, the CEO of Intel, who was quizzing one of his lieutenants about the pros and cons of outsourcing a large part of the organization to “low-cost geographies”. A quote he used to demonstrate that the argument being used was weak stuck with me; “I trust in God but everyone else needs to bring me data”. My point is that world class companies, large and small, live by data and so should you.

The thing I love about online advertising and the lead sector in particular is that there is more data than in any other industry in which I have worked, just about everything is measurable. And day after day I see that the companies that use the data most carefully, whether they be sellers, buyers or intermediaries, are the ones that time after time beat their competitors.

This article is intended to give both an overview of the types of use that lead buyers should make of data as well as some insight to the companies and tools that exist to help buyers collect and analyze data.

The Four Key Metrics

There are 4 metrics that I believe that every lead buyer should know cold although few do. These are:

1. Speed to Contact – of leads contacted how long from when the lead is received does it take to contact that person.

2. Contact Rate – the percentage of leads that you buy that end up being contactable.

3. Qualification Rate – the percentage of your leads that turn out to be candidates for your product once you have contacted them.

4. Conversion Rate – the percentage of your leads that generate revenue for your company.

Most lead buyers don’t know these 4 simple metrics and are thus driving an expensive sports car (as we saw in my previous post - leads are expensive) with a blindfold on. Think of it like this:

• If you don’t know these metrics for each of your campaigns how do you know which lead sources you should be buying more from?

• How do you know how much you can afford to pay for leads? Surely you don’t accept the same price from each vendor?

• If you don’t know these metrics for each of your sales team members then how do you know who’s doing a good job? And more importantly what are you going to tell the sales people who aren’t closing deals; “increase your speed to contact and try harder to convert qualified leads” is better advice than “work harder”.

I could go on but my point is that these metrics are so fundamental to every aspect of your business that if you do nothing else you should at least get a grip of these statistics. If you want to make life easy on yourself then invest in a lead management system, solutions like Leads360 have these metrics available on the first screen that you log onto. Even if you receive leads by email, make the effort to track and analyze your data in a spreadsheet and stop burning money on leads that you are not in control of.

What benchmarks should I strive for?

I hear this question a lot from lead buyers and I ask it myself of my own sales team. Once I know the 4 key metrics, what levels are good and which are bad? What is the average attainment of these four metrics among lead buyers?

This is complicated massively by the fact that people who don’t track the 4 key metrics probably achieve a much poorer level but no one will ever know. Among those companies that are able to track these metrics there are discrepancies between them in terms of the average lead quality and the robustness of their sales process. Both of these factors create a wide range of rates that are achieved between companies (also known as a high standard deviation). The 4 metrics also diverge quite a lot between industries and at different stages in economic cycles e.g. lead conversion rates in the mortgage industry are currently quite low. However, solving for all of these factors a broad brushstroke benchmark for each of these metrics is as follows:

• Speed to Contact: 1 hour or less is good but the range tends to be huge
  
• Contact Rate: 70% is average
  
• Qualification Rate: 35% is average
  
• Conversion Rate: 1.5% is average
  

Again, these a broad averages among those companies that I know of that measure these metrics because they have a system in place for doing so. I bet you could slash the %s for those companies that have no idea what their metrics are.

Lead Scoring

Increasingly, the sophisticated lead buyers are using predictive models to score their leads when they arrive. The way that this is done is usually a third party takes a very large data set of lead data and the outcome of those leads i.e. if the lead converted or was qualified and then uses advanced statistical techniques to determine what are the most predictive attributes of whether the leads will close or not often times augmenting the raw lead data with other consumer data they are able to find on that lead as well. It sounds complicated but from the lead buyer’s perspective it is quite simple. The lead is sent from the lead generator to the scoring company who runs it against their model and a score is added to the lead when it arrives with the lead buyer. The score is usually generated within a couple of seconds so it has no meaningful impact on the speed with which the buyer receives the lead.

There are several reasons why lead buyers want to use scoring:

• If you have a lead management system then you can distribute high-scoring leads to your best sales reps.

• Increasingly buyers are rejecting leads with low scores. This is particularly prevalent among the largest education lead buyers.

• It gives you an early warning signal if one of your lead providers dips in quality. Without a scoring system you have to wait until your key metrics work through in order to detect quality dips. The time lag is often 2 or 3 months, which can be a lot of wasted marketing money!

Lead scoring varies in price. Almost all providers of lead scores charge by the lead but the price can range from about 15 cents per lead to as much as $1.00 per lead. In an industry that is relatively new the pricing model has yet to fully work itself out. The sector is also far too new to have any particular companies emerge as having the most reliable scores. However, the following companies have scoring products and have been successful at attracting customers.

• TargusInfo
  
• eBureau
  
• iLeads
  
• Leads360

The bottom line: Profitability

The one metric that I am yet to cover is the most important and very often overlooked. It is the financial metric fundamental to all successful businesses in the long run and marks the confluence of performance and financial indicators; profit. Most simply put, you may be achieving incredible conversion rates on your leads but if you have to pay a large fortune for each lead you may still not be in business for long.

It is a simple concept that time and again I see is completely overlooked by lead buyers. I am often astonished by people’s willingness to spend several times more for leads that they “think” convert well without doing any analysis to see if the leads actually cost less overall than the money that they generate. Expensive leads are not always, if not hardly ever, a good investment.

So how do you go about analyzing the profitability of your leads? There are two related indicators that you should calculate; profit and ROI.

Profit

Profit is a raw measure of how much money leads make you. The formula is simple enough. It is calculated as: Amount of Revenue Generated by leads - Amount Spent on those Leads.

ROI

Return on Investment gives you a percentage score of profitability that is more easily comparable regardless of the amount of money involved. It is the best way to compare the effectiveness of one lead provider’s leads with another’s. It is calculated as follows: (Amount of Revenue Generated by Leads - Amount Spent on those Leads)/ Amount Spent on those Leads. If the ROI is positive then the leads are profitable, if it is zero then it is break even, and if it is minus then the leads are losing you money.

The following spreadsheet allows you to do your own profitability analysis:

Lead Buyer ROI Analysis Spreadsheet

What if I need help getting started?

None of what I have described above is particularly difficult but I am well aware that the thought of pulling together a lot of disorganized and disparate data is often just too daunting for many business owners. Especially when it is tempting to think of analytics as a luxury and not a necessity – hopefully this blog will have convinced you that it is at least necessary to be highly successful.

The good news is that there are some emerging services that can help lead buyers do the analytics. The foremost of these is Sparkroom. Sparkroom has developed a proprietary technology that will suck in your data and stitch it together. Once that’s done, a team of analysts crunches the data for you in order to develop a set of insights about how to improve your lead buying. They then take on the negotiation with your lead providers to reduce the price of your leads and increase the volume of leads you buy that you will be successful with. They don’t come cheap as they charge a percentage of your total media spend. However, the companies that I know of that have used these guys are very complimentary.

If you are looking for a less expensive option for organizing your data, analyzing it and being given insights about how to improve things then you should consider one of the better lead management systems. The topic for my next post as luck would have it!

4. Lead Retail: Buying and Selling Leads

There is more to buying and selling leads than meets the eye. For instance, how do you know that you are buying leads for the best price? Are you aware of who you are buying leads from; if you buy from lead provider A, how do you know that provider A hasn’t just bought the lead from lead provider B who has a much lower reputation? Should you buy leads that are exclusive to you or pay less for a lead that is also sold to a handful of your competitors? Conversely as a seller you need to figure out the same questions in reverse, except that you need to optimize these decisions in real time so that there is no procrastination period between when a consumer hits “Submit” and the lead buyer’s sales agent receives the lead.

How much should I pay for Internet leads?

Obviously this is a broad question and but largely dependent upon a few critical factors:

1. Which industry you are in
   
2. How many times the consumer’s information is going to be resold/split
   
3. How picky you are about your filters i.e. if you are buying mortgage leads do you only want leads in certain states and for certain LTV ranges for instance?

The other big factor is also market demand, which obviously creates macro ups and downs in the price of leads. At the time this post was written (May 2009) mortgage leads are slow in comparison to leads for people who need credit card debt help, for example. However, the table below is a very approximate attempt to characterize the average price paid for leads.

Lead Type	Companies lead shared with	Cost of shared lead	Cost of exclusive lead
Insurance	6-8	$5 - $8	Not available
Education	3-4	$20 - 30	$50 - 60
Mortgage	4-5	$15 - 20	$35 - 40
Automobile	2-3	$12 - 25	$30 - 50
Debt	3-4	$15 - 18	$25 - 40

Should I buy exclusive leads?

Exclusive Internet leads are a waste of money. Consider this, the average home buyer who uses the Internet to research mortgage quotes will submit their information 2.3 times. There is no such thing as an exclusive lead. The advantage you are trying to achieve of not having to compete with others can largely be eradicated by being the first company to call the lead. Investing in a quality lead management system and a solid sales training program normally takes care of this; and for less money.

How about buying leads through an exchange?

The concept of a lead exchange is a great… in theory at least. Sellers of leads submit leads to the exchange and buyers enter orders for leads. The exchange matches the highest bidder for a particular type of lead and a transaction takes place. Conceptually an exchange eradicates the friction of market imperfections like the difficulty of negotiating with a vast number of sellers and is thus likely to maximize efficiency for both buyer and seller.

The concept has attracted quite a number of players over the past few years. The following is a list of the key exchanges by vertical in the order of quality and possibly size (in my opinion):

Exchange Name	Main Verticals Covered
LeadPoint	Mortgage, Debt, Education
Reply!	Auto
Detroit Trading Exchange	Auto
LeadPile	Auto, Education, Insurance, Real Estate

As yet, none of the lead exchanges have really lived up to their promise. They have attracted customers but have generally struggled to get the highest quality leads to flow through them. Most larger buyers use lead exchanges as a back up for unusual spikes in volume and rarely for much more. There are undoubtedly things that lead exchanges could do to make themselves more attractive to buyers, but that is a subject for another post.

3. Lead Capture: How leads are generated and a little information about lead providers.

It seems a bit strange that this blog is ostensibly about leads and yet it has taken me until my third post to actually discuss lead generation. Obviously this topic is the focus of the entire blog so we will not go into a huge amount of depth in this post. However, there are several things that are worth understanding as part of a Leads101 course.

Lead capture methods

Internet leads almost always start out as a form on a website; however what really differentiates the lead is who put the form on the site in the first place. What I mean by this is that sometimes the advertiser will host their own form on their own domain, for example if I go to Honda’s website and request a quote then I’ll be presented with a 3 stage form that will give me a quote, take my information and then allow me to select from a handful of Honda dealers. Once I hit submit the lead is sent to the selected dealers as well as Honda corporate office. The lead generator in this case is Honda. On the other hand there are also plenty of companies that all they do is generate leads and sell them to others. A parallel example is autobytel.com who makes money primarily by selling Internet leads to car dealers. On their site it is also possible to request a free quote (I’m not sure why they qualify this offer as “free”) and go through a 4 step process that also ends in one’s data being shared with multiple car dealers.

Another category of lead that is worthy of discussion due to its increasing popularity is the “hot transfer”. This is a lead that is passed to a lead buyer as a phone call and normally involves the hot transfer company buying internet leads, calling the lead from a call center and then transferring customers if they turn out to be a qualified prospect.

Lead categories

You can buy an Internet lead for customers looking for a huge number of different products and services ranging from businesses looking to buy massive multi-million dollar software systems to individual consumers looking for moving companies. However, the sale of Internet leads is certainly more popular in some industries than others. In the business-to-consumer (B2C) sector the industries that generate and buy the most leads are (in descending order of volume); Insurance, Education, Mortgage, Automobile, Debt Solutions.

Lead providers

Lead providers (the companies that generate and sell leads) are usually differentiated only very slightly from one another in terms of what they offer. Some lead providers only service one vertical e.g. mortgage but normally larger lead providers serve multiple verticals. While most lead providers will tell you their leads are high quality, most lead providers use a similar assortment of methods to generate the leads. Ultimately lead providers who generate leads that convert well do one or more of the following:

1. Provide information that helps a consumer decide that they want to be put in touch with someone who can sell them a product or service provider. For example a mortgage lead generated by bankrate.com, where people are going to educate themselves about mortgages is likely to be better than a form on a website that has nothing else to offer other than the form and a marketing message.

2. Request a lot of information from the consumer. The reason being that the lead provider reduces the likelihood that the consumer will complete the form with every additional piece of information collected and thus only the folks that are really serious will fill out the whole thing. A great example of this type of lead provider is LendingTree who asks for 100s of pieces of information in order to match consumers with lenders.

3. Thoroughly analyze whether the leads that they generate convert into a sale or not. Many of the best lead providers will ask their buyers for lead closing data so that they can match closed deals with where and how that lead was generated.

Who are the best lead providers?

This is obviously a question that most lead buyers are desperate to know the answer to; however, in the absence of industry-wide statistics about which leads actually end up in sales, there is no really good way of determining this. Some companies do exceptionally well buying from very small lead providers who are only have a few buyers in their portfolio and are rigorous about only generating leads that suit those buyers. Others swear by the regularity in quality of the larger lead seller’s leads. In future posts I will attempt to answer this fundamental question with equal measures of solid data and complete conjecture.

2. Advertising and Promotion: Where do Internet lead providers find customers?

A lead’s quality is almost entirely dependent upon the method in which the generator lured a consumer to provide their information with in the first place. Simply put, if you want to know how good a lead is, you need to know it’s original source. Did someone who was searching specifically for your product on Google fill in the lead form or was it completed by someone who was told they could win a free iPod if they filled out their information? Clearly the Google lead represents a much more interested consumer.

Unfortunately it’s not quite as simple to figure out the source of a lead as the example above suggests. With a few exceptions, the only true way to figure out where a lead came from is to generate the lead yourself. The reason for this is that just about every lead generator prefers to keep the source of the lead you are buying secret. This is for several quite good reasons:

1. If the lead provider told you the source of your lead you might choose to go around them and generate the lead yourself using the same advertising
2. A basket of leads is usually a blend of leads from good, bad and ugly sources. If the lead provider told you the source of each lead, you would probably want to cherry pick the leads. This could quickly make it uneconomical to generate the lead
3. There is often a great deal of science behind when, where and how lead providers advertise. Merely telling you the source of the lead may not do justice to the decision that the provider has made to advertise there.
4. This is one of the dirtiest secrets in the lead industry. More often than not, the lead provider will not know where the lead was generated because they have bought the lead from another lead provider at a wholesale price. Trading of leads is rife in the industry.

Despite the fact that you may never know where a particular lead was generated, it is useful to know what the different options are. If nothing else, you may shock your lead provider with your knowledge.

Regular “above-the-line” media

Radio, TV, print and outdoor is used to generate consumers to complete lead forms as it is fairly uneconomical to do so. Where it is, the user tends to be of high quality. Probably the largest user of conventional mass media among lead providers is LendingTree. More and more lead providers who have a proclivity for TV or radio use their advertising to generate calls which they then qualify and pass through to buyers as voice transfers, also known as hot transfers.

Organic

Organic is an overused term in the lead industry. Literally it means leads that are generated by someone who has gone directly to a particular site looking to fill out a form because they know that that site is where they can find out information. Often, however, people use it to mean leads that are generated by people who search for something and then find a lead provider’s site because it appears in the unpaid search results. This in my mind is not really organic, but Search Engine Optimization (SEO) driven advertising.

While many lead providers will tell you that their leads are “70% organic” or some such statistic it is rarely, if ever, actually true. Of course the reason that people say this is because organically produced leads are usually very high quality.

Search

Ever since Google invented AdWords search has been a battleground like none other among lead providers. Although there are other search engines, most notably Yahoo!, MSN and AOL, Google has such market dominance that it is worth concentrating the explanation of this medium upon this one company.

Search-generated leads tend to be high quality. Since Search Engine Marketing is hard, like trading derivatives or advanced calculus is hard and traditionally this is one place that very successful lead providers have differentiated themselves. Bidding on keywords is such a complex science that many of the larger lead providers have teams of people figuring out ways in which to optimize their buying formulae. Indeed it is not uncommon for a sophisticated lead providers to have campaigns in place that are bidding upon 10’s of millions of keywords and phrases at one time, many of which will generate one or less clicks per day.

Online Advertising

This is a broad term for lots of different types of advertising but here I really mean banner advertising. Successfully buying banner ads on sites is just about as complicated; if not more so, than search optimization. It consists of figuring out both the best location and time for an advertisement as well as the most appropriate or effective creative work to put in that spot. This is rarely a manual process. Large lead providers can spend several million dollars a month on banner advertising, they treat the buying of online media as a search for arbitrage opportunities just as an options trader in Wall Street would. In other words optimization technology and complex statistical models usually come in to play in the search for profit.

Email

Email is one of the advertising/promotion media most used by lead providers. Why? Because it’s both cheap and highly effective. Although I am yet to find someone who willingly admits to opening unsolicited or semi-unsolicited emails, a stunning number of people do open these things and follow the links provided.

Affiliates

Affiliate marketing is essential for any large scale lead provider and describes the practice of paying another company for directing online customers from their websites to the lead provider’s website. There is a huge variety of ways that affiliates get paid however the predominant model is per lead. Indeed just over 80% of affiliate deals are structured as a cut of revenue in some form or another. From a lead provider’s point of view affiliate management takes a lot of time and effort since without a great deal of scrutiny of the quality of the leads being delivered by the affiliates it is easy for rogue practices such as false advertising and incentive marketing to occur.

1. An Overview of The Internet Lead Ecosystem

Most people outside of the lead industry assume that there is a very basic internet lead value chain that looks something like this:

1. A consumer enters their information on a website like LowerMyBills
2. The information is stored in a database
3. A company pays for the lead
4. The lead information is emailed to the buyer
5. That company calls or emails the consumer

While such a simple process sometimes does exist, the lead ecosystem is so broad and complex that it is not unusual for a person's information to touch more than 10 companies as it flows through the lead ecosystem.

The Internet Lead Ecosystem

Over the next six posts I will cover the major components and companies that comprise the lead industry. Namely those associated with 1) the promotion and advertising that draws a consumer to enter their information online; 2) the methods for capturing that consumer's information; 3) how leads are bought and sold; 4) what types of evaluation go into determining lead quality at, or just after, the point of sale; 5) how leads are managed; and finally 6) the types of activities that successful lead buyers of leads carry out in order to ensure that they get the maximum return on investment possible for every lead that they buy.

As I hope that you will see, generating, buying and using internet leads is not rocket science. However, it is a more complicated industry than most people think. Understanding the different parts of the ecosystem, what each of those parts contribute and who the major players are in each sector of the value chain can give you a massive advantage as a lead buyer.