Sunday, May 31, 2009

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

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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:

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 3rd 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.

Saturday, May 30, 2009

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

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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.

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:




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!

Wednesday, May 27, 2009

4. Lead Retail: Buying and Selling Leads

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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.

Tuesday, May 26, 2009

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

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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.

Monday, May 25, 2009

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

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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.