LEADCRITICScience and Mathematics Principles Hold Great Promise for Performance Marketing Companies
Filed Under: Adchemy, featured, Leads 2.0, Lead Generation, Analytics
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By Murthy Nukala
Founder and CEO – Adchemy
Just a few weeks ago, as Microsoft Chairman Bill Gates testified on Capitol Hill about the state of technology and the need to relax visa standards for foreign technologists, I started to think about the state of technology in our industry. With Internet advertising evolving every day, I’ve begun to develop this ongoing theory that the technology behind lead generation, particularly when it comes to mortgage leads, is on the verge of something really big. I’m very curious to know if others agree.
From my perspective, and to borrow a very popular phrase, we’re ready for Lead Generation 2.0. Version 1.0, which served up a mix of bad creative and spotty measurement, is over. We all learned that lead generation companies can’t just provide leads in volume and then pray they convert. Particularly today, as the universe of mortgage companies continues to shrink and those that still have online advertising budgets spend less than they once did, all of us are being called upon to explain and ensure the quality of the leads we provide.
The million dollar question, then, is how do you ensure quality leads? I believe the answer is for mortgage companies to leverage scientific and mathematic principles and create data-driven processes that measure the effectiveness of advertising (including creative and online forms) and then make decisions, or allow systems to make decisions, based on the data. In my opinion, this type of thinking will drive Lead Generation 2.0.
Let me say, up front, that I’m a mathematician by training, so I have a bias in favor of this type of rationale. Nevertheless, below are two of the scientific and mathematic principles we can employ that I think can have a tremendously positive impact on lead generation.
Experimental Design – at its core, experimental design is about setting up a rigorous experimental structure that yields the most accurate data. A lot of mortgage companies study data sets, but the number of them that do it the right way is probably very small. Some organizations try to determine lead quality and conversion ratio by looking at lead flow from the same time of day (i.e. 1 p.m to 2 p.m.) over a seven day period, others over 30 days. Some look at the type of lead (i.e. purchase or refinance) and compare that with individual banker experience to get a read on conversation percentage. This is all well and good, but I suspect that many of these experiments are flawed from the start. In their quest to act, many businesses forget about control groups, randomization and replications in their studies and are therefore making decisions based on inaccurate data. Effective experimental design can yield important findings that will aid in the delivery of quality leads.
Statistical Machine Learning – a subset of artificial intelligence, statistical machine learning is the process of programming computers to dissect massive amounts of data and effectively “learn” over time so that better processes can be put in place. Think about how much time mortgage marketers spend trying to figure out why people respond to one type of advertising campaign over another. Companies have entire teams of business analysts studying data all day, every day. Yet we have the ability to adopt technology in which forms and creative change based on the raw data itself rather than “supposed” patterns, guesses, or the hunch of the person reviewing the data. Statistical machine learning, which can effect changes to online ads in real time, holds enormous promise for our industry.
I understand that talk about “experimental design” and “statistical machine learning” might be overwhelming because the concepts are difficult to implement and the thought of hiring an academic to join your organization might seem a little strange. However, I also know that science and math is starting to become cool again, and that means we all have access to a wide selection of wonderfully talented young people who can help us improve our businesses and the products we provide.
As reported in a recent Computerworld article, according to the Computing Research Association (the group that follows year-over-year enrollment and graduate trends at 170 Ph.D–granting institutions) enrollment in computer science programs, which declined after the dot-com bust, may be leveling off. In addition, the Bureau of Labor Statistics projects good growth in IT jobs up to 2016, which should keep science and math majors excited about IT.
As I think about the future of lead generation, I see great power in our community’s use of science and math. I also know there are a lot of people like me, trained in these disciplines, who are excited to make their mark in the online world. As an industry, we should leverage the knowledge base that these people have and tap their expertise so that we effectively deliver on the promise that all of us make to our clients – to deliver high quality, convertible leads.
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LeadDiddy | Mar 19, 2008 | Reply
This is all rhetoric and hype so far. Murthy, when will you give one specific detail on what you are doing new and differently? Is there any beef to this hype? To think the best lead gen companies are not using advanced math, have million dollar BI systems, nor employ PhDs is inaccurate. Beyond the rhetoric, is there anything new you are doing?
Raj Parekh | Mar 20, 2008 | Reply
Murthy,
I won’t question your claim that science and mathematics may improve the quality of the lead. I will even accept that there are some secret formulas being mixed in the adchemy laboratory that are going to change the “quality” of the lead. However you have to admit that every lead generation company is going to stake claim to a secret sauce to make the sale, and financial institutions will necessarily diversify their lead buys so they do not put all their eggs in one basket in the event one lead provider’s secret sauce is left out of the fridge for too long and spoils.
I’m quite impressed that your team is made up of intelligent individuals who will use their education and business experiences to improve lead generation practices, but at the end of the day, no matter how good your lead happens to be, if there is no one to address the lead in the expected timeframe once it’s delivered to the point of sale, the “quality” of that lead will certainly suffer.
My segue is obvious. This is where lead management comes in. If implemented correctly lead management systems should not only give the lead buyer insight into how the lead is converting based on the claimed quality and the scientific processes implemented by the lead provider, but also the other contributing factors that affect the quality of that lead i.e. the efficiency of the production staff that actually responds to that lead once it is delivered to the point of sale. Additionally and ideally, lead management systems should also be working more closely with you, the lead generator, to help you better understand those production level factors, post delivery of the lead, that are affecting the quality of the lead.
You state that we have to set up rigorous experimental structure that yields the most accurate data and create software that can dissect massive amounts of this data and effectively “learn” over time so that better processes can be put in place. Well, improving these processes is not only important in lead generation, but equally as important in lead management. Looking at all the pieces of this puzzle will be the only way we get a holistic understanding of the ever elusive “LEAD QUALITY”.
This ultimately requires us to work more closely together, and this means we have to do more than just refer business to each other. We have to find a way to build collaborative systems.
Great post.. I look forward to meeting you at LeadsCon.
Nick Hedges | Mar 20, 2008 | Reply
Murthy and Raj,
I like both of your posts. There is no doubt that we are at an inflection point in the evolution of our industry. It is reminiscent of the state of the search engine industry 5 years ago. At the time Google’s strategy was to invent and employ the most scientifically elegant approach possible to enable consumers to discover and organize information online. Yahoo!, on the other hand, followed a less scientific and more qualitative approach to driving consumer demand for their product. We all know how that battle has played out since then.
Similarly, in my opinion, the Lead Generators and Lead Management Solutions that emerge as “Lead 2.0” leaders will undoubtedly be those that have the most rigorous, robust and scientifically sophisticated approach to quantifying both lead quality and which behaviors drive customer profitability.
At the moment the jury is out about who the “Google’s” of the lead industry will be since the techniques each company are using are necessarily highly proprietary (I have a strong opinion as to which company it will be in the Lead Management Solution space, of course). However, at the end of the day it isn’t rhetoric that will determine this; it will be the lead buyers who vote with their feet when Lead 2.0 products begin to emerge… I give it less than six months before this really starts to happen in a serious and transformative way.
Raj Parekh | Mar 20, 2008 | Reply
Nick,
Thank you for your reply. I have heard very nice things about you and look forward to meeting with you in the near future. These topics seem to be the precursor to the discussions that I’m sure will be in full bloom at LeadsCon. What’s very interesting is that we clearly see that changes in this space are afoot, and I for one think it’s a positive sign that there is some harmony to our collective thought no matter which lead management system you personally endorse.
Sometimes we have to be willing to erase everything that is currently on the whiteboard and create a whole new 1.0 because 2.0 can imply that we are just adding 1 to the original 1.0, which may have been built on a false premise in the first place.
Joe | Mar 20, 2008 | Reply
Based on the LeadMarket Watch widget, LoanBright is not just using science and math, they may be using some kind of voodoo magic.
Abracadabra, Alakazoo, need to buy a house? well here’s a loan for you..
Lead Critic | Mar 20, 2008 | Reply
LOL…voodoo
Murthy Nukala | Mar 21, 2008 | Reply
Raj,
I completely agree that companies who handle different stages need to be working together. Since there are multiple hand-offs between companies and stages — publishers handing off to advertisers, who then handoff to lead buyers — transparency and collaboration are essential to driving the best results for lead buyers.
As Joe says, there can’t be magic, it has to be based on numbers and algorithms.
Look forward to catching up at Leadscon.
Murthy