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I understand that mortgage lead quality is an often talked about topic and I am probably beating a dead horse for many of you, oh well.
This is my first post in some time and I need the typing time.
Lately there has been much adieu about lead quality dropping and in particular from the tier 1 sources. Volume from some of the tier 1 vendors has also dropped according to several discussions I have had with clients. According to my conversations with the vendor reps, this drop in volume is due to their recent focus on improving lead quality.
Great – The lead providers that have used banner ads for these last few years have decided that a better quality lead is necessary in this market.
What if I have reconsidered what the definition of “Quality” is, should the lead vendors now perk up their ears and listen to me or any of us? In the past, I believed quality was a blend of several factors, (e.g. contact rate, transfer rate, opened loan rate, funded loan rate, and return of revenue). I used to look at every one of these categories and when the numbers were right I picked vendors as if they my date for the night.
What if I now I think lead quality is nothing more then the right price point?
How could I think such a thing you ask?
Recently I have spoken to dozens of mortgage companies all looking for advice on vendor selection and management. Hey Lead Guru, what do I look for in a lead? What is the best way to monitor them and ensure ROI?
I made my suggestions and offered solid advice (At least I thought so) but it turns out in the end, no one really considered anything other then pricing on their leads. How often I heard “Hey I just got 100 Lower My Bills leads for $8 each.” Wow.
So I say again, at this time I have decided that lead quality is nothing more then the right price. Buy a bunch of lower cost leads and invest your employee equity burning through those leads.
In the end you benefit only the large providers – let’s see some more dancing monkeys and rhinos producing click throughs. I need a new car soon so hopefully you’ll be in a position to get me a good price.
Well that is my rant for now, look for me next week same time, same channel. Signing off, “Cynical and still in the game”.
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18 Comments
I could not agree with you more. More often then not, mortgage companies are making budget decisions based on cost per lead rather than cost per application (initially) and cost per funded loan (when you have a large enough sample size).
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Great post. Love it. The problem is when buyers speak about “quality,” that term is subjective. How to you define it or more importantly, quantify it? The better term is lead “performance.” That can be attributed to specific metrics which affect ROI. Performance, unlike “quality,” is not really open for interpretation. Lead buyers need to be able to speak about their marketing as a matter of performance. If they can’t, then lead “quality,” isn’t the problem, your internal operations (or lack thereof) are the problem.
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Anonymous, even that is a very incomplete picture. Looking only at costs only gives you a very small part of the total picture you need to look at. You also need to look at Income. Google shares are at $600 a share right now. They cost a lot, but they are still returning a darn good percentage on your money, so cost alone is not going to cut it if you really want to measure lead performance.
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Lead buyers are very frustrating and I couldn’t agree anymore with this post if I wanted to (I know Guru, you’re not used to me being on the same side as you). I have begun to understand that every buyer thinks that thier team is the best and they can close anything that they touch. If they don’t do well it must be the leads. It is the mindset that says if a woman won’t go out with you she must be a lesbian. So, they look for the cheapest data possible becuase if the phone number is good then they WILL get the deal. The psychology of the average lead buyer should really be studied by science.
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John, I agree – I like the term performance better, it is a more refined definitive term. DISCLAIMER Understand that I only used LMB as the example as that Is the name I’m hearing almost every day so It was used in context. WebsterM!! My man – LOVE IT. Agree to disagree has been our past but you never know. Everyone sees light differently (When I was younger everything was purple, LOL), so it’s nice to see when the insiders see things the same. I will be in MBA next week so If any of you are there, stop and say hello.
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Look, maybe during the boom people forgot that sales is hard. Making money is hard.
If quality leads to you mean a great roi and a white hot lead – the consumer answers your call, listens patiently and savors every word of the pitch, and jumps at the opportunity to get a loan from you, then yes, there are not going to be too many of those, and market forces will drive up the price to the extent that everyone except the best sales people will complain “they’re too EXPENSIVE”
So then average salespeople face the hard work of working warm leads (and this is not lake wobegon – 50pct of us are below average closers of internet leads. Hell, I’m probably average!)
The warm leads (not cold calling – warm caling) cost less. They don’t answer every phone call – they may decide to go with a local bank or not get a loan. But some do and great companies will get a fine roi from them. But losers will complain the warm leads are “low quality”
here’s.a tip; when the high quality leads cost too much and the other leads are too low quality, maybe your’re the problem… Maybe you’re (aghast) just average
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John, I absolutely agree that revenue should be looked at relative to cost. Mortgage shops should perform head-to-head tests. Early on they can use cost per app or cost per credit pull and project the resulting funded loans. Later within a test they can look at revenue relative to lead cost or rev per funded loan relative to cost per funded loan. This last step is in important. I have seen examples where the cp rate or app rate is mediocre and the lead to fund rate is high.
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Who is OJ talking to? Lol, us lead buyers for loan officers or loan officers?
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Anonumous,
Doesn’t your last example speak to the success of the mortgage operation. If they have a high pull through on mediocre leads , which is rare I would congratulate over all operations. Either way, all conv. rates and COA, COF, etc all lead to ROI, the most important indicator. This is why sometimes less expensive leads may even be able to convert at a lower rate and still maintain a good ROI and same for the opposite, a more expensive lead may produce a lower ROI and have a higher conv. rate. So price is a factor, but just one of many though.
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After we evaluate everything… we will try to shift resources from less profitable sources (1) to those that have superior performance (2)(3)(4).
Source 1
3 mo avg
Total Leads 1055.00
Total Amount $41,650.00
Total Apps 379.00
Total Openings 26.00
Total Closings 13.00
Total Revenue $108,362.27
$/opening $1,601.92
$/closing $3,203.85
Revenue Ratio 2.60
Source 2
Total
Total Leads 1567.00
Total Amount $45,128.00
Total Apps 591.00
Total Openings 58.00
Total Closings 26.00
Total Revenue $213,023.23
$/opening $778.07
$/closing $1,735.69
Revenue Ratio 4.72
Source 3
Total
Total Leads 890.00
Total Amount $27,488.00
Total Apps 342.00
Total Openings 26.00
Total Closings 12.00
Total Revenue 95461.00
$/opening $1,057.23
$/closing $2,290.67
Revenue Ratio 3.47
Source 4
Total
Total Leads 793.00
Total Amount $29,323.00
Total Apps 319.00
Total Openings 27.00
Total Closings 18.00
Total Revenue $152,848.00
$/opening $1,086.04
$/closing $1,629.06
Revenue Ratio 5.21
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Well well well I can bet source one is a tier 1 provider and can probably guess accurately which provider. Lol
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Source 1 might have acceptable “quality” but at the wrong price. So, Guru, I agree, “right price” is key for us lead buyers. The question is, can source 1 deliver at the right price?
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So what ratio of total revenue to lead costs do people on here experience?
What would people consider a good ratio?
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Look for 300 percent at least assuming overhead.
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top line rev for us ytd thru august 07 was 9.6M – total bill same period for leads equals 1.73M – 75% of our vol is from purchased leads – say a ratio of 9.6(.75)/1.73 = 3.8 = 416%. I looked back at similar analysis for full year 04, 05 and 06 – and those #’s are 513%, 461% and 499% so I guess we are having a bad year – imagine that
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[...] 16th, 2007 · No Comments There has been a bit of discussion over "declining" lead quality. Of course, it is easy to lay the blame of declining app and funding rates at the feet of lead [...]
Owen your numbers are right in line with a quality run shop. Kudos to you and your team for running a tight ship. Would like to discuss further. Can you run your contact info to the Lead Critic Admin, they will forward to me?
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As the founder and CEO of a major tier one mortgage lead provider, I have to say that my sales associates are approached daily by many lead buyers looking for the cheapest deals. While it’s only natural that pricing is often the first question put on the table, prudent buyers must also forecast their ROI based upon the method, freshness and exclusivity of that particular lead and the business that procured it. Penny wise and pound foolish? Perhaps sometimes … but not all the time.
Stories of success (and failure) float out of the lead buying experience, BUT lead “quality” is only a single, yet very important, factor. Others include the way in which each lead is worked and by whom, their expertise and mortgage market knowledge they possess. Are they using a lead management system and using it correctly and consistently? Do they have the ability to build lasting rapport and
offer a unique selling proposition that’s truly beneficial to the borrower, etc.? How does the lead buyer perceive the lead and how does the borrower perceive the lead buyer?
Some lead buyers only experience success with old leads that others would consider absolute garbage. And other lead buyers only experience success with more expensive real-time, display advertising
generated leads.
A deep objective analysis of a lead buyer’s surrounding business goals, infrastructure, staff, systems, knowledge and training can help determine which leads would yield the highest ROI. In my
opinion, substantial tests with multiple lead providers is the ultimate determinant. Numbers don’t lie.
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David I agree that most leads have a home, and that a well run home will have measurable success regardless of the “Quality”. My post was to point out that many of us have changed our viewpoint on what Quality actually is and price seems to be the overriding factor these days. I’m looking forward to meeting you at the K – dinner. See you next week
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