LEADCRITICNegotiating Your Lead Price.
This weekend I received an email asking the following question:
When buying leads how hard should I negotiate with providers?For instance if they quote $30 per lead... What should I counteroffer?
I found it worth answering through the blog for a few reasons. First, there has been so much talk about price, whether it has been regarding ROI or specific prices given by lead providers. Second, I think we can all agree that price is important when deciding to use a lead provider or not.
I think we can also all agree that we might pay different prices for different leads and/or from different lead providers. So how do you decipher what price point is suitable for to pay, especially when you are not really sure of the real quality of leads? Do you simply try to negotiate the lowest price point period?
Here are my thoughts:
First, you negotiation power relies on your buying power. If you are consuming over hundred leads a day (not from one provider) and you plan on buying 20 or more leads a day from multiple states, you are going to have little more negotiation power than someone who buys 20 leads total a day and maybe 5 leads from each provider for one state. Keep in mind that if this is you it doesn’t mean you cannot talk down the rice. It just may be a little harder.
This is far from an exact science, but here is what I do and a few other lead buyers I spoke too do. I think we all have a price that we are comfortable paying. We base that number off of our average ROI and conversion ratio of our current and past leads. I may be comfortable paying $42 a lead and others may be comfortable paying $30. Don’t forget to take into consideration the filters you have in place as well. The more flexible you are on the filters the more flexible the lead provider will be on the price.
When negotiating for a fair price be considerate and respectful of the lead provider. There is nothing worse than being on the other side of a price negotiation. I think being mortgage brokers we can all understand when people try to take a hard line on price with us, we are more inclined to tell them to hit the road. Typically when I have looked for a lower price point I am very cut and dry. I know that if I am buying strictly on price point and they cannot meet the price point I am going to move on to the next provider. Do if my comfort zone is $30 -$35 and the lead provider is asking $45 and they say no to a $35 price point I not even going to waste my time and move on.
I suggest to shoot for a $5 to $10 dollar price decrease on the leads. I am usually happy with a $5 decrease. If I am looking for $10 and they don’t give it to me I clearly cannot afford the lead and I need to move on. Where it gets complicated is, for me at least is not crossing the “are you crazy line” to many times. You should defiantly do it once and while to test the waters, because you never know what they may give you to stay on there network. A great example of this is the wide range of price points with LMB.
I suggest starting the negotiation early too. When a lead provider calls me for the first time I may tell them ” I have tight filters and I am sensitive to price”. This starts the talks of well because both parties know what to expect.
There really are so many factors when negotiating price so I would also like to hear from other buyers what there thoughts are. Are they similar to mine or do you have a different take on it? Is there something that you think is important and that I may have left out?
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Morelli | Oct 29, 2007 | Reply
It’s funny how much has changed in the past few of years. When I was selling leads at a “Tier 1″ provider back in 04 and 05, we wouldn’t entertain the thought of a price break unless you were a huge national account. Very rarely did anyone else get any breaks. At that time, 20 leads per day would get you a price break of exactly $0.00. I closed deals with a little over half a dozen large national lenders whose prices we did negotiate. One in particular…and no names mentioned…signed a deal for 19,000 leads per month…however, the price was in the high teens, more than a 50% price break.
I would have to echo the sentiment in this blog post. Buying power will aid your negotiation ability the most. You either buy a large volume, or you target states where the lead provider is having trouble selling into, or perhaps lead types (refi vs. purchase / credit level). Find their weak spot, and if you can be profitable with it, attack the price on that and you will get what you want.
David Schneider | Oct 29, 2007 | Reply
Excellent observations, Critic.
All lead buyers want and deserve the highest quality leads. What’s surprising is many buyer’s obsession with price, often demanding deals that are within the same range of what they had been paying with the lead providers they had become incredibly disappointed with.
A recognition of what it cost to generate a truly viable lead should be considered. Various methods of lead generation produce different costs. The cheaper isn’t always the best, the mid-range isn’t always the best and the most expensive isn’t always the best. It lies all within the effectiveness of the marketing/marketer and their filter parameters, the entities they’re dealing with, the efficacy of their advertisements, the pressure they place on their providers to generate more and more and more to feed voracious appetites of those lead buyers who have figured out how to effectively work leads and build shockingly high ROI’s as a result of what others fail at.
I’m pretty comfortable buying gas at any filling station. Gas is gas, is gas, is gas. It’s the same basic formula. I can’t say the same for leads. Sometimes you get what you pay for and sometimes you don’t. Buyer beware.
David
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David Schneider
Founder/CEO
800.949.2919, ext. 107
david_01@zipsearch.com
http://www.ZipSearch.com
Bill Rice | Oct 29, 2007 | Reply
This is a great framework. Typical high octane Lead Critic quality. Here are a couple of other things that I think are useful knowledge to take into negotiations:
1. Try to generate a few leads yourself (SEO on your website, Google AdWords, etc.). Really get a sense for the difficulty, quality, and YOUR cost to generate
2. Match your filters to your programs and licensing. Like Morelli points out, you may have a demand/supply niche that gets you an opportunity discount
3. Pay per lead is not the only model out there anymore. Ask if they have any “alternative” lead generation programs. You may be surprised at the results
4. And, then just to reiterate what Lead Critic always says–measure, determine ROI, and optimize–the answer may change
Lead Guru | Oct 29, 2007 | Reply
I just appreciate the fact that this points out, most people out there really don’t have any buying “Street Credit” but are running around crying foul to the lead providers. If the providers were not trying so hard to put a performing lead into their hands and they didn’t have any relationship with the provider, I’d dump the account and move on to other worthwhile lenders. I’d love to hear what Webster has to say on this one.
Lead Critic | Oct 29, 2007 | Reply
great points.
It is so hard to answer such a question because one, I have never gone around haggling price, so to speak. Either it is what I expect or not and I move on. I think you can haggle down the road though, too. “Hey these leads are not working for me, but they would if they were at… price point. If not I am going to be forced to move on.”
I think the best way to receive the price you want is with respect and flexibility.
David is right. Different types of leads have different lead prices so like I said in the post there is no exact science.
Follow your gut.
webstertm | Oct 30, 2007 | Reply
It’s funny because when a lead really produces well (which I know is a very fluid concept) then buyers will pay the value of the product no matter how high it is. Nonetheless, I was recently misquoted in the Scotsman Guide as saying the higher the price of lead to more likely it is to be a valid lead. We all know this is absolutely not true. Remember that the more you pay for a lead at a company the more incentive you give them to not oversell the data. Most larger companies get lower pricing because of thier daily volume, states and purchase committment. Too often I deal with buyers that allow their wallets to make their decisions. Most buyers have champagne tastes on a kool-aid budget. They use their low budget with tier 2 or tier 3 companies, get burned and then condem the whole industry. After being the military I know the dangers of using a tool built by the lowest bidder. Pay for quality, just do not over pay for it and keep in mind that this will differ from provider to provider and from product to product.
P.S. I missed you too Guru.
ajiny | Oct 30, 2007 | Reply
The natural emphasis is on price because it is the only thing you can control at the outset. If we hadn’t all bought supposedly fresh leads only to call and find out they are six months old and 35 other people have already called we probably wouldn’t be so suspicious.
In the end quality is probably more important than price but you need to test and test and review to determine that you are getting quality.
Unfortunately for quality lead providers they work under a cloud much like mortgage lenders in that they get tarred by the bad players.
Lead quality is a hard sell just like service quality is in lending.