I just want to think out loud a bit, which I guess isn’t much different then most of the post here, so pardon the random direction of the post.
I was just thinking about mortgage lead prices and what the true value of a lead represents. I guess in most cases it is different for each buyer, which leads me to my question. Is there a fixed value of a lead? In the good old days of the mortgage industry leads were being sold in the $40.00 and up range. Back then most lead buyers had no problem paying the higher prices due to the higher returns they were seeing. Today, I think lead prices can now find themselves at a far lower price, but what is reasonable. Clearly you get what you pay for and at the other end of the spectrum you can pay way to much for what you get too.
There are companies that understand their metrics and accept reasonable lead costs. There are others that have one goal in mind and that is to buy the cheapest lead available. This usually includes rotating through lead providers at a higher rate, very little communication with the providers and ultimately lower quality leads. The benefits are that there is more room for error for your operation and less responsibility for the success of the partnership.
I know that leads perform differently and therefore require different acquisition costs, but based on your conversion ratio, gross revenue per deal and target ROI, what price should you be willing to pay for a lead?
Just curious what you guys come up with if you had $15,000, the average conversion ratio of 3% and an average gross revenue per loan of $3,500.
How much should you pay for a lead?
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I would buy 937 leads for $16 from a better quality provider.
Your 3% conversion would lead to 28 loans generating 98k in revenue = 5.5 revenue return ratio. AWESOME.
Now all I need is loan officers, 15k and a lenders license. Oh yeah, I also need liquidity, hahaha.
Noel,
Do you know what the average gross per loan is these days?
I was working with a peer the other day and guestimated based on 4 companies results that its exactly what you proposed in your example, $3500/loan.
oh, good. I was just guessing and I was curious if I was far off.
Thanks
A 550% ROI would be very low for me and probably cause havoc to my P/L. I am shooting for at least a 1000% ROI. Which begs the question maybe I pay my LO’s too much since that is the biggest single line item on my P/L. What does everyone else pay in terms of commission structures out there?
Don’t most assign a value to a lead in the manner described below?
[Lifetime expected rev per lead] – [Required Margin] = Per Lead Value
Latetopost, are you talking about advertisers or buyers?
Those that are actually paying for the leads – buyers.