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Guest Post By Adrian Huth, friend and “good guy” in the industry.
Allow me to introduce myself…. I am an individual who has been in the lead generation industry going on 10 years. I have seen the industry involve from the early days of the mortgage boom to the now recent collapse and repositioning to new verticals gaining increasing value such as loan modification and debt consolidation leads. I have seen the evolution of the search engines and SEO marketing and was there in the beginning of cost per click marketing. I have witnessed how lead generation and lead quality was affected by the rise of the affiliate networks, display advertising, email marketing and incentivized leads. I saw first hand how all these different types of marketing caused lead buyers to cancel and how some increased closing ratios. Even back 4 years ago with all these types of lead generation I began to suspect that people are playing a game of buying and selling leads to each other and that everyone is becoming the enemy of the other. Lead generation has now evolved into screwing people over and this has now become the de facto business model and state of the industry.
Price is Everything, Right?
Now lets say I’m a new lead gen company and I need to get lead buyers on board in order to get my company going. The problem is I don’t have any trust or unique value propositions of the leads I will sell to the lead buyer. Well what if I sell my leads less than the competition? For a lead buyer getting leads for less than the competition must be attractive and a company just called me saying they can get “high quality” “exclusive” leads for less than what I am paying now. Great so now I have the lead buyers on board and I need to generate leads fo them because they will want a considerable volume. How can such company generate these leads for less than the competition and keep a profit margin of 80%?
Lets start with affiliate networks. Hey popular network how bout you run my offer for $20 dollars a payout for a debt consolidation conversion. Network agrees because most debt offers are at 15 or less and this sounds like a good offer. But wait the company is selling the leads for $20 exclusive to the lead buyer so how is the company going to make any money. Simple. Only fire the pixel on the 4th or 5th time the lead capture form is filled out. Also, lets double or triple sell the lead at the same time to maximize profit margins. Then we will scrub 10 to 20% of the leads as well in order to squeeze a little more revenue out in the end. Brilliant!
Conversion rates unfortunately probably won’t be really good though for the publishers because the same form will convert at only 5% compared to 20% of the offer paying out a $15. To offset this lets create incentivized offers using ebooks and endorsed downloads by celebrities. We can pull the offer once a cease and desist letter is given to the lawyers. Problem solved and our mailers will love it as well because of the higher conversion rates.
Looks like a Debt Lead But Sure Doesn’t Smell Like One!
So I just bought 4000 debt leads and closed only 3 deals can I have my money back? “Hi, I just received your inquiry that you are interested in consolidating your debt… What!? You aren’t interested and only wanted to talk with Oprah!?” I thought the lead company said these leads were generated organically? Unfortunately you paid by wire transfer so the best you can do is cancel and give to your legal department. How do companies like this stay in business when they know you are going to cancel? Because they know you are going to cancel and will slash and burn the next client the same way. As long as new lead buyers fall for the cheaper leads they can count on new clients signing up for a month or two.
How To Protect Yourself
The real victim here is actually the lead aggregator. These are the lead companies that have signed up lead buyers and instead of generating leads in house they buy posted leads from companies described above. As most of the clients will cancel because of the quality of the leads the company is left with nothing or at best signing up new lead buyers and canceling the lead contract with said company. At the end of the day though the damage has been done and for companies in the business for the long haul reputation of the quality of your leads can reverberate shock waves that can be hard to recover. As for the company selling leads that will never close they don’t care because they will just change the name of the company once no one will buy leads from them anymore. The following are steps to take to help protect yourself as a lead buyer.
1. Ask to see landing pages.
This won’t always work as companies will frequently have multiple landing pages and domains in which they are generating leads.
2. Show me the marketing.
If they say they generate leads from organic search ask to see what keywords the company ranks for in the search engines. If they claim they generate leads by PPC ask to see some ads that show when certain keywords are typed.
3. Start small.
Buy a small amount of leads at first and be responsible for checking on the quality from your sales team and if these leads are closing or simply hanging up when you call.
4. Pay by credit card.
Though there are lead buyers out there that scam the system as well by chargeback every lead order they buy this can give you some reassurance that if a company sells you 100% bogus leads you can take immediate recourse.
5. Ask for references.
Surely a company can give you the name and phone number of a company which has success in buying leads from them.
6. Research the ceo and company name in Google.
Does the company frequently come up in Google on the ripoff report or as a general quality lead business. How many years has the company been doing business?
7. Use a lead management system with reporting.
The more accurate the data you have on the source of what deals are closing and what ones do not only helps figure out the best place to spend your money OR more importantly where not to spend your money.
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12 Comments
These are great points Adrian, thanks!
Its really too bad these types of companies could not be audited and shut down!
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Nice post. However as I was reading it one company kept coming to mind who fit the bill on all accounts….
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oh do tell…
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Unfortunately, it seems like everyone is doing this. What wasn’t mentioned is that some lead companies simply lie about their returns too; returning 30% or higher to cut their costs.
So, how do you revamp the entire industry? How about some enlightening commentary on how to fix it?
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I agree with Paul. It’s an issue that is much bigger then one company. Pointing out to the buyer what the problem is, is not helping further our industry. What we need is a solution, but where do you start?
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The solution is…. Generate your own leads. Pay a company to help optimize your website and you can create “Exclusive” leads.
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Very interesting and absolutely true. I’ve seen this first hand and over a long period of time. Companies that churn and burn will eventually fail…but is it really failing if they profit well into the 7 figures per year for several years….
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part of the solution I agree is to invest a little in some in house generation but some companies will need much more volume than they will be able to produce.
Ultimately I would like to see the affiliate networks police these “advertisers” with better tracking technology and monitoring as some of these companies would not be able to enter the marketplace so quickly without them.
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Thanks for this. It shows me how a lot of people in this industry operate. It reminds me of how I was ripped off by a lead company who told me they were generating leads to find out that they were using old data and running through a press 1 campaign. These guys were not Predictive and took my Dollars. Anyone know a good provider?
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Lead Guy,
Pointing it out to the buyer absolutely furthers the industry, its called education and is typically the starting point for action.
I agree with Adrian that the affiliate networks would be a good place to start, however in many cases they are the problem too and skim their publishers. Its a big issue and a very difficult one to fix.
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We need new products. Why does everyone think internet leads r still the only game in town? Internet leads make it too ez for cheaters to exploit the greed. Pay Per Call Live Exclusive (TV) Leads r delivered direct clients sales rooms. Clients can hear every call. AND vendors can’t resell the leads. (Ok they can but it’s MUCH harder). Conversions work and clients get the acquisitions cost they need. I spent 15 yrs on the buy side. The clients need to get their ROI. They control the mkt. We need to deliver an honest product. The boom’s over fellas. We need some fresh ideas. Until a system is put in place tp make the sale of semi exclusive internet legitimate, I won’t trust’em Yes I sell Live TV Leads.
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Good point Mark, but it must be noted that TV leads have been around for much longer then the internet. Obviously with advent of leveraged media buys more can afford to play in the traditional TV and radio space, but lets not fool ourselves. TV advertisements are far from a new product.
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