Lead Generation - Quality over Quantity

There was a time in lead generation when all that mattered was the number of leads someone could produce. The price paid per lead was almost exclusively based on the numbers generated, not necessarily how those leads performed for the end buyer. Those buying leads instinctively knew that leads from certain sources did better than others, i.e. leads from email did better than co-registration, but all too often vendors looked out for only their bottom line, charging buyers full price for leads they knew contained, at best, a mixture of sources and, at worst, nothing but garbage.

Today, suppliers of leads to the market still look out for their bottom line and that can still mean acting in a way that isn’t always in the best interest of the lead buyer, but sneaking in the garbage has become harder and harder. The change from quantity to quality has taken several years, but the environment has in fact changed quite dramatically. This is the message that many echoed at the recent invite-only Online Lead Quality Summit being hosted by TARGUSinfo. The validation firm has made a name for itself in the online space, even though this piece represents only a fraction of its overall business. That the company can organize a one and half day event around the topic, though, is proof about the changing landscape.

Perhaps no other vertical summarizes the changes in online lead generation quite as well as mortgage banking. Today, if an online firm says that it generates mortgage leads, a person will be curious what their edge is. But, say that three years ago or more, and that same person will have to withhold from making a snap decision (negatively) about the company. In other words, more than a few supplying leads as the refinance boom started did not earn the best reputation within the Internet advertising industry.

I don’t have the figures, but I would imagine more than a few people decided to enter the mortgage banking field during the refinance boom, either as an independent broker or by joining one of the large institutions. And, these people needed leads. Mortgage banking had already taken advantage of online leads prior to the refinance boom, so scaling operations to accommodate more leads didn’t necessarily require reinventing their business. What it did mean, is that companies made projections based on the number of leads needed, close rates, and the amount per close to determine just how many people they would need in order to meet those projections.

With so many companies going through the same exercise, you had a confluence of events happen, at least in my opinion. It began with a huge flood of demand for leads entering the market; this demand entered the online advertising market but not in a coordinated method. The buyers of leads didn’t know with whom to run; many of today’s firms existed during the lead rush but their reputations had yet to cement. That left buyers in the hands of whoever got to them first; then with the volume needs in hand, these buyers ended up being more brokers than anything else. They would then farm out the deals to whoever said they could produce and the cycle would repeat.

The information asymmetry bred the operational inefficiency that, as the market cooled and competition increased, began to highlight the weakness in the entire system. This ended up with buyers having a lower lead to close ratio than in the past, frustrated employees, upset customers, and a sense that the buyers were paying more than they were receiving. Buyers started to then cut down on the number of companies with whom they dealt, cut back on the number of leads, and implemented systems to better track performance of the incoming leads. Those on the supply side, that both sensed changes afoot and intended to survive the shakeout, began demanding more accountability with those that they worked, implementing technology solutions to improve quality, and in many ways, earning their money.

The system isn’t perfect but enough innovation has occurred and enough external pressures – higher cost of media, greater performance tracking to identify low quality media, and decreased demand – that overall lead generation moved from simply focusing on quantity to quality. Will quality always remain more important than quantity? I think it will, but when another industry develops an insatiable demand, chances are quality will again slip and those in the field look to fill demand. The good news is that while it might take a step backwards, this occurs after taking two steps forward.

Comments

[Rob Deichert]

Jay - Great post

It seems as if quality not quanity has come to the EDU lead market. Based on some of the more memorable deals this past year it's happened. Mortgage if quality is important it seems as if its by provider. Most data I have on the space does not show that lead geneartions actually get back close data on their leads. Are you seeing close data in your mortgage business allowing you to de-average your media buys?

[Bill Rice]

Jay,

Your comments on the dramatic trend of buyers (lenders) wanting to add accountability and observability to the vast lead flow is precisely the opportunity I sought to leverage back in 2003 when I started Kaleidico and conceived of our icoSales lead management product.

These lead assets, particularly as they increase in price, are an increasingly effector of their profitability and success. The first step, as you highlight, was to need to manage them more closely as costs rose and margins compressed. The second step, is for the first time seeing what is really going on with their leads in their shops and measuring the "quality" of the lead provider. It is my experience, and the data proves it, that the performance of leads (perceived as "quality") are significantly effected by both lead generator ("marketing method") and sales behavior.

When do you think that buyers will begin to expect lead providers to intelligently target their media buying to buyer profiles? This gets to Rob's point. We are already, based on our customer's (the buyers) preference, sending very specific lead actions information back to the provider. Unfortunately, the vast majority of lead providers do nothing useful with this valuable information.

I really enjoy reading your Blog!

[ron pruett]

Another good post Jay and we'll be covering it on our Offertrax blog this week. Keep up the good work.

[Helen Chernikoff]

Hi, Jay - I'm a journalist at Reuters covering for-profit education and was wondering if I could possibly speak with you about lead generation? Hope this is an okay way to contact you. Feel free to e-mail me.

[andy jacob]

Jay:
I read all your lead gen articles with great interest.
Keep them coming!

[josh stomew]

Jay, keep up the wonderful posts.. Your writings are amazing..