Why All Online Home Improvement Lead Generation Services Suck
When I first started working in the home improvement business as a sales representative, my sales manager began my training by saying: "All the leads you will ever run while you work here suck. Now that we've established that, we don't have to talk about it ever again." The point he was trying to make was that, even though the leads "suck" -- if you handle them the right way, a sales representative can make a decent living selling to them. The same thing can be said about internet leads and lead generation services. Contractors that have used these services unsuccessfully, tend to paint "Internet leads" with a broad brush by saying they are poor quality -- yet the most successful companies are able to generate a good ROI from them. Why?
Lead Generation is Everywhere!
In most industries, online lead generation is a big business. If you start a company and prove that you are able to generate a steady stream of leads for a particular product or service, you will find a ready market willing to pay you for the leads you generate. From financial services, to health care, to automobiles, to online education there are hundreds, if not thousands of companies on the web trying to capture enough information from potential customers to sell. For example, last year I was doing some research on home mortgage rates. I found a site that asked me to register to check rates in my area. Within the first 30 minutes of filling out that form I got calls from 3 mortage companies; 3 more called me within the first hour. I couldn't believe I fell for my own lead generation tactics!
Lead Generation & The Home Improvement Industry
Recently I read a blog Lead Quality: Time To Lower Standards by Todd Bairstow at Keyword Connects. Todd's company is a well known lead provider in the home improvement industry. The premise of Todd's post was that that compared to other industries, lead generation for the home improvement industry is way behind the pack. He made an observation that while attending a national convention of lead generation companies with over 3500 attendees, only about 50 served the home improvement industry.
The US home improvement business is close to a $300 billion industry. For most home improvement contractors, steady lead generation is their top business problem. Most contractors struggle with generating signfiicant traffic to their own websites, let alone developing leads from that traffic. So with the need for online leads so great, why wouldn't more companies jump in to fill that void?
Todd quoted the CEO of Bankrate.com , wh0 when asked what he thought the next hot market for lead generation would be said "no one has been able to crack the code or build a sizable business in the home improvement space." According to Todd, there are two reasons why the home improvement industry has not generated the attention of the big players in lead generation. First, he says that there aren't a lot of national players willing to buy leads. In fact, Home Depot and Sears really are the only two national players that buy online home improvement leads. Because the industry is so fragmented, selling and supporting countless local companies is a major undertaking for a lead generation company. I have to agree with this observation. A big part of our work at Three Deep involves working directly with local contractors to develop, manage, and optimize campaigns for our Clients that generate leads for them in their markets. Our work involves a sales effort (yours truly), as well as project managers and technical resources such as analysts, web developers, copywriters and designers. Pulling these resources together is often too expensive of an investment for smaller companies, who unfortunately need the most help. These are the companies who could benefit most from an increase in available lead generation services.
Baristow went on to note that the other reason there aren't more lead generation companies serving the home improvement industry is that home improvement business owners' demands about lead quality scare most lead generation companies away.
High Demands = Low Quality?
It seems as though in the industries where online lead generation services have really taken off, the thirst for leads is so intense that the lead buyers will accept an enormous level of bad contacts from the companies that they buy leads from. Buyers typically don’t challenge sellers who use aggressive tactics to capture contact information (i.e. “leads”) that may or may not refer to actual human beings interested in the buyer’s product. In short, to meet their volume needs, clients in these industries are able to tolerate a significantly lower bar on lead quality in order to keep the lead flow coming in. Go back to the mortage example; had I put my name in as Fred Flintstone and used a fake phone number, those 6 mortage companies still would have paid whatever fee they paid to get that information -- and never thought twice about it; chalking it up to a cost of doing business. They know that they'll get a few clunkers but overall there must be enough good ones that come through to make it work.
What kind of demands would a home improvement business owner make to a lead generation company? Well how about the following:
- The lead needs to be a homeowner
- The lead actually wants to set an appointment for an in home demo
- The lead wants to buy the product that my company sells
- The lead can afford to pay for the project
Actually, Todd only specifically mentioned the first one -- I added the last three, just from personal experience.
While Todd's company and Three Deep are both in the lead generation business, our services are completely different. He sells inquiries on a "per inquiry" basis, while Three Deep provides comprehensive custom managed services. What we do have in common I suspect, is that we are often put in a position of having to defend the quality of the leads we generate for our Clients.
Three Deep & Lead Generation
In our case, we build, manage and optimize paid search campaigns on behalf of our Clients. When someone "clicks" on one of our ads, the Client pays for it. Our job is to get our ads in front of people looking to buy our Clients products, and to get as many of those people who click to actually respond as possible (either via phone call or by filling out the online form.) For most home improvement products, if we spend $1,000 and only get 3 responses, we've got a problem. However, if we get 15 responses -- we're doing a pretty good job. Do some of the people who respond put in fake names or bad contact information? Yes, it happens. Are some of the responses from non homeowners? Believe it or not yes, it's just part of the lead generation game. We often go through an education process with new Clients, helping them understand that we can't control who clicks on their ads, and that maximizing the conversion rate of their website or landing pages will result in a few unqualified inquiries, but by taking the good with the bad they will still come out ahead.
The bigger issue is what do you do with the good leads you generate? If your company has a poor lead handling methodology, those weaknesses will ultimately be exposed on internet leads extremely fast.
The Problem with Lead Handling
Do you immediately respond to all inbound web forms? Statistics suggest that 78% of the sales from online web leads go to the first company that responds, and that the odds of contacting a lead from the internet decreases 2100% from 5 minutes to a half an hour! If you don't get ahold of the prospect on that first call, how many times do you call them? Did you know that 6 calls has been statistically proven to be the optimal number? Do you have a process in place to ensure that these calls are being made systematically, or are you leaving it up to "when you have time?"
Do you answer all of your calls live? We listen to a lot of phone calls and one thing that we've learned is that a lot of people don't leave voice mails anymore. For every one voice mail you that you do receive, you've probably got 2-3 people who hang up and call someone else. It's absolutely critical that when that phone rings, someone is answering it!
Who is answering your calls? If it's your sales department, stop immediately! If it were left up to the sales department, the only leads they would ever run are those prospects who told them over the phone they were ready to buy, and would have cash waiting on the kitchen table. If you have an appointment setting department, are they scripted? Do they routinely capture the prospect's name, address and phone number within the first 30 seconds of the call? I can't tell you how many calls we hear with potential prospects that go on for over 20 minutes, where the agent answers every question the prospect asks, only to be told: "Thank you, you've answered all my questions..when I'm ready to do something, I'll call you back!" The truly sad part is that the agent is often left with no name, or contact information for that prospect. That owner might as well have burned the $100+ it probably cost to create that call!
What we have found is that the difference between a successful internet marketing campaign and one that "sucks" almost always comes down to the way those inquiries are handled and the efficiency in which those raw contacts are set into appointments. What is your appointment set rate for any particular lead source? Can you even answer that question for your business; meaning are you tracking it? Our research shows that the average company generally has a 35-40% appointment set rate, but that rate could be increased to as high as 60% or more with the proper scripting.
Look at the analysis to the left. The same campaign, spending $3,000 per month on online lead generation, with the same raw lead cost of $70 can have a dramatic difference in overall marketing cost -- with the only variable being appointment set rate. The company with a 55% appointment set rate, has almost a 5% lower overall marketing cost. What's the difference between a 35% and 55% appointment set rate? It's really a combination of several factors including: response time, answering inbound calls live as much as possible and not overqualifying your raw inquiries.
Just like my old sales manager who told me "all the leads suck," it's what you do with the leads you do have that makes all the difference. It's pretty rare that you get a lead, from the internet or any other source, where the prospect is ready to buy, and only wants to know the amount to write the check. Raw inquiries are just that - raw. They've likely never bought a home improvement project before, and don't know the first thing about the process. The first sale you need to make is to sell them on the value of an appointment. If that isn't happening with the leads you are generating right now, who's fault is it?
Joe Talmon, the former President of Larmco Windows told me that the first step to being successful with internet leads is to "be brutally honest with the man in the mirror." Talmon built an internet division at his company from scratch that ultimately generated over $2MM annually, but he didn't have success with internet leads until he realized that it was his company and his people who "sucked" at setting appointments from the internet -- not the leads themselves. Once he made that realization, he was able to put processes in place that fixed the problem.
The New Home Improvement Lead Generation
85% of all product and service inquiries now start online. Internet customers are more educated, better prepared and require a higher level of professionalism than any other lead source used by home improvement companies. For this reason, companies who try to use the same sales processes for a canvass lead, for example, on an internet often find that those processes don't work as well. For that reason, the impression that internet leads "suck" gets lodged in many owners' heads. Breaking this line of thinking, according to Talmon, is similar to any 10 step program; the first step is to admit that you do in fact have a problem. After that, the second step is admitting that you are powerless to solving the problem on your own. Once you take those steps, he said, you are on the road to recovery.