All Lead Companies Are Not Created Equal
All lead companies are not created equal - hard to believe, right? This article shares with you some of the differences in types of leads you can purchase from lead providers and several of the major pitfalls common to the industry. Before we get into too much detail, let's quickly discuss why you need to become well educated and effective in this aspect of your business.
As the industry experiences a dramatic shrink in demand for new mortgages and refinancing, reliable lead partners are more important than ever to the average mortgage broker looking for growth.
You purchased 100 leads. You did not risk $3500 in newspaper, direct mail or television ads. Sure, the most successful media campaign might produce more.most often it does not. Let the "experts" take the risk while you invest your dollars in training your team to get a better return on the 100 calls or leads you know you have coming in.
The challenge lead providers face is even more difficult as major companies with huge appetites downsize, directly affecting their cash flow for purchasing media to generate leads. Simultaneously, consumer confidence wanes due to rising rates, the negative press surrounding interest only loans, option arm loans, etc. and "the real estate bubble."
This is a p rob lem for the average Broker because major companies have been the source of revenue necessary to drive enough media to a lead company to enable them to generate the leads necessary to pass back to the major companies, heavy eaters so called. This relationship, or source of revenue, is what has in the past enabled the average Broker to benefit with a lower cost per lead from a lead company - rather than driving leads via their own marketing dollars.
Now, as a business person we understand the equation of supply and demand - and now we face a challenge, quality or quantity? With the average Mortgage Broker being a small business of up to 12 loan officers, it is absolutely necessary that you invest heavily in the following key success factors regardless of your particular preference; 1) educating your staff on the risks consumers are facing, 2) educating your staff on the value and benefits of owning real estate regardless of the interest rate, 3) training your staff with proven sales techniques, 4) tracking the success of your lead purchases with a lead distribution system and customer relationship management tool guaranteeing follow through and 5) a rock solid processing team.
Assuming the above is in place, let's get back to the argument at hand: all lead companies are not created equal and which path do we take quality or quantity?
Lead companies come in all shapes and sizes. You have; internet leads, telemarketing leads, verified leads, non-verified leads, incentive based leads, co-registration leads, real time leads, next day leads, 30 day old leads, "exclusive" leads, "semi-exclusive" leads, "non-exclusive" leads, filtered leads, non-filtered leads, spam leads, aggregated leads, direct marketing leads, the nasty phenomenon called "trigger" leads and lastly "seasoned" data from your title companies. Surely there are more types coming as the industry forces innovation; however this is the bulk of lead types regarding lead companies at this time.
Let's take these a few at a time; "exclusive," "semi-exclusive" and "non-exclusive" is a semantics game in the industry. There are really no such things as "exclusive" leads - the company may sell them to only you, but the consumer averages an application at 3 sites during their search process. You do the math. "Semi-exclusive" this is one of my favorites; they are sold at a premium because they only sell this lead to 2 companies. Cute. "Non-exclusive" this is a little more accurate because they are sold to up to 4 companies per the agreement. Here is the catch with exclusivity. What you really want to know is the ethics of the organization , because this is in reality how it works.
Major states such as California, Florida, New York, New Jersey, Washington, Arizona, etc where there is high demand and high competition, these leads average a sell through of 3.5 times to 4 times with no challenge. The demand is there, the property value is there and the competing is worth it. Other states average 2.2 times sold and smaller states average 0.8 times sold. When you average this out, unless you have a "big eater" with a "nationwide appetite" sell through is difficult, which means profitability for the lead company is difficult.
The ethical practices of the firms that you deal with are the key. When they are not making a profit here is what happens. They will sell the lead to other companies that sell leads when they don't reach their maximum number of times they can sell it and some will sell it more. This is known as lead aggregating. Meaning if they can sell the lead up to 4 times and they averaged a 2.2 flip, they will sell it to an aggregator who can sell it up to 4 times and that company will sell it to another aggregator, etc. You can see why you run into leads that have received 18 calls after applying on the web. There is no p rob lem with aggregating leads as long as the maximum flip of the lead is not exceeded. Hence, it's an ethical issue.
Additionally, you have companies that will sell the lead the next day as an "buyer not found" lead, 30 days later as an "expired" lead and companies that will farm through the data looking for people that are still interested and pass that through as a live transfer - worse yet, they will sell it as an "exclusive" live transfer, meaning literally that you are the only recipient of the lead as a live transfer, not that it is an exclusive lead.
The water gets murkier and murkier as the demand gets tighter and tighter. The rule of thumb needs to be that you take a partnership approach, do your due diligence, check with your local and/or national associations and work with trusted sources. Good business is out there and if you work with the right company, the refinance boom is still in full swing.
Scott Kirkpatrick is CEO and President of Superior Internet Solutions. Superior Internet Solutions is located in San Diego and can be found online at www.MortgageMarketingSpecialists.com . Superior is the only full service , one stop resource for mortgage brokers; providing web sites, client for life newsletters, search engine marketing, direct mail, realtor networking tools, refinance leads, live transfer leads, loan status, lead management and more. Superior has over 1500 clients covering all 50 states, works with name brands such as Chase Bank and Fidelity National Title and is the only firm in the industry with an official partnership with Yahoo, Google and with the National Association of Mortgage Brokers, www.NAMBMembershipSummit.com.
