The next generation?
Mortgage Introducer01-08-2008
Lead generation has changed. A year ago, the press was full of stories about disreputable lead providers taking brokers money and sub prime remortgage leads selling for £150 each. Now all we hear about is conversion rates and uncontactable leads. So what has happened? Fundamentally, the main reputable lead providers aren’t doing anything dramatically different. However, like many companies in the finance industry, lead providers have been affected by what is happening in the wider economy and this has impacted upon the experience of those using lead generation to source new business.
Lead generation has not escaped the effects of the credit crunch. Over the last few months lenders have drastically reduced the number of products on offer and fewer consumers than ever are being approved for mortgages. This means that if a broker bought the same thirty leads today compared to a year ago, the number converting into business would most likely be a lot lower. This will be the same experience for all lead providers. The method of sourcing leads will not have changed – i.e. consumers going online searching for mortgage advice – but if lenders don’t want to lend to these consumers then the leads generated will not convert as well. The lead generators cannot control this as they are as much at the mercy of wider market conditions as any other company in the industry.
However, this is not to say that leads won’t convert into business at all. It just means that compared to a year ago, a broker has to buy more leads to do the same volume of business. What has happened though is that lead prices have fallen to reflect these changing market conditions. For example, a prime remortgage lead may have sold for up to £50 a year ago whereas the same lead may now sell for less than half this price. The opportunity is still very good for companies with the correct processes in place and who take a more long term view. Some of the leads you buy may not convert today but as the market picks up you have a readymade pipeline of opt-in prospective customers to tap into. What the lead provider should do is give support and advice to their customers to let them know how lead generation is changing and give them the tools to adapt.
In the past – which in fact was as recently as last summer – a lead buyer could buy a few sub prime remortgage leads, convert a few into business, bin the rest and they could pretty much guarantee making a very healthy return. All the issues which we talk about in the industry such as lead quality, lead delivery etc. did exist but they didn’t matter. Buying leads was a pretty simple step to making money. The conditions for lead buyers today are very different and as the overall market has taken a turn for the worse many of these issues have started to surface.
In the current market a lead buyer needs to take a much more thorough approach. A broker buying remortgage leads should consider this as just the start of the process. The key to making lead generation work for a lot of brokers is all the ancillary products that can be sold around the initial mortgage. By upeslling into other products such as General Insurance, Protection, Conveyancing etc. the broker can maximise the value of every lead they buy. In some cases, these upsells can generate more income than the mortgage. Where lead generation fits in is that it very quickly puts you in front of a consumer who may be suitable for one or all of these additional products. In today’s market, these upsells can’t be ignored and income generated from them should be attributed back to the source of the revenue generated from buying leads.
The other biggest factor that has affected lead generation is the way consumer behaviour online has changed. With more people having easy and quick access to the internet and with a significant increase in the number and profile of finance related websites the average UK consumer is going online more often and visiting more websites to look for financial advice. They are filling in more forms and submitting their details multiple times. In addition to this, consumers are going online at a different stage of the purchasing process compared to a year ago. Previously a consumer may have left their information at a later stage in the sales process, i.e. when they were ready to make a purchase. Now they are looking for mortgage related advice at an earlier research stage. The result is that when buying leads, a broker gets access to the consumer in this earlier research stage and will therefore require more time and effort to convert into business. This is an affect experienced by many online companies and is not something exclusive to the world of lead generation. However, this should not necessarily be seen as a negative thing. The consumer intent hasn’t changed so as long as lead buyers understand how the consumer lead has been generated and therefore how to speak to that consumer in the most appropriate way then the leads will still convert into business. Again, the lead providers have a responsibility to inform their customers about these things so they can take the necessary steps to keep their lead buying successful.
Lead generation is now more than ever the most cost effective and targeted way to source new business but the approach needed is very different today compared to a year ago. In the current market, lead generation really comes into its own and this can be seen most clearly if lead generation is put in the context of other marketing activities that a broker can undertake. Brokers should look upon leads as an investment in their own business. The focus is often too much on the upfront costs of leads but the key is looking at the lifetime value of lead generation. For companies with 1-5 brokers with a limited marketing budget there are a few options available to source new business. These range from taking an advert in the local newspaper or getting a listing in the yellow pages to more miscellaneous forms of marketing such as an advert in a local shop window or restaurant. Probably the most expensive marketing a small business might undertake could be some kind of flyer dropped through the letterbox of a few thousand local residents. The trouble with all these paid for marketing activities is that money is spent with no trackable results, no guarantee of any phonecalls and the constant fear of when the next prospect may walk through the door.
Looking at things in this light, the case for building an opt-in database of customers that steadies your business in good times and bad times seems very compelling. Lead generation offers the quickest way to do this – buy leads and you are buying opt-in, real-time internet generated leads filtered down to the ideal customer for your business. But the important thing to consider is that leads are not just today’s prospective customers – they are investments. They can generate income for your business over a very long period of time if you have the correct processes in place to manage those leads. What this means is that if you look at lead generation only in terms of immediate return on investment, then you are missing part of the story. The leads that don’t convert today or this week are potentially just as valuable as they are a readymade customer prospecting database. From the leads you convert today, you may get another few percentage conversions if you nurture these leads over a period of time. This is pretty powerful. That little extra effort can significantly increase income.
In essence, rather than a short term solution to make a few quick pounds, lead generation has started to mature to become a viable marketing tool to add to your armoury when sourcing new business. Over the last year, wider market conditions have accelerated this process. What lead buyers need to factor in is that today more than ever it is what you do before and after you buy the leads that will determine your success. This includes proper planning, proper processes and realistic expectations. The fact remains that lead generation is still the most cost effective and measurable way to source new business and is set to become even more important over the coming months and years.
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