I'm in marketing and looking for some advice/guidance from those of you on the sales side of the fence.
I have a real problem with the pay-per-lead model used by the leads industry. I learned to truly despise it while at eBay where it was responsible for such an extreme amount of affiliate fraud the FBI had to be called in. Its an incentive model that rewards quantity over quality and gives bad actors a big advantage over everyone else.
After catching a talk by a vendor who had the hubris to say there is nothing wrong with internet leads and that sales teams who can't work shared leads just shouldn't survive I thought I'd throw my 2 cents in.
You’re not imagining things, internet leads really do suck because the pay-per-lead model incentivizes fraud, plain and simple. Even without the fraud the lead model just isn't good for selling. For example, we recently had a chance to work with a major ad agency who handles the account of a large insurer ($100M+ ad budget). We develop predictive algorithms to optimize for different advertising outcomes. In this case we were able to offer the marketing team a choice:
A) Improve lead quality & increase overall revenue but generate fewer overall leads.
- OR -
B) Worsen lead quality & decrease overall revenue but generate more overall leads.
Guess which outcome the marketing team chose? (Answer: B)
After selling my SEM platform to eBay in '07 I had a chance to work with the team looking to tackle this exact problem for eBay. In 1998 eBay was focused on driving user growth in its marketing programs so it used the same objective when it started an affiliate channel in 2000. The program was designed primarily around generating new users. Managers of the affiliate program at eBay & cj.com were heavily incentivized to drive user growth. While they would take action on obvious affiliate fraud they never had an incentive to actually go and hunt for it. A hear no evil, see no evil attitude developed.
A number of bad actors realized that as long as they could maintain a minimum level of performance they could stuff their pipeline with low intent, incentivized or even fraudulent users. They grew to dominate the program because this model rewarded aggregators who can take high quality leads from A and mix in low value or even fraudulent leads from B,C,D to create a pipeline with overall quality X. They generated a larger volume of leads than everyone else and the name of the game became keeping pipeline quality just high enough to meet a minimally acceptable standards while generating as much volume as possible.
Its far more profitable to generate a low quality pipeline because low quality users/leads are easier to generate. The bad actors (aggregators) always had plausible deniability, "XYZ assured us they were generating traffic thru SEO
, I'm shocked they were using a click farm in India to generate signups. We had no idea (wink/wink)". This model actually forced good actors to become bad just to compete - everyone had to focus on quantity over quality in a race to the bottom. You simply weren't rewarded for generating a high quality users.
The dollars involved weren't small either (think $10M+/yr affiliate checks) and it went on for years. All told, losses were probably over $100M (and that could be conservative).
Currently buyers have very little power in the marketplace and thats a problem, your only leverage is simply not participate and buy leads.
Ignoring internet leads really isn't the answer. Google has captured so much buyer intent that flows into SEO
/SEM you just can't ignore this channel, especially if you want to grow. At the same time I don't see any way to buy leads in this marketplace without getting burned. Like eBay discovered, quality just gets worse over time until it all collapses in a race to the bottom.
There is a solution but it involves putting the power back into the hands of buyers who can then force some changes.
eBay discovered the solution to this mess is to move to a revenue based model. The price buyers pay for leads would be based on the revenue these leads generate. Since no-one in this industry is eBay this would need to be done in an open marketplace where buyers and sellers could transact and compete.
Under this model, buyers would compete against each other bidding a % commission of their sales. You "bid" based on the revenue you generate and this is translated by the marketplace into an effective price-per-lead for lead sellers.
This model correctly aligns everyone around common goal of increasing revenue/sales.
The main advantages of the performance model:
- Buyers aren't antagonized by a lead refund process. Lead refunds are made redundant.
- Sellers are getting actual market rates for their leads. Anyone who generates good quality leads should see 2-4X the revenue they see today.
- Good actors are rewarded and have KPIs to dial in efforts and generate leads the market demands. Revenue focus, not lead volume.
- No profit motive for bad behaviour, the bad actors either reform or disappear.
- Any seller action that damages lead quality get punished by the free market. Selling a lead to call centres before putting it in the marketplace would simply result in a lower price per lead. Do anything to the lead that makes it harder for sales team to close and consequences are less $$. Waste the time of a sales rep playing games with bad leads and the market punishes you.
- Marketplace provides buyers with predictable pipeline of ideal prospects and forecasting based on their bid. They get to see where they sit amongst peers in key KPIs to improve their sales process. This is where AI/Machine Learning can get involved.
- Consumer experience is greatly improved.
To anyone who says the current model is working I dare them to fill out a few quote forms and see if they can keep their phone turned on. This isn't good for user experience (UX) and big G! (google) values UX above all else. If this industry doesn't reform we'll all wake up to a day where Google is doing leadgen. They've already been experimenting with this in other markets (plumbers etc). Geico already spends $100M+ on AdWords, guess who Google will be selling leads to.
I work with customer intelligence (CI) datasets all the time, there is no excuse for the lead return rates you are all seeing with the tools we have today to scrub bad data. In fact, every lead card you buy should come with a CI profile before you even get on a call. This probably isn't happening because sellers profit by trying to sneak bad leads by you, or worse sneak in aged leads that would be discovered using CI.
So, I'm curious. Marketing teams I work with don't see a problem or pain point to solve. They are all measured by lead volume so a different model is bad for them. I wonder if those of you who work in sales feel the same way. I've put together a survey below that has 1 question on it, if this marketplace existed today what would you be willing to bid for leads?
I have a bunch of Amazon eGift cards left over from another project so if your willing to hop on a 10 minute research call in exchange for $10 eGift card I'd appreciate learning about insurance sales. Maybe there is a problem to solve here, then again maybe not.
As new user I can't post links (so need to cut & paste):