What Internet lead services should do to corner the market - Contractor Talk - Professional Construction and Remodeling Forum

Mike Finley · 04-13-2006, 06:58 PM

Imagine letting the market set the rates for leads instead of the lead service setting $40 for this lead and $80 for this lead. How can lead A, B, and C be all worth the same? They can't. How can a lead from a customer 3 months away be worth the same amount of money as a lead where the customer is read to hire? The simple answer is they aren't. Yet the lead services think contractors are stupid.

I'm waiting for a lead service to figure out that letting the market set the value of their leads will make them more money in the long run. All they have to do is auction their leads to the highest bidding contractors. They can choose to set it up so the top 3 bidders get the lead or the top 5 get the lead or whatever. A lead comes in and it goes to auction for a fixed amount of time. Contractors look at it and place a bid. The market will set the price, the contractors who bid will be happy since they have chosen what to pay or not pay for a lead. The only problem will be the lead service will be unhappy because they can't sell the same lead to 30 contractors for $40.00 each.

With the auction system they might only make $200 on the lead instead of $1200.00 but the difference is the contractors will flock to the site and stay with them, since they would actually be offering a product that works, instead of the current system of turn and burn which they have now. I'm guessing the average lead sites annual retention rate is somewhere in the neighborhood of -1000% and that might be conservative.

RobertCDF · 04-13-2006, 07:42 PM

Mike, I think its an excelent idea... Maybe you should go for it

I just might be interested in something that works like that.

Sider' Brian · 04-13-2006, 10:30 PM

Mike that does sound like a great idea! Get er' goin'!

Melissa · 04-14-2006, 01:22 AM

I think it's an awesome idea too. Like the next ebay, but for the service industry!

Seriously, go for it! Before I steal your idea..... just kiddin!

Speaking of ebay: hubby met a designer who is doing 6 kitchens (in 1 house

) for the creator of ebay- each starting at $150k!anyway, it could be you.....

emorenci · 06-08-2008, 12:18 PM

What a brilliant idea!

And while the leads are up for bid...time is passing. And the home owner gives the job to another contractor in the meantime.

You complain you can't reach the home owner. Now, you have put time between you and the lead. That makes a whole lot of sense.

Susan Betz · 06-08-2008, 03:52 PM

Quote:

Originally Posted by Mike Finley

Yet the lead services think contractors are stupid.

You could have stopped right there.

**Ed the Roofer** · 06-08-2008, 05:04 PM

It still does not prevent them from selling those leads to other lead services or a separate division of their own entity.

The auction bidding time could be a very short time table before it goes out to open dispersement though, which would potentially guarantee the auctioning companies the first exclusive stab at the job.

Good outside the box thinking Mike.

Ed

Mike Finley · 06-08-2008, 05:09 PM

Quote:

Originally Posted by Ed the Roofer

Good outside the box thinking Mike.

Ed

Don't give me more credit then due.

The original post is tongue in cheek. The auction model won't work because lead services have huge acquisition costs in order to generate leads. It's a totally broken and bogus system. Nobody can provide a quality service to contractors because they have to compete against their competitors for the same consumers and their competitors are all keeping the customer acquisition costs too high for a real service to compete. The numbers don't work, so the game keeps going around and around...

rbsremodeling · 06-08-2008, 05:36 PM

ok I will do better than Mike. There is a lead service here that sells leads at a flat fee or percentage of the job depending on the size of project. They give the lead to 3 contractors only and no reselling of lead you don't pay a dime until you contract and sign the job.

Then you pay them in stages as the job goes along. They stay in contact with the HO and the Contractor through out the whole process from start to finish.

Mike Finley · 06-08-2008, 05:45 PM

Quote:

Originally Posted by rbsremodeling

ok I will do better than Mike. There is a lead service here that sells leads at a flat fee or percentage of the job depending on the size of project. They give the lead to 3 contractors only and no reselling of lead you don't pay a dime until you contract and sign the job.

Then you pay them in stages as the job goes along. They stay in contact with the HO and the Contractor through out the whole process from start to finish.

and the catch is...

... their good for about 3 leads a month right?

rbsremodeling · 06-08-2008, 05:54 PM

Quote:

Originally Posted by Mike Finley

and the catch is...

... their good for about 3 leads a month right?

A contractor that shares my warehouse space uses them, we are good friends. He would easily get 15 to 20 leads a month. He only does kitchens and baths. They are high end leads with very good budgets. Their screening process is very good. The budgets and neighborhoods are top notch.

poolcageman · 06-08-2008, 06:07 PM

Can you give their name out?

rbsremodeling · 06-08-2008, 06:20 PM

I can but won't for two reasons.

I have never dealt with them personally so my info is second hand. I can not recommend something or someone with out first hand knowledge or interaction.

Secondly I think it is a local firm. I do not think it is a national firm I think they are locally based and operated. but if you pm me I will give you the name of the company and you can research them yourself and see if they operate in other areas

poolcageman · 06-08-2008, 06:55 PM

Fair, enough

Mike Finley · 06-08-2008, 08:47 PM

Quote:

Originally Posted by rbsremodeling

A contractor that shares my warehouse space uses them, we are good friends. He would easily get 15 to 20 leads a month. He only does kitchens and baths. They are high end leads with very good budgets. Their screening process is very good. The budgets and neighborhoods are top notch.

That's really good to hear. They certainly seem like the exception to the rule. I'm glad there is at least one glimmer of light out there.

Grumpyplumber · 06-08-2008, 11:14 PM

The idea might work for large projects, but here's the catch...
Imagine plumbers bidding against eachother for a small $150 job.
Most online inquiries in my trade are just that, small jobs.
The trouble with the idea is that you'd have the propensity for inexperienced newbies to overbid the leads not realizing the big picture on overhead.
Something about this idea sounds a little like Bidclerk...you might be onto something, but you might want to consider a max on bids....maybe giving the lead to the first to max vs highest bid, with a max bid amount set in advance.

smallcontractor · 03-12-2009, 11:51 AM

I have an answer to your dilema...the lead service we chose only sells leads to the first 3 contractors that buy it. the cost is a flat $24.95 per lead, but that's not so bad. I know that I will only be bidding against a max of 2 other contractors for the job. The site is: quality contractor services.com. They do only HVAC and plumbing now and only in the New England area..but I think are planning to expand West and w/ other contracting areas.

SelfContract · 03-12-2009, 12:15 PM

...Ok,.. I will build web site ...FREE for all... only 1% fee on each lead sold ...come to my pocket to maintain that site !!

easymoney · 03-13-2009, 12:13 AM

I never liked the whole "Lead" business, and didn't know how bad it was untill I started reading posts...
What do your guys prefer? Leads or Advertising? Say for example Service Magic or Yellow pages? all costs being equal...

RidgeWalker · 03-13-2009, 08:31 AM

The idea sounds good in theory but I don't think it would work. After having some experience with online leads, it's all about immediate responses.

The whole mentality of the user using a service like blablafindacontractor.com is that they will have an immediate resource of contractors to give them bids.

We live in an immediate results orientated society and users view the internet as the supreme tool for satisfying this need. They won't use a service that says you'll get your contractors within 24 hours or however long it takes the lead company to complete an auction for the lead.

While some people do not like company's like Service Magic they have a very successful business model designed to meet the users need. They deliver leads so fast that sometimes the users are still on their site when the contractor calls them. I say this because I've called many leads and the prospect as like, " Wow! I haven't even left the site yet and you already called me!" They absolutely LOVE this level of service and the immediate delivery.

Part of the reason leads cost what they cost from companies like Service Magic is because they use affiliate marketing so a percentage of the lead fee must go to the affiliate who directed the service request to them.

If they did not use affiliates to leverage their traffic which diverts a huge amount of marketing cost's we probably would never pay what they'd need for a lead so they could operate a business.

As it sets now, an affiliate gets paid $X percentage or a flat rate for a certain lead. They already know what a company like SM is charging and that they are charging it up to X times because the lead is sold more then once. The lead company would basically loose it's huge affiliate leverage because the affiliate would have to:

A. Have to wait for the auction to end to get paid.
B. Be making the same while the service provider is potentially making a significant amount more.

There are only TWO aspects of the lead company's business model that they really really need to take care of. The affiliates and the users. The contractors are a dime a dozen and they know that. If they change the system and make it less desirable for the affiliate to bring them traffic the affiliate will just divert traffic for their competitors. If the user has to wait to long to receive qualified contractor information they won't have a good experience and won't return when they need another project completed.

Reality check, we the contractors are the LEAST important factor in the process even though we provide their income by paying for leads. Why? Because we are a dime a dozen and they will ALWAYS be able to recruit more contractors when they want too. They also use affiliates to get new contractors so they have a never ending supply of new contractors joining the program. Part of that set up fee goes to the affiliate = )

And Mike, the internet lead services basically do have a corner on the market. Service Magic alone has over 8 million links pointing to their web site. They have over 6 million web pages. That my friend is cornering the market.