My personal experiences with lead generation services

Way back in 2014, we started a conversation about online referral services (such as HomeStars, Trusted Pros, Angie’s List… and their ilk).  Where they really worth the investment? Here is a recent post about that from Neil Damackine, Construction ND, Terrebonne, QC… Note that Neil does not identify who the firms are and they are not necessarily any of the ones we have just mentioned.

I was doing pretty good without any type of outside lead generation when a landscaper friend of mine told me about his lead generation service and even referred some customers that he had served. I found the quality of his clients to be high so I decided to sign up with his service. After about a year using two different lead generation services, here are my observations.

The common sales pitch begins with: Our clients expect to pay a little more and we only give the lead to three contractors.

The reseller’s team of “owner representatives” send out the leads to several contractors and take the first three who bite. Then they usually collect the submissions and present them all to the client for a decision.

The lead generation companies I dealt with are paid two different ways but either way you’re better to re-qualify every lead to get the whole picture.

Flat fee leads have been between $5 and $50. Refunds were available if the lead was non-responsive or the contract has been given before I established contact.

Commission leads are paid only if you convert the lead but a commission is expected for any future work for the life of lead.

Pros:
No effort leads in the inbox.

Cons:
1. Flat fee leads have been generally dubious in quality but there were some pearls in the ruff.
2. Commissioned leads can cost up to 10 per cent on smaller jobs!
3. Commissions continue to all future work requested by the “owner’s” client
4. A few “owner representatives” are competent and nice to work with. But others don’t know how to qualify prospects and submissions properly, let alone distinguish who’s best suited for the work. Or they simply don’t care because they’re making a commission on the job no matter which contractor gets it! The clients are not all properly vetted and it can seem a lot like the dumb leading the blind when an inexperienced owner representative mismanages a lead (apologies to anyone who’s offended by my lack of political sensitivity!).
5. I insist on doing my own presentations but I’ve found many of the clients who need the most care are reluctant to make decisions without their “owner representative” (re-read 3-4!).
6. All the contractors are supposed to be vetted but I calculated the winning bids from a few different jobs (requiring specific license categories and trades certifications) to discover they were below cost on labour and material — even before adding cost of sales and mark up. This leaves serious questions as to the qualifications and techniques of the winning “contractor.”

In the end, many lead re-sellers are OK for a handyman looking for a few bucks but not so good if you’re a professional contractor with a long term perspective. I like to give back to my clients so I find it crowded whenever a third party’s cost constantly overshadows the cultivation of a long term client relationship way beyond the initial work.

I think there’s room for professional lead re-sellers and I’m fine purchasing a lead for either a one-time fee or a single reasonable commission, but looking ahead I’m concerned that the high cost of sales being paid to a non-construction third party is creating an industry monster thats going to damage contractors and job quality. At least, so far I’ve seen nothing to convince me otherwise. There is an increasing [prevalence] of renovation services by contractors who resemble telemarketers more than building professionals. A number of renovators accept these terms without a thought to the destitution of their markups – and subsequent ability to give back to the client and build their business. [This all adds up to ] nothing more than a smoke screen — and money taken out of the client’s budget for basically nothing in return.

The end is a predictable: front line contractors becoming disposable products with no claim on the relationships they’ve built with clients in a continual servitude to the marketing “contractor.”

In conclusion, most of what I’ve experienced from lead marketers is what I wanted to get away from before I started my company in the first place! Renovation marketers slice the renovation pie a lot thinner for the most important people at the table, the client and the construction professionals. It’s far better that renovation and construction business owners invest the cost of sales money into proprietary marketing and lead generation. Because once the client relationship is established, both renovator and client will benefit far more together without the constant financial servicing of a bloated elephant overshadowing the room!