- What is Lead Generation?
- Lead Generation Methods
- Lead Generation & Customer Acquisition
- Lead Generation & the Online Advertising Value Chain
- Prominent Lead Generation Companies
Lead generation is the practice of collecting relevant information from consumers who have expressed some level of interest in a particular product or service, and delivering that information to companies that are interested in following up with that consumer in order to close the sale. A lead is the set of personal information (often including name, address, phone number, email address, and detailed interest information) that is being delivered. The consumer has usually provided this information willingly in return for detailed information on the types of products/services that are currently being offered.
By enabling the relatively easy collection of large amounts of personal data on a scale never before possible, the Internet laid the foundation for what is now a thriving online lead generation industry. Companies such as Rent.com and LowerMyBills have built extraordinary value by helping helping companies connect with consumers that have expressed some degree of interest in the services they provide, whether that be a new apartment, or a new mortgage on their house.
It may be helpful to think of lead generation as a step within the overall advertising to conversion process. In effect all advertising is about generating leads and converting them into customers, with companies operating at various points in that process ranging from the first time a consumer is exposed to an offer (CPM based advertising) to actual conversion (CPA based advertising).
Certain industries tend to rely more heavily on online lead generation as a source of new customers. They tend to have customers with higher lifetime values, since the value of the acquired customer should exceed the cost of purchasing the lead, as well as the telemarketing or other direct marketing cost associated with converting them into a paying customer. Common players in the lead generation market include:
- Affinity Programs (Columbia House, BMG Music Service)
- Financial Services, Mortgage (Countrywide, Wells Fargo)
- Financial Services, Loans (Freddie Mae, Sallie Mac)
- Financial Services, Credit Cards (Chase, Citibank, Discover)
- Online Education (Apollo Group/University of Phoenix, Career Education Online)
- Pharmaceuticals (AstraZeneca, Pfizer, GlaxoSmithKline)
Lead Generation Methods
There are generally two methods by which online leads are generated - comparison lead engines, and co-registration.
Price/Feature Comparison Lead Engines
A large segment of lead generation companies position themselves as price or feature comparison engines. They realized that a consumer searching for a particular service would find value in a site that could aggregate what's currently being offered to help them select the vendor that's best suited for them. To access this information users of these sites would need to fill out their personal information as well as provide specific details on what they are looking for. This information is then sold to the highest bidding advertisers, who would follow up on the lead in an effort to close the customer on their product or service.
The leader of the comparison lead generators is LowerMyBills.com, which was acquired by Experian in May, 2005 for $330 million. True to it's name, LowerMyBills positions itself as a a service that helps consumers save money by comparing prices across multiple vendors. The primary market that the company serves is the mortgage and refinance industry, however it also offers plan and rate comparisons for wireless, debt consolidation, credit card, long distance, insurance and internet access services.
To get consumers onto their site, comparison lead generators such as LowerMyBills rely almost exclusively on online direct response advertising. In fact, LowerMyBills was the ninth and eighth largest online advertiser in January and February 2006 respectively, spending approximately $7.5 million each month to drive consumers through its lead generation engine. The company's distinctive banners have become well recognized on the web, even inspiring a number of imitations from rivals such as NexTag.
The following details the lead generation process for a consumer researching the best mortgage refinance rates through LowerMyBills.com:
1. A customer clicks on a LowerMyBills banner such as the one below.
2. They are then taken to a landing page which requests only four fields of information. This is done to get the consumer initially committed to the process, decreasing the probability of abandonment.
3. The second page begins to collect more information about the consumer's existing loan and property value:
4. The third page collects more personal information, including income and property address:
5. The fourth page requests the consumer's contact info, and provides the names of the four lenders whose rates are being compared: Aegis Lending, H&R Block Mortgage, Countrywide, and Pinnacle Capital.
6. Next the consumer is asked to submit the most sensitive personal information of the process - his employment information and social security number. Note that the names of the lenders that are to receive his information have changed, allowing LowerMyBills to sell this lead to even more companies.
7. The consumer then arrives at a confirmation page informing them that the lenders they've been matched with will be contacting them within 48 hours. The detailed customer information that has been collected throughout this process is sent electronically to each of the lenders that have purchased the lead, and LowerMyBills is credited for each lead that is delivered. The price per lead varies based on variables such the amount of the desired mortgage and the state that the lead originated in, but can be as high as $80. Some lenders integrate the incoming leads with their sales management software, allowing them to follow up with a lead via phone or email within minutes of receiving it from LowerMyBills.
8. Since lead generation is ultimately about customer acquisition, the final step is actually the phone call or email that is sent out from the lead buyer to the prospect. These messages usually include a strong call to action in order to close the customer as soon as possible, since lead buyers know they may not be the only company that purchased this particular lead. Below is an example of such an email.
While the larger lead generation companies will provide plan and rate comparisons across multiple verticals, other smaller lead generators have built micro-sites focused on specific channels such as mortgage refinance or debt, and promote those individual registration pages (primarily through paid search) to drive consumers through the registration process. An example of such a microsite is TheAmazingRate.com. This "website" consists of nothing more than a registration page that collects all the information needed to sell the lead to interested lenders.
Co-Registration
Co-Registration allows consumers to opt in to receive more information about a particular product or service as they are going through the registration process for something else. For example the NY Post requires a free registration in order to view the newspaper's content conline, where it asks for name, email address, and income among other data points:
On the next page of the registration process, the NY Post offers its readers the chance to receive information on other offers that might be interesting to them, including Circuit City and Educational Direct.
These offers are served by Aptimus, a lead generation company that provides hosted co-registration services to publishers such as the NY Post. Each of the advertisers on this co-registration page have agreed to purchase a set amount of information per lead (for example name & email address) for a specified cost. Every time a consumer opts in to one of the offers, Aptimus collects the relevant information that was provided in the first registration page and sends it to the advertiser. Aptimus will then bill the advertiser for the leads that were generated each month, and give a percentage of the total revenue to the NY Post.
Most co-registration advertisers use an opt-in model as is seen in the above example, which requires consumers to explicitly agree to receive further communication from the advertisers. Opt-out models, which pre-check the box next to each of the advertiser offers and require consumers to uncheck the offers they are not interested in, has gone out of favor in the industry due to privacy and performance concerns. The cost per lead for opt-out co-registration tends to be extremely low given the poor conversion rates.
Some publishers will use incentivized co-registration to artificially boost the number of consumers that select to receive more information from advertisers. This involves promising consumers the chance to win prizes by selecting a certain number of offers from a long list of co-registration advertisers. Although this drives a lot of leads to advertisers and enables more communication with potential customers, the conversion rates through incentivized co-registration are very low compared to the opt-in model. Below is an example of a range of co-registration offers on GadgetCity.com, a site run by NetBlue that gives away "free" iPods.
Lead Generation & Customer Acquisition
As mentioned above, lead generation is best viewed as a step within the overall customer acquisition process. Although lead gen companies are paid per lead, their success is ultimately dependent on how well those leads convert into paying customers. Lead buyers follow up on their leads by phone, email, or physical mail anywhere from minutes to weeks after initially receiving them. The number of conversions from each batch is carefully measured, tracked back to the source that it came from, and compared against the lead buyer's metric goals. Based on this analysis, the lead buyer will decide whether to re-purchase leads from a particular lead generator. If a particular lead generator's leads consistently do not perform it will soon be dropped as a provider, and may even be asked to return the amount paid for the intial batch of leads (particularly if there is suspicion that the leads were provided in a fraudulent manner).
Lead Fraud is one of the biggest issues in the lead gen industry today. Certain lead aggregators will use deceptive methods to gather and sell information, including scraping contact information, illegally buying and selling lead lists, recycling leads, and spamming. It is important when considering whether to purchase leads from a particular vendor to only work with reputable companies that are transparent in how the leads are collected.
To further illustrate how close lead generation is to customer acquisition, one need just look at the number of lead generators that also offer straight cost-per-acquisition programs. In fact, it is just a small step (and sometimes a more lucrative one) to present a consumer comparing a set of price and plan information with the ability to sign up for the service they're interested in right then and there. In doing so the lead generator has moved from traditional lead gen into what can be considered a publisher running CPA deals to a highly targeted audience.
Lead Generators and the Online Advertising Value Chain
It is interesting to note that several lead generators appear on the list of top online advertisers in April of 2006, including LowerMyBills, NexTag, and InsWeb. In fact, some lead generators can act as advertisers, purchasing media on publisher websites in order to drive traffic to their own properties. Given the fact that their business is driven by the per-lead metrics, lead generators tend to be notorious direct-response advertisers, measuring every impression, click, and conversion carefully to ensure that it backs into their numbers. They tend to make use of ad networks, however will also go directly to publishers.
In addition to using lead generators, many end users of leads will also run their own lead generation campaigns utilizing their own web properties. For example in addition to working with LowerMyBills, Countrywide Home Loans has also been advertising its own website in an effort to collect its own leads. In doing so it is bypassing the lead generators and going direct to the ad networks and publishers.
Finally, it should be noted that the line between lead generators and ad networks can occasionally be quite blurry, especially with co-registration. This is because many ad networks offer some type of lead generation services through the publishers whose inventory they manage.
| :: A Closer Look: Innovation in Lead Generation | |||||||
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At it's essence all advertising is about lead generation. Lead generators create value by providing
advertisers with a pool of pre-screened consumers that have already expressed some interest in their
product or service. In effect, consumers are actively requesting to receive more information on a
particular product or service.
They can do this in a number of ways: they can request more information from a specific advertiser, fill out a form on a price/feature comparison website such as LowerMyBills, or check a box while completing a registration form. Often these leads will travel through a middle-man before reaching the advertiser, which creates some degree of inefficiency in the market due to the lack of transparency. Publishers may not know what that lead is truly worth to advertisers, and advertisers may not know how much the publisher is being compensated per lead. In addition, the consumer is never really sure who is capturing their data and where it is being sent. A handful of new startups in the lead generation space have launched in an attempt to solve this problem. LeadPoint has developed the world's first real-time lead exchange. This allows publishers to sell leads directly to advertisers through a platform that is managed by LeadPoint. Pricing is market based, allowing both publishers and advertisers to maximize the value of each lead that is purchased. The founder of LeadPoint, Marc Diana, was the former VP of Business Development at LowerMyBills.com Root Markets takes that concept one step further. The company enables consumers to collect the data on themselves, and then optionally share, barter, lend or sell the information to a marketer in order to get a better deal, a customized product or a better rate. For example a consumer interested in a mortgage would be able to anonymously offer their credit score, click-stream data, Amazon purchase history and a few other pieces of information to advertisers through the Root Exchange in return for customized mortgage deals. The company recently purchased Lead Filter, an exchange for mortgage leads headed up by Robert Wilson, one of the founders and first CEO at LendingTree.com. The founders of Root Markets are Lew Ranieri, the legendary former head of mortgage trading at Solomon Brothers credited for creating the multi-trillion dollar mortgage-backed securities market, and Seth Goldstein, former entrepreneur-in-residence at Flatiron Partners. Investors include Ranieri, Josh Kopelman of First Round Capital, and the NY Times. Company Profiles: | |||||||
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Prominent Lead Generation Companies
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One of the top online lead generation companies, providing leads across 18 categories including mortgage & debt. Acquired by Experian in May 2005 for $330 million. More |
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One of the leading price comparison engines for products, financial services, education, and more. Consistently on the list of the fastest growing private companies. More |
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Provide leads in the mortgage, credit card, and loan services areas. Customers include BofA and Citibank. Acquired by IAC/InterActiveCorp in 2003 for $743 million. More |
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Leading online source of apartment leads. Also offer lead generation services for moving, storage & truck rentals. Acquired by eBay in Feb 2005 for $433 million. More |
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Leading education-focused lead generation company. Represent over 125 schools and more than 1,600 accredited programs. Acquired by Experian in July 2005. More |
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Co-registration advertising network. Currently reaches 7 million unique users through 130 publishers. Publicly listed on NASDAQ under "APTM" More |
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Co-registration advertising network. Provides publishers with a plug-and-play co-registration system. Customers include Pfizer, P&G & MGM. More |