More on lead generating services

The NARI (National Association of the Remodeling Industry) Linkedin.com forum posting on Lead Generation Services continues, after several days, to attract dozens of postings from various members making observations about these services. The thread is only accessible if you are a member of the group, but as far as I can tell, you don't actually need to be a NARI member to sign up and gain access.

Contractors, I sense, have a love-hate relationship with the LGS industry. Some feel they are virtually scams, imposing themselves between potential clients and their businesses, selling badly unqualified leads (or worse, reselling leads originally 'discovered' by another LGS.) Others say, if they work the leads properly, a certain percentage convert, and if the conversion rate is satisfactory, the LGS earns its keep.

In the thread, contractors debated about the value of qualified versus unqualified leads -- some said they will pay handsomely for leads where the prospective client is really ready to do the work, not just tire-kicking. And in fact, I've seen some examples where this type of LGS exists: Ned Overton in Washington described a local service he uses who charges a 10 per cent commission -- but the leads are usually excellent, and if the prospective client is stalling, the LGS gets to work to encourage client action. (Overton builds the commission into his sales price; and of course the LGS in this case is only paid when the sale is completed.)

On the other hand, I've read reports of LGS which provide nothing of real value after sucking the contractor in with up-front fees or automatic credit card charges. I won't name names here -- but you can see some horror stories on this Contractortalk.com forum.

Frankly, I really can't quarrel with contractors who use lead generation services intelligently, and regard the costs like other advertising and marketing expenses. If they convert the leads to sales and the cost per conversion is within their break-even matrix, then the LGS is providing value; if not, it is dumped.

But there is a bigger issue here -- and it touches on whether you are running a commodity business playing a "me too" game or really want to get ahead of the game in marketing.

Lead Generation Services are like the Yellow Pages of the past (and yes, I realize some readers still use and get business from the Yellow Pages). You pay to access a marketplace or directory of potential clients, but you have little differentiation and are spending a lot of money to be seen near your competitors. You are virtually inviting low-price-wins-the-job business. This is hardly a way to make good money in contracting.

In the ideal situation, you want leads which are not spoiled by other contractors fighting you at the same time for the work. Obviously the best leads in this channel are repeat and referral leads (and systematic programs to encourage these referrals should be a key part of your marketing.)

But to grow, and to sustain yourself during a recession, you will have to advertise, and advertise some more, in appropriate media. If you get it right, your ads will be the only ones seen (or one of only a few) by potential clients within your niche.

How can you find the most appropriate media to use? Check with your best clients, learn what they read, listen to, and like, and then go for it.

To Boston and beyond

This morning, we fly to Boston, MA and overnight before continuing to Providenciales, Turks and Caicos. for a week's winter vacation.

The Boston area is home for consultant Mark Paskell, publisher of The Contractor Coaching Partnership Blog. Mark phoned me on Christmas Eve, sharing some observations about what works and what doesn't.

Good marketing, it turns out, revolves around some basics. Generally, residential contractors need to spend about five per cent of their annual gross revenues on marketing. This means, if you sell $1 million in services, you should be spending about $50,000 per year. This isn't a hard-and-fast number, of course, but gives you an idea of where you can get started, and where you should be heading.

Of course, the big question is how should you spend this money. Paskell, like me and many others promoting our services to the trades community, finds greatest value within the relevant associations. In his case, he is actively involved in the Boston chapter of the National Association of the Remodeling Industry (NARI). Through his relationships here, he has gotten to know many of the the most successful remodelers in the Northeast.

He shares my belief that, for remodelers, the best source of business indeed is referral and repeat clients (as you would expect) and that systematic initiatives through follow-up service to existing clients provide the best results.

He would like to develop a truly useful leads service. I'm a little skeptical about that idea -- the challenge is that anyone who gets into the leads business ultimately runs into the paradox of 'success'. If your leads are good enough and of great enough value to provide genuine opportunities to your lead clients, you will attract more and more contractor clients for the same number of leads -- perhaps increasing your profitability, but ultimately decreasing the value of the leads you provide.

We both agree that most contractors really are ill-equipped at marketing; and can benefit from coaching and solid advice. Accordingly, I certainly would recommend Mark's services especially if you are int he Boston area and northeastern States.

(My blog entry tomorrow will be delayed, probably. We need to be up extra early to catch a 5 a.m. flight to Charlotte, connecting right on to Providenciales. Once we are settled in, I'll share with you a tale of our honeymoon turned into business trip, built on a rather unusual interview with an offshore tax shelter dodger, who ended up arrested and charged with drug and money laundering offences in Canada -- and a case that made its way to the Canadian Supreme Court.)