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Marketing mastery: Proceed with caution when purchasing leads

November 26/December 3, 2018: Volume 34, Issue 12

By Jim Augustus Armstrong

 

The importance of lead generation can’t be overstated in today’s age of online marketing. But beware—not all lead-generation systems are created equal.

Case in point is HomeAdvisor, which is being sued by a group of eight home-improvement companies. The city of San Francisco is also taking HomeAdvisor to court for making false or misleading claims regarding background checks on contractors. Here are just two of the several allegations:

  • The leads sold to the companies are “overwhelmingly bogus” and “illusory” because they are often “over-distributed” or contain, among other things, disconnected phone numbers, people who are not homeowners or contacts for nonexistent residences.
  • When companies cancel their HomeAdvisor membership, HomeAdvisor leaves their company profile page on its website and then sells the information entered by individuals who attempt to contact the company to other HomeAdvisor members.

You might be thinking Angie’s List is a safer bet—think again. Angie’s List, which was acquired by HomeAdvisor in October 2017, faces its own legal challenges. In fact, Angie’s List recently settled a class-action lawsuit for $1.4 million for manipulating search results and reviews.

Over the last 10 years, I’ve spoken with flooring dealers who have bought leads from various “lead-generation” companies and the results are rarely good. For example, one dealer I spoke with was spending $6,000 per month buying leads; 12 months and $72,000 later he wound up with mostly price shoppers. He didn’t even break even.

Unfortunately, I’ve heard many versions of his story from different dealers. I’ve said for years that instead of buying leads from HomeAdvisor and other lead-gen companies, you’d be better off heaping your money into a pile, setting it on fire and roasting marshmallows over it. That way, you’d at least get some use out of your hard-earned dollars.

The conduct of HomeAdvisor and Angie’s List angers me. Retailers are working hard, trying to build their businesses and compete against billion-dollar, multinational corporations who want to put them out of business. Then these lead-gen sales vampires come along and promise dealers lots of leads, then suck them dry with their monthly fees with zero accountability while delivering nothing in return.

When it comes to purchasing leads, let the buyer beware. Here are some points to keep in mind when contemplating purchasing lead-generation services:

  1. You have no control over the quality of leads or “how” they are generated.
  2. Buying leads does not foster long-term relationships with prospects.
  3. Leads sold to you are also sold to your competitors. You will have to call the leads back quickly or you’ll lose them. However, you pay for them regardless.

Another problem is some marketing companies will generate leads using cheap-price come-ons. Any leads generated by this method are predisposed to shop for the cheapest price. So, even if you make a mad-dash to call every lead immediately, many of them will wait to get prices from your competitors.

We all need solid leads to grow. Just be smart about it and remember: If it sounds too good to be true, it probably is.