Unless you run the world’s most secretive HVAC company, you probably receive calls on a regular basis from companies that want you to buy leads from them. You have probably tested one or more of these services, and at some point you’ve probably gotten burned with bad leads.
We have spoken with hundreds of contractors in the past year, and many of those contractors have told us, in so many words, that lead generation companies are crooks. Let’s not beat around the bush — yes, there are lead generation companies that follow questionable business practices. But, not all bad leads come from bad companies.
My company has a perspective on this which, while not unique, is uncommon: we’re in our 12th year of generating and selling our own leads, we buy leads from many other lead generation companies, and we sell leads to contractors. We run into all the same problems that you have, but we have also found trustworthy companies that sincerely care about generating good leads. What we’ve also found is that, in many cases, good, trustworthy companies can send bad leads.
Why do good companies sell bad leads?
Let’s start with an idealized story about how an HVAC lead is created.
Meet John Doe. John is a homeowner whose furnace dies on December 1st. John goes to Google, and finds a good website that can tell him how to buy a new furnace. On that site, he fills out a form to request that up to 3 contractors give him a free estimate to replace his furnace. The website sells that lead on an exclusive basis to a single company that has a network of contractors, the network sells the lead to 3 different contractors, and the contractors immediately call and set up appointments with the homeowner.
Without knowing anything about the contractors you’re competing against, you might expect to close a sale in 1 of 3 leads that you bought. If you got lucky, the site might only have 1 other contractor in your area that wanted to buy leads, and you’d close 1 in 2 leads. Given that a typical shared installation lead costs around $50, you’d buy these leads all day and all night. Who wouldn’t spend $100 – $150 to get a $7,000 sale?
What’s wrong with this story? It turns out that it falls apart in a lot of different places. We’re going to introduce the different players, and then talk through how their competing motivations can sink an otherwise good lead.
Who are the players in this story?
First, there’s the lead, Mr. Doe. Unfortunately, as we will see, Mr. Doe may not be as innocent and accommodating as our introduction suggests.
Second, we have the website that actually converts Mr. Doe into a lead, by collecting his contact information and his indication of interest.
Third, we have the network that buys the lead from the website, and sells it to its network of contractors.
Finally, we have the contractors that buy the lead from the network. Despite laying out cold hard cash for each lead, contractors sometimes share in the responsibility of otherwise solid leads going bad.
Problems with the Homeowner
Let’s dissect Mr. Doe’s motivations and actions a bit, to see how the homeowner may undermine his own value to the contractors that buy his contact information as a lead. Remember that our homeowner does not find his furnace intrinsically interesting. He just wants his house to be warm, and he wants to keep as much money in his pocket as he can, with the least hassle.
Mr. Price Shopper: Sometimes Mr. Doe doesn’t want up to three quotes — he wants a dozen quotes. His idea is that if he requests quotes from several different websites, he will get contacted by lots and lots of contractors. Surely one of them will offer him a dramatically lower price than the others.
Alternately, perhaps Mr. Doe is replacing the furnace in a house that he is in the process of selling. As long as the furnace works during the final home inspection, he’s happy.
By the time you, the contractor, purchase the lead, the same lead may have already been sold 8-10 times, all from different websites and different networks, and your odds of winning the job are very slim. In this case, every company involved in generating the lead acted honorably — but, the lead quality to any one contractor is likely to be low.
Mr. Price Gouger: Sometimes, Mr. Doe has already selected the contractor with whom he wants to work. His entire interest in requesting quotes is to find another contractor that will offer a lower price, so that he can use that lower price to knock 10% off of his favored contractor’s price. He may be price-conscious, or he may just feel like he hasn’t done his due diligence if he hasn’t tried to gouge a bit.
Mr. Distracted: Sometimes Mr. Doe answers the call of the first contractor, likes what he hears and sets an appointment. 10 minutes later contractor #2 calls. At this point, Mr. Distracted has what he wants, and rather than saying “no” to contractor #2, he just says “What? I never requested that a contractor call me.” By the time contractor #3 calls, Mr. Distracted doesn’t even pick up the phone.
Mr. Sticker-Shock: Sometimes Mr. Doe has the best of intentions when he requests that contractors contact him: his existing furnace seems out of date, and he has a $1,500 tax return that’s just burning a hole in his pocket. However, the first contractor gives him a ballpark estimate of $5,000 – $7,000 and he gets cold feet. Maybe his furnace will keep running for 3 or 4 more years. Mr Sticker-Shock stops responding to contractors. (This exact scenario happened with a lead we generated as recently as April 12, 2016.)
Problems with the Website that Generates the Lead
Fraudulent-Site.com: Fraudulent-Site.com generates traffic with pay-per-click advertising, and can generate a good lead on Google.com for $75. The network that buy its leads, though, only wants to pay $25. Fraudulent-site.com can make money as long as it mixes 3 fake leads in with the good leads. Now, Fraudulent-Site.com will bill the network for $100, at least initially making a $25 profit on its one good lead.
Multiseller-Site.com: Multiseller-Site.com has a similar cost structure to Fraudulent-Site.com: they can generate a good lead for $75, and the networks only want to pay $25. Rather than straight-up fraud, Multiseller-Site.com solves this problem a bit differently. Our multi-seller friend inks agreements with 4 different networks, and sells the same lead to all 4 of them, grossing $100 for the lead. (This is almost always a violation of Multiseller-Site’s agreement with each network.) Each of the networks may be unaware that the same lead has been sold multiple times. (This can happen because they can’t see what Multiseller-Site is doing, they aren’t paying attention, or they actively don’t want to notice.) The dozen contractors that now compete for this genuine lead each have a very slim chance of winning.
Incompetent-Site.com: Incompetent-Site.com is often a variant of Multiseller-site.com. Leads aren’t really their bread-and-butter, but they add some beer money on the side. Incompetent-Site.com slaps up a lead gen form on their site, and lets it run. But, there are bugs. Perhaps the homeowner refreshes the page out of impatience after submitting their lead, and incompetent-site doesn’t block the refresh. Suddenly the same lead has gotten sold twice. The homeowner refreshes the page again: now the lead has been resold again. Even if the site is aware of the problem, they aren’t really incentivized to fix it, because selling the lead multiple times nets them more revenue at the end of the month.
Incentivized-Site.com: Who doesn’t love a great incentive? Incentivized-Site.com knows that they can generate more leads by offering an incentive to their site visitors to complete the lead gen forms. For example, we have encountered gaming sites who give free coins to gamers if they complete a “survey”. To complete the survey (and get their free coin) the gamer must indicate an interest in a product or service. Voila, leads with valid contact information get sold, but there’s no real commercial intent behind the leads.
CoRegistration-Site.com: CoReg-Site.com generates a valid lead — perhaps for a mortgage. Now, someone that’s looking for a mortgage might also need their furnace replaced, right? So, when the lead has finished completing the forms, CoReg-Site presents them a new page with just a single question: would you like to receive quotes to replace your furnace, and a default answer: “Yes”. The homeowner clicks the “Next” button, and sees a new page asking if they want a home warranty, again, they click “Next”, and now they’ve been sold as 3 different kinds of leads. There’s no dishonesty here — but the “furnace install” (and “home warranty” leads) are relatively unlikely to convert.
Inflator-Site.com: Inflator-Site.com has a different solution to the economics of lead generation: they know that networks pay more for installation leads than for repair leads, and that repair leads often convert to installations at some point. So, when a homeowner submits a request for a repair lead, Inflator-Site.com simply “inflates” that repair lead into an installation lead, and earns an instant premium on the lead.
Problems with the Network
See no evil, hear no evil: This is probably the most common issue with networks. The networks only make money when they sell a lead — if they don’t have any leads to sell, they don’t make any money. So, many networks end up being reactive in the face of low-quality leads: when a contractor complains, they’ll do what they can to make them happy. However, they don’t want to shut down lead sources if those sources generate billable leads and few contractors complain.
The Multi-Seller: There are a couple of different variants here. Whenever a lead is generated, the homeowner is told the maximum number of contractors that will contact them. Each time that a lead can be sold to a contractor is called a “leg”. Leads typically have 3 legs, but some companies will sell a lead up to 4 or even 5 times to different contractors. The multi-seller will simply ignore the number of legs that a lead has, if they have contractors that will buy.
There’s a slightly more complicated version of the Multi-Seller as well. As mentioned earlier, most networks buy leads on an “exclusive” basis — that means that the company that sold them the leads agrees to sell the lead only once. However, some companies will sell each “leg” of a lead separately to other networks, at a fraction of the exclusive price, and with the understanding that the purchasing company will only sell the lead once. The purchasing company, however, may call the homeowner, and ask them how many contractors they want to talk to. If the homeowner says that they want 3 contractors to contact them, the company feels comfortable selling that single leg multiple times because they have the homeowner’s consent.
The Client-Scraper: Finding new contractor clients that want to buy leads is hard. So, why not take a short-cut, and just scrape your competitors’ clients? Submit fraudulent leads (with phone numbers back to you) and see which contractors call you back. Wait a week, call those contractors, and see if you can sign them up as clients.
Let’s Outsource Phone Verification to our Contractors: Let’s imagine that you are a large network, that you don’t phone-verify your leads, and that you buy leads from 100 different vendors. You have a good sense of which of those vendors historically generate high-quality leads, and you price and manage which leads you buy accordingly. One day, however, one of your high-quality vendors signs on a new vendor of their own, and that vendor starts generating fraudulent leads. These bad leads trickle into your lead flow indirectly and out to your Contractors. Because you don’t phone-verify leads, you can’t spot these sorts of leads before you sell them. When enough of your Contractors complain, you go back to your trusted vendor, but it isn’t straight-forward to fix the problem because your trusted vendor doesn’t necessarily indicate the sources its own leads.
Problems with the Contractor
Mr. Helpful: Mr. Helpful loves HVAC, knows a ton about it, and loves to help people. Mr. Helpful gets a lead on the phone, hears the homeowner’s description of the problem, knows what’s wrong, and explains how to solve the problem over the phone. The homeowner really appreciates Mr. Helpful’s help, and solves the problem herself. Mr. Helpful believes that the reason he isn’t generating sales from the leads is that the leads are low-quality. (Yes, this happened with one of our clients in late 2015.)
The Procrastinator: The Procrastinator knows that the only way to grow her business is to get appointments, so she buys leads. But, she hopes that she can manage those leads in the evening. So, a lead arrives at 10 in the morning, and she calls promptly at 6pm, 8 hours after the lead arrived. The homeowner, in the meantime, has already spoken with 3 neighbors and gotten referrals to a handful of different contractors, and by 10:15am, he had 3 appointments scheduled. By the time The Procrastinator calls, the homeowner is done setting appointments. The Procrastinator concludes that the lead was bad.
One-Call Paul: Contractor Paul buys a lead, calls and leaves a message. The homeowner doesn’t call back. Paul decides that it must have been a bad lead.
What Can a Contractor Do?
When you consider all the ways that a lead can go bad, it may surprise you that you get any good leads at all! However, good lead generation companies take the following steps to ensure that they have quality leads:
They build a history with their lead sellers, so that they know which lead sellers historically have high-quality leads.
They have automated software that scan leads for signs of fraud.
(Not to blow our own horn too much, but) some companies call every lead before they release them to their clients
Companies have policies to credit their clients for bad leads
We recommend that you buy leads from several companies, and that you follow our 19 Tips to Improve your ROI from HVAC Leads.
Have you encountered any of these homeowners, websites, networks or contractors before? Tell us about them in the comments.