Can We Do Right By The Customer And Still Make Money?
Years ago, I remember speaking to someone who worked in online mortgage lead generation, and he half joked, half lamented the fact that he wouldn’t recommend his company’s service to a friend looking to refinance. And, even today the same sentiment exists. The main reason – in many of the large verticals today, consumers go through a sub-par user experience. It would seem as though it should be easy to fix, but like so many things, it’s not as easy as it seems.
While individual brands and agents/brokers/contractors, etc. will advertise on their own, the vast majority of leads come through the aggregators. (I am a fan of aggregation, so any negatives uncovered are not inherent flaws with the model. ) The customer experience goes like this. A user lands on the site, provides the necessary information needed, and then hits submit. They are then contacted by up to eight lead buyers, some times right away. Depending on the model, the user may or may not learn of the individuals that will be contacting them. When I went through the process for moving, the site sent them to me in this email.
As for insurance, it is not widely the practice to disclose from who you will hear. That’s also the case for refinance, debt, home improvement, and virtually all non-branded experiences. Online education is the big exception, as users must more proactively select which schools with whom they wish to speak (even though the list from which they choose is often heavily influenced by the aggregator).
Online lead generation for auto insurance is among the more unique verticals in operation primarily due to the high degree of co-opetition that exists. Aggregators commonly sell unsold leads to other aggregators to increase their revenue / recoup costs. As a result, a lead buyer who works with Company A might be receiving a lead from Company B. And, a user who visits a site operated by Company C, could very well hear from both A and B. While this helps make sure that all parties make as much as possible, it creates little incentive for a buyer to develop as deep a relationship as they might, and it means the consumer can easily be overwhelmed when it comes to speak with someone.
The shopper with policy in hand can make the most of the current system, but the casual shopper who clicked on a banner ad won’t be. Why? For them, the value proposition isn’t fulfilled. They come to sites run by aggregators most often after seeing an ad leading them to think they will see rates at the end of the process. Most use verbiage similar to, “See how much you can save?”, “Are you paying too much?” , “The average driver can save x”, and so on. If the ads very clearly said, enter your information, we’ll throw it into a black box, and then wash our hands of you only for you to get called by up to eight people who will try and sell you on insurance, would they do it? Getting back to an earlier point, is this something you would suggest a friend do? Again, it’s not that there is anything wrong with lead aggregation, and we shouldn’t just blame them for any shortcomings in the user experience.
Proactive vs. Reactive Selling
Auto insurance is not something that people think about all the time. They don’t always realize that they can switch to a new provider or that they might save more. It takes the vast majority of them being reminded that they could save for them to make the effort to look into it. That’s what the branded TV commercials do and what the online ads do. They get people’s attention and make them take action they might not have otherwise. It’s the difference between Proactive Selling and Reactive Selling, where the latter is for the small majority who are actively searching / thinking about the process. And, as a result of this process, more people end up saving and the ecosystem does more business than were it simply to wait until it crosses people’s minds.
Everyone in the ecosystem relies on this model, and it’s the only way for instance that a lead generator can be competitive. There is some serious doubt that it will last, though. One of the biggest questions facing our industry is should the users get to decide which of the available lead buyers gets to contact them instead of being “matched” (and bombarded)? And, is that really good for anyone, including the lead buyer? It certainly isn’t great for the lead generators, because the current practices make it too easy for even more competitors to enter.
Blind Matching vs. Total Choice
A handful of companies take a truly transparent approach to the matching of user and lead buyers. Zillow is one such example. Luckily, for Zillow, they don’t have to make money like vast majority of companies. Being the a specific type of heavily funded company, they have the luxury, or at least permission, to operate in whatever manner they feel is best. For Zillow, this means no money spent on user acquisition and an emphasis on transparency. It’s a great model if you can make it work. For the rest of us, it’s simply not practical to emmulate. But, while user choice makes a lot of intuitive sense, it doesn’t necessarily mean an easy transition is possible.
Given that most companies must spend money to make money, they need to have a way to make money once its spent. For lead generators, this means guaranteed buyers. If users make it almost all the way through the process, i.e., fill out their information and are presented with those who could meet their needs, but end up not selecting any one, that’s a real problem. Or, they may decide to select only one. Again, that’s suboptimal, because they will get better service by having some competition. The real challenge are the unknown economics for the lead buyer and seller. If a buyer pays $10 for a shared lead, what do they pay for what InsWeb is calling with their BestInsuranceMatch.com product as a referral lead? Do they pay 50% more, two-times more, etc.?
The knee jerk answer is that they should pay similar to how they do now, that is, a percentage of the average expected profit. Today that calculation includes a certain cost based on number of leads needed to close. But, if by the user chosing with whom to speak, shouldn’t that mean a higher close rate for the buyer? And in addition to the higher close rate making the lead worth more, isn’t the hassle of not spending so much time on lower converting leads also worth a premium? That’s the questions being asked, but the industry faces a real headwind in getting to the answer. If the economics don’t work, i.e. they don’t close that much better to reduce the number of leads sold per inquiry, then we are left with fewer leads generated (because companies can’t be as competitive for media) and with a user experience that is still sub-par. But, it’s a user experience that so far maximizes economic utility. I just hope for the sake of online lead generation, that companies keep trying to prove alternate models exist where the user gets a better experience, the buyer gets a high converting lead, and the seller / aggregator can profitably purchase media.
