There are many pros and cons to deciding between purchasing leads from third-party sources compared to generating them yourself. At the end of the day, typically the client acquisition cost is the biggest thing to consider. However, one of the most overlooked ideas is the quality of the lead. It's imperative to supply and demand metrics that businesses have a reliable flow of work to stay booked out for two to three weeks. Here we will be covering the pros and cons of each to help you decide which is the best resource for the success of your business.
Why is the quality of the lead just as important if not more important than the amount you paid for the lead? If the quality of the lead is low that means it might not ever be closed or “won.” Regardless of how much was saved in acquiring the new lead, if it doesn’t become a billable project, then the money is lost. That is why there should always be a balance between quality and cost.
For example, let's say you currently have some inbound leads that are referrals. Chances are you're going to be able to close them very easily because they're already aware of you and they have already heard from their friend or family or professional reference, all about you so you have credibility. In contrast, if you started to cold call people, chances are the ratio of those that you would close is significantly lower.
The quality of the lead can be equivalently as important as the cost per lead because, at the end of the day, the cost per lead is what most people think of but the true cost is the cost to acquire a new customer.
Cost Per Lead
You've likely already thought through what your cost per lead should be. For example, if your average mitigation job is $1,200, you may have done some reverse math on how many leads you need, and what's your average close of those leads.
| Cost per Lead | Close Rate | Cost to Acquire a New Customer |
| $30 | 30% | $100 |
| $30 | 50% | $60 |
| $30 | 70% | $42.80 |
Referencing this table above, you can see that the average cost per lead can be drastically changed depending on the quality of the lead.
The Quality of The Lead
Not all leads are created equal. The source of the lead can have drastically different close rates over time. Generally, you can presume that if you use third-party sourcing there are at least 3 or 4 other companies with the same list of leads. Because of this, your close rate is going to be drastically different because you have three or four other people also calling them nearly immediately to get the same job. That doesn't mean you can't stand out and book the job, but you'll need to factor that into your close rate.
When you are using your own, customized website and digital marketing strategy to generate leads, the quality of the lead can be more controlled by techniques such as target audience, market, and location. For example, compare Radon Mitigation jobs for real estate transactions to jobs where the homeowner is concerned about their own health and safety. The customer wanting the real estate transaction is likely only going to want the least expensive option and will want you to get there as soon as possible. However, if you get a concerned homeowner, they are going to be much more likely to give you the attention needed to find the right contractor to do the job and you'll have a bigger opportunity to upsell the revenue on the project. Because that homeowner is interested in getting a better system than average. Another nice thing about using your own way of marketing is that you have more control over the process.
Your Marketing: You Set The Expectations With Prospects
You can set the expectations in terms of when you'll be in contact with the customer, what the customer expects from you and what the process will be like in order to get a quote. However, if you use a third-party source for leads, it's likely that they'll set the expectation that someone will send you a proposal in a matter of hours. Whereas that is likely not to be your process.
Let's Do The Math and Compare!
| Cost Per Lead | Close Rates | Cost to Acquire a New Customer |
| $30 | 20% | $150 |
| $50 | 30% | $166 |
| $70 | 50% | $140 |
| $100 | 70% | $142 |
As you can see above, the cost per lead may not actually be as relevant if we have a really low conversion rate.
On the contrary, if we have a really high conversion rate, we're willing to pay more per lead because it's more likely to be able to close that lead. Conversion rate is figured by comparing the number of times a person visited your website, at what cost and did they complete the goal such as filling out the contact us form.
| Cost to Acquire a New Customer | Revenue per Job | Percentage of Revenue |
| $50 | $1000 | 5% |
| $166 | $1500 | 11% |
| $140 | $2020 | 8.9% |
| $142 | $500 | 28.4% |
You can see that if you have a higher cost per conversion, chances are you'll be able to do things like upselling Radon Protection Plans, Add-on accessories, color-matching exterior customizations, ongoing monitoring, etc.
In conclusion, the percentage of revenue is strongly equated with lead generation performance. Higher quality leads cost more but the payoff is bigger in the long run time and time again. Not only did you close the job, and make more revenue but you’ll also have a better chance of referral work and lifelong customer loyalty.
