Special Insider s Report Top Producer Secrets About Cheap Leads Revealed! Avoiding The 5 Ways Cheap Leads Can Steal Your Money By Clint Jones CEO, ProspectZone TM Smart leads.
Cost per Lead vs. Cost per Application Do you know how much you pay for your leads? How about what you re paying per application? If you re like most agents, you can probably rattle off your per-lead cost in your sleep. But few agents and brokers pay attention to a far more important measurement how much they re actually paying for their submitted applications. This points to a big difference between top producers and busy agents still trying to break through the wall. Successful producers understand the difference that quality makes. They know from experience that low-quality cheap leads can actually cost more than higher-quality leads. How do they know? They run the numbers. Let s say you had $1,000 to spend on health insurance leads and you had the following options: Cheap Leads Quality Leads Budget $1,000 $1,000 Cost per lead $2 $10 Leads purchased 500 100 Close rate 1% 5% Leads closed 5 5 On the surface, both types of leads may appear to deliver the same results. However, the truth is that they re actually hundreds or even thousands of dollars apart. The estimated close rates used in this example are relatively conservative. You may get slightly higher conversion rates especially on the quality leads. Nevertheless, if you take the time to consider the full cost of cheap leads, you ll soon see that cheap leads actually demand more time and incur additional costs. In this whitepaper, we ll review the five main reasons why supposedly cheap leads may actually force you into a money-losing situation and provide a three-part method for reversing that problem. 2
#1: Higher Admin Costs Cheap leads can quickly increase your admin costs without increasing your sales volume. If you re using a manual lead management system, you would need to pay an assistant to input and manage all those new leads. Or you could do it yourself. But every hour you spend on admin is another hour you re not SELLING. How many hours would it take you or your assistant to type in all that new data and stay on top of them?! Once they re in your system, you need to start making phone calls. This is when the additional costs of cheap leads really start adding up. Let s go back to the example scenario we re using. To get the same number of submitted apps, you would have to call up to five times (5X) as many cheap leads as you would quality prospects. Cheap Leads Quality Leads Leads to call 500 100 Close rate 1% 5% Leads closed 5 5 Just dialing their numbers and trying to make contact with all those leads will take time. You could get an automated dialer to plow through those leads, but that would entail even more costs. Remember that you re not in business to stay busy. You re in business to sell health insurance and make money! 3
#2: Wasted Time We ve already established that cheap leads will take more time. Now let s convert that lost time into lost income and see exactly what your wasted time is worth. Say each lead took an average of 10 minutes of calling and talking on the phone. If you had to call and talk to all 500 prospects in the example cheap leads database above, it would take you 5,000 minutes, or over 83 hours. That s more than a couple of 40-hour weeks! That also assumes that you re able to contact them on the first call. So how much time do you end up wasting on cheap leads? Better yet, how much is your time worth? If you were being paid by the hour, what would your hourly pay rate be with cheap leads? Assuming average commissions of 15% and premiums of $2,500, here s how the two lead types in the example would compare: Cheap Leads Quality Leads Leads to call 500 100 Leads closed 5 5 Commissions $1,875 $1,875 Hours spent 83.33 16.67 Your hourly income $22.50 $112.48 As you can see, you re making more per hour when you work quality leads. Your time is worth more and your services are more valuable. 4
#3: Lost Opportunities A better way to look at the extra hours it would take to weed through all those cheap leads is in terms of lost opportunities. Going with the quality leads in the example scenario would give you an extra week and a half of free time, when compared with the cheap leads! Cheap Leads Quality Leads Leads to call 500 100 Avg. time per lead 10 minutes 10 minutes Total minutes 5,000 1,000 Total hours 83.33 16.67 You could use that extra free time with your family or to improve your golf game. But you can also use that extra free time to generate more business and close more deals: Drip market to unclosed leads For starters, you can use that extra time to put all your unclosed leads in a drip marketing funnel. Many leads just need more time to close. Unfortunately, many agents are too tied up with new leads to conduct an effective drip marketing campaign that can increase their overall conversion rates and sales. With the extra free time you get with quality leads, that s no longer a problem. Work more quality leads You can also use that extra time to obtain and work on more high-quality leads. This means you can close significantly more deals during the same time that other agents are still slogging through their cheap leads. 5
#4: Wasted Energy Another casualty of cheap leads is your energy. That estimate of two weeks to go through 500 cheap leads is actually an understatement. It could realistically take you a whole month or more just to get 5 closings! And it s not just the number of phone calls that ll take a toll on your energy. It s also the sheer volume of rejections just to find a handful of genuine prospects. Some experienced producers can just shake off rejections as a normal part of selling insurance. For most agents and brokers, however, having to go through all that can be draining. That s bad for you; and bad for your business. 6
#5: Lower ROIs All of the time and cost demands that come with cheap leads can quickly add up to drive down your return on investment. This is important because your ROI tells you whether or not an investment pays for itself. It also lets you see whether you re investing in the best type of leads and the right lead sources. For simplicity, let s just focus on your lead cost and time. Assuming your time is worth only $25/hour, here s what your ROI will look like: Cheap Leads Quality Leads Lead cost $1,000.00 $1,000.00 Cost of your time ($25/hour) $2,083.25 $419.25 Total cost (lead + your time) $3,083.25 $1,419.25 ROI ($1,875 commissions total cost) -$1,208.25 $455.75 Lead ROI ratio (ROI / lead cost) -120.83% 45.58% Cheaper leads may seem like a bargain at first. But when you consider all the expenses incurred by cheaper leads, you can quickly see that they can bleed your profits away. In fact, cheap leads actually LOSE money to the tune of $1,200 for this example group of five applications! 7
A more telling calculation is your cost per application. Cheap Leads Quality Leads Submitted applications 5 5 Total cost $3,083.25 $1,419.25 Cost per application $616.65 $283.85 If you consider these two lead sources according to their average cost per application, you can quickly determine whether or not you stand to make a profit or lose money. When you factor in all the expenses involved with chasing the cheapest leads, each submitted application will cost you $616.65 on the cheap lead side. If you average $375 in commissions for each successful application, then you re clearly losing money every time you use cheap leads. 8
But Expensive Leads Aren t Necessarily The Answer This doesn t mean that you should go out and start buying the most expensive leads you can find. Some expensive leads aren t much better than cheap leads and deliver ROIs nearly as low. Instead, you need to look for a three-part solution: Quality leads. You need to find a lead source that can connect you with genuine prospects who weren t tricked or bribed to become leads. Quality lead source. You also need a health lead provider committed to giving you quality service. A lead source that stands behind their lead data. In particular, this means you need a provider with a fair return policy on leads with invalid data. It may take you a week to finally reach a prospect and confirm that the lead is invalid. But if your health insurance lead provider only gives you three days, you would have to eat the cost of that invalid lead. So make sure your provider gives you at least a week to return invalid leads. Compare leads. Lastly, you need to track your leads to see what kind of closing rates and cost per application they give you then compare them with other lead types. An effective lead management program is crucial in today s market. This three-part approach can help you maintain a lead flow of quality leads at the right price a cost per acquisition that generates a profit. You should already know what your probable commissions will be. Using your probable or average commissions as a benchmark, you can quickly measure your lead cost per application to determine whether or not you should stick with those leads. Or find something better. 9
About the Author Clint Jones In 2001, Clint Jones co-founded Norvax to provide sales automation and web marketing technology for the health insurance industry including the first nationwide multicarrier quoting engine for health insurance professionals. Three years later, along with co-founder Brandon Cruz, Clint launched ProspectZone to respond to the growing demand for high-quality, Internet-generated health insurance leads. They have been instrumental in building ProspectZone into the #1 provider of qualified health leads to thousands of health insurance agents. Clint currently serves as the CEO for both companies. About ProspectZone Since 2004, ProspectZone high-quality leads have been used by the nation s leading health insurance carriers to power their broker force and internal sales efforts. The country s top producers trust ProspectZone s rigorous lead quality process to power their aggressive sales goals. ProspectZone connects genuine insurance shoppers with agents who provide them competitive quotes on insurance products. ProspectZone is the creator of Smart Leads real data from interested prospects in real-time, plus innovative tools to help improve ROI. 10