New lead model question - could cost per sale work?

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indexcos
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New lead model question - could cost per sale work?

Post by indexcos »

Hi Everyone,

We are an online financial services media company and we own and operate a very large network of insurance websites and currently sell clicks to direct writers through aggregators on a CPC basis.

We are producing 500+ personal lines inquiries a day across the country, and our traffic and click volume continues to grow.

For a media company, the click business is nice because we are paid up front for the initial click with nothing to worry about after this. But, it's a one time sale.

Our next step, in the coming weeks, is to launch complete forms for auto insurance and then other lines of business. We were originally planning to sell our leads to lead vendors, but we have a new idea we would like to get your opinion on.

As traffic to our network of sites come from Search Engines only, the quality of our traffic is top tier and we receive top payouts per click from our partners because carrier back-end conversion rates are so high.

So, here is the question - we are confident in the quality of our traffic and we are confident that we can scale the business substantially and we want to put our money where our mouth is. Couple this with the fact that we do not want to build a one-off transaction business and we would like to create a sustainable business with recurring revenues where we create real value, we are considering a new model.

We would like to launch a cost-per-sale model whereby we would partner with a group of agencies in each state and offer leads as they flow through our system to these agents where we are only paid upon a sale as a percentage of commission - and we share in commission over time as the customer renews. In theory, this perfectly aligns us with agencies to produce the highest quality leads.

Now, we know that there are legal issues involved in order to get compensated on a sale in the insurance business. That's why we have become a licensed producer in several large states and we are pursuing more producer licenses in further states. We do not want to sell and service insurance, but we want to create a model where we can do what we do best - source high quality consumers online - and partner with agencies to deliver these consumers with a payment model that rewards us over time with very little up front risk to the agency.

We realize there are many complexities around such a model, especially for us to track and manage leads that are distributed that may become sales weeks or months later. For this to work well, we are going to need to build trusting relationships over time and we can't do this with everyone assuming it is interesting. We also probably cannot do this with individual agents, this really needs to be worked out directly with principals / agency owners at the agency level.

OK, that's a lot of info for an initial post - we are really looking forward to your guidance and advice here. Is it a good idea? Would agencies be interested? What are the challenges?

Looking forward to your thoughts and wisdom!

Thanks.
d's insurance store
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Re: New lead model question - could cost per sale work?

Post by d's insurance store »

All the vendor's want a piece of the agency income stream. After all, everyone knows we're just overpaid oafs who hire people to do the work while we play four days a week on the country club golf course and the money never stops.

I'll offer up my comment with the following admission and bias. I am an industry veteran who has spent tens of thousands of dollars on P&C and Life leads in past years with horrible results. Results so dismal that I've vowed to never spend another dime on that product, no matter how inviting the offer of what the return policy is or what promises are made by the phone sales person. If in fact you folks are the lone exception to the rule, more power to you, but frankly, I consider most (or at least those I've dealt with) in your industry to be untruthful crooks (and I'm keeping my language clean because this is a public forum).

STICK TO JUST GENERATING AND SELLING LEADS! To try and figure out a 'fair' commission amount and then track and audit renewals would be a nightmare for you. If you and your firm found the retail insurance business so great, then you'd figure out a way to open your own agency and keep all the commission.

If you guys are as good at generating leads as you imply and you have a customer base of happy clients, then be the best you can be in that arena and leave the selling and servicing of insurance prospects and clients to an established agency.
indexcos
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Re: New lead model question - could cost per sale work?

Post by indexcos »

d's insurance store,

Thanks very much for your candid remarks.

We know how bad the insurance lead generation market space is (and mortgage, and education, etc. etc.)

Most lead vendors are exactly what you say they are.

But, we have a completely different platform, and as such, we are putting our money where our mouth is - we will not charge you per lead, but per sale, less risk for you.

But, that is why we need to share revenue over time. You just pay for sales so we are perfectly aligned.

Isn't this far better than your past experience buying incentivized leads from really shady lead vendors?

Thanks for your comments.

We can sell leads of course, but we thought a pay per sale model could be attractive - not the case?
lonestar
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Re: New lead model question - could cost per sale work?

Post by lonestar »

Ok, I'll give my two cents. D's is, as is usually the case, right on. It is not like most agents are getting filthy rich, although the ones that have paid their dues and worked really hard over a long period of time, do experience some financial rewards. I would think most agents are like me, we work our tail off to not only make the sale, but to also service the business and to retain it. We are not looking for ways to do the same amount of service work, field calls about bills, remarket when necessary, meet with company reps, pay rent and overhead, keep track of a commission split on renewals with a lead generation firm while reducing our cut of the renewal. The carriers are already attempting this. If I am going to split my commission, it will be with a producer in my office, who works as hard as I do at the above mentioned items. Strictly a business decision on my part.

On the other hand, if your leads are as good as you claim they are, you will have no problem selling them for $50 / lead instead of the regular $10-$15 leads already out there.
indexcos
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Re: New lead model question - could cost per sale work?

Post by indexcos »

Hi lonestar,

Again, thanks very much for the candid reply. This is a really interesting conversation, and frankly not at all what we expected to hear, but extremely helpful nonetheless!

A few comments:

1. Our assumption is that the primary job of the producer, and the reason carriers pay most of the commission they pay to agencies, is to sell. We further assume that the most time consuming, difficult part of the sales process is prospecting for good leads. If this is the case, we would further assume that receiving high quality leads that you pay for only upon closing a sale would be interesting because it removes risk and removes acquisition cost investment. We are thinking about this as if we would be a virtual 1099 commission only producer for your agency where we bring high quality prospects and your producers close the deal - we know that closing deals in itself is time consuming, and that there is a servicing component, and there would be some level of ongoing admin specific to this model, but we would have thought that sharing some part of the commission you would typically pay to a 1099 producer would be attractive as you basically already use this model.

If these assumptions are close to reality, then I really don't understand this point from a purely profit margin point of view:

"We are not looking for ways to do the same amount of service work, field calls about bills, remarket when necessary, meet with company reps, pay rent and overhead, keep track of a commission split on renewals with a lead generation firm while reducing our cut of the renewal. The carriers are already attempting this. If I am going to split my commission, it will be with a producer in my office, who works as hard as I do at the above mentioned items."

I really don't follow this logic though, as doesn't this all come down to acquisition cost and lifetime value math to then cover opex and profit? If there were a better way to get to more profit, shouldn't you be more than willing to share commission to get there? If I were an agent, I would not mind at all sharing my commission perpetually the same way an agency shares commission with me perpetually if the profit over time is better for me and for the agency with less risk, right? The agency should feel the same way.

Looking at this from an individual producer's point of view, assuming they are responsible to source their own leads, if he now pays for example $150 for 10 online leads and spends time and energy with these leads to close a $1,000 auto policy - a lot of time because the leads are terrible, the agent's personal acquisition cost is probably $200 (lead cost + time) for the $50 in perpetual commission he gets (assuming 10% to the firm and 50% of the 10% to him for renewals). He doesn't make any profit until year 5, when considering ongoing servicing time and cost, maybe year 6 - then the margins are really attractive thereafter.

What we are proposing is to NOT pay $150 for leads, and rather only spend time closing on high quality leads we provide to you for nothing up front to close the same $1,000 auto policy. You will have some costs to close leads and some costs to service, and some time to administer our deal, but even if you share your commission using our model, for example, if you shared 10% of the agency's commission on closed deals with us, so (as an example ratio), we would earn $10 a year while the agent keeps $40, and the agency keeps $50 on a $1,000 policy you would very likely be profitable on the account in year one, and profitable year 2 onwards, even considering servicing costs.

In absolute terms, if the average "lifespan" of a customer is say, 10 years, as an agent in the first variant, you earn $50 x 10 = $500 for a policy that cost you $200 to acquire, so $300 profit over time. In our variant, you earn $40 x 10 = $400 for a policy that cost you $50 in time to acquire, so $350 profit over time - without the $150 lead purchase marketing investment and associated risk and wasted time. We would take that risk and investment and be paid $10 x 10 years or $100 over 10 years for the closed deal, which is roughly what it would need to be to cover the cost plus profit for us to deliver the high quality lead. So, you can pay $150 up front for lots of poor quality, or $100 over time for less leads of higher quality - isn't this better? Furthermore, we would be perfectly aligned as we would need to deliver only high quality leads witha a high lifetime value for us to make our margin as we would be losing money in the first years. It is very expensive to build and maintain a network that can compete with GEICO and Progressive online, I am sure that's obvious - but the idea that online leads can be purchased for $15 and actually convert is a mirage at best. It costs closer to $100 to produce a truly high quality lead. That's the reality, and in the end, we would argue that agents are getting sucked into the mirage as leads "only" cost $15 each. Over time, they realize they need to buy $150 or $200 or more of these leads to make a single sale.

Of course, our assumptions may be way off, or my math maybe wrong in terms of your current conversion rates and lifetime value but my math is definitely right regarding the price per crappy lead and price per quality lead. If my other assumptions aren't that far off, why is this not attractive? I don't think agents and agencies should get too hung up on sharing commissions as a concept because of all the servicing hard work you do - as long as the math makes sense and you end up with more gross margin to cover this with less risk you should be happy.

That said, maybe the case here is, the agency itself does not invest in leads at all, therefore, doesn't mind if the producer spends time knocking on doors, spending personal funds buying leads, etc. as long as he produces the business, the agency takes 50% of 10% on day 1, not really worrying about if the agent himself is in the red or not on that deal. The idea being that agents eat what they kill and if they can't kill enough they won't survive. Even if this were the case, the agency should still prefer our model because we would provide more velocity of sales - your agents would spend less time wasting time chasing poor quality leads, would close more business faster which hits your bottom line faster, plus the agents are a lot happier.

Is this way off?

2. We are not assuming that servicing, etc. is not part of the reason you are paid a commission - but, the reality is that carriers are taking on more and more direct billing, customer service, etc. that agents used to do in the past. Now, of course, you have some servicing time and cost, but if you would argue that a large part of your commission is for this, then we are really misunderstanding how the agency model is supposed to work. How much of your commission is this really worth?

3. Assuming we are close to correct on points 1 and points 2, when you take on a 1099 producer on commission only, what do you expect him to do most of the time? Sell, right? The servicing part is certainly part of the job, but I would be surprised if agencies take on producers because they are great at servicing.

4. If point 3 is more or less correct, and most of his or her time is spent prospecting, if we can deliver much higher quality leads with no up front risk, and better profit where is the downside?

If the answer to 4 is that simply you don't want to split your commission perpetually then my question back to you would be - are you really satisfied that you and your agents are paying $15 a lead that 20 or 30 agents get, mostly sourced from win-an-ipod scams 5 years ago just to avoid sharing your commission over time? As D said correctly, most lead vendors are blindly ripping agents off. They tell you they sell a lead "only" 4 times - but ask NetQuote, QuteWizard, etc. where they source these leads from. They won't tell you beyond some sort of vague answer like, "we have multiple sources for our leads and we also use paid search". Why? Because they buy a large share of their leads from this seedy underground network of lead reseller middlemen and secondary and tertiary markets. Sure, they only sell it 4x on their network, but they are not the only lead vendor to buy it. And buy the way, the leads they buy are 5 or more years old. On and on and on... You get the picture, and probably know this very well. And, they make a mint doing this. They offer generous returns of up to 50% - and hope that most don't return the leads.

There are 4 simple reasons why they do this - they prey upon agents that a) know that more and more consumers are shopping for insurance online and b) know that the average agency cannot afford to invest the time and money to do online marketing properly c) use the mirage trick of "only" $15 per lead and d) for some crazy reason, the agency market accepts the practice.

The net result is that agents think "internet leads are poor quality" while the largest direct writers are investing billions, literally billions in online advertising to generate these same "poor quality" leads and continue to take share from the agency market as more and more consumers start the insurance buying process online every month. Internet leads are not poor quality. The insurance lead vendor model is a poor quality. But it can change.

As for us, we can sell auto insurance clicks - just clicks - for $15 easily all day to direct writers. We can continue to do this. But, if we move into the lead gen business, we wanted to try to create partnerships with agencies where we prospect for them online a kin to a 1099 producer prospecting for the agency and only get paid when deals close.

Of course, to make this work, considering we can earn $15 for a simple click, we need to participate in ongoing commission. The upfront investment required to build a network and infrastructure to deliver high quality leads at scale is huge. Selling leads at $15 each to multiple vendors is not interesting for us. We could make a quick buck doing this, but frankly, we don't think it's sustainable. Better would be partnering with agencies to remove risk and share in commission over time - but we would need to get to $100 per conversion over a number of years for the model to make sense.

Even selling leads, as lonestar suggests, for $50 each is not profitable, if the leads are truly high quality. It's as simple as that. We could sell them up front for $80 or $90 each, but we think that it would be a tough sell in the face of the $10-$15 mirage option.

Therefore, if agencies and agents want to get serious about acquiring high quality leads online, they either need to be willing to pay closer to $100 up front or a bit more over time. We are offering the latter to reduce risk and remove upfront investment. But, if this really is not interesting, then this has been a very helpful discussion as won't be able to build out the platform as we thought we could and can rather focus on something else.

That said, my final question is, as an agent, what are your real acquisition costs for online leads and what is the lifetime value of your customer for auto insurance? If you honestly do this math, wouldn't our proposal sound interesting? Even for an agency? If not, why not?

If we really can't convince agencies and agents that our model could be of interest, the alternative we are considering is a live auction where agents can bid in real time for high quality leads to see if we can get to the numbers we need for each line of business by simply selling them up front with no ongoing participation. This would be our second choice, but so far, it sounds like this might make more sense.

Thanks once again for everyone's candid replies, they are very helpful! Please correct all of my assumptions!
d's insurance store
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Re: New lead model question - could cost per sale work?

Post by d's insurance store »

I believe your assumptions about the agency system are off the mark, at least in this universe.

Participants on this board tend not to be the agency principal's of large operations...those who putter around here tend to be owner's and some producers of small to medium sized agencies. People like myself, an owner, make the day to day decisions about spending money on acquisition efforts.

I don't run my agency with a very sophisticated accounting system, so if I were to buy into your lead program, I'd have to figure a way to keep track of your share of commission in addition to any and all of the other ways I have to keep track of commission distribution. That's a hassle.

Before setting up a 'partnership' with you, I'd have to be convinced that your leads are far better from a quality standpoint than other vendor's that pitch me day in and day out. I'd have to evaluate the characteristics of your lead intake...is this a prospect that wanders through the internet every six months for a better price? Is this a prospect that has potential for cross line and future sales? Is this a prospect that has risk characteristics of high value, or will this be a minimum coverage lead that has a low quality score and income attributes that will require resources by my agency to keep the payments current? And, finally, might this prospect turn into a client that exhibits lots of claims, fault or not that will impact my profitability with a bonus paying carrier? (Yes, it's possible to get a commission of $80 and then because of a policy loss, lose $5000 in potential contingency bonus monies).

As a businessperson, I have no desire to give a firm like Bankrate my money just for the opportunity to chase a name, phone number (maybe active, maybe not) and an email (maybe valid, maybe not) just to keep busy. There's an observation of mine, mostly attributed to the captive insurance agent universe, where there's pressure from sales managers to produce that leads to the purchase of low quality leads just to look as though the agent is 'trying'. When the ROI evaluation comes in with negative results, the rationale is expressed, "well that wasn't so bad...I only lost 'X' dollars on the investment...far better than the time before when I lost even more money".

Your financial evaluations may well be spot on, but the demands and pressures of owning, running and usually actively working a retail insurance agency preclude people like myself getting too deep in the weeds of 'partnering' with a firm like yours and sharing only the commission into perpetuity, without you sharing any of the downside risk that just comes with soliciting, selling and servicing personal lines insurance policies and juggling the income derived from said venture.

As a lead vendor, your results may in fact be better than the competition with results that shine and you may well feel cost and pricing pressure that precludes you from finding people willing to pay top prices for top quality and this is your way of trying to manage your future business risk within your chosen niche, but that only means that if I could validate your quality, I still might only be willing to pay $35 per P&C lead because of my own cost and expense pressures. But in the final analysis, I still don't want you as a partner for life.
indexcos
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Re: New lead model question - could cost per sale work?

Post by indexcos »

d's,

Thanks so much for your detailed and candid reply. It is extremely helpful and gives us a much better understanding of how agency owners would think about such a partnership. Many very good points you have made, we had not considered.

In response, I would have two follow-up questions:

1. Rather than pay us in perpetuity based on a percentage of commissions we create which can be complicated and time consuming to calculate and track, would mid-sized agencies be interested in a a simpler approach, for example, $12 per year per closed client for a max of 5 years (for auto insurance)? So, no percentages to track per client and not paying us forever? Or, is even a modified approach like this not of interest?

2. If this is not of interest either, then I think we would need to explore creating a simple bidding platform where agencies can bid on high quality exclusive leads in an auction format where you pay once up front at the price the market creates. If we go this route, the one key question is what key filters are "must haves" for agencies to place bids? For example, you may want to bid $25 for an exclusive auto lead in Michigan, but you must have leads from only certain zipcodes and only leads that are also homeowners, or leads that are at least 25 years old, etc.

The challenge here is, we can apply as many filters as you want and the bid price will adjust accordingly, but the more filters, the less inventory. Rather than apply and track dozens of filters we would rather make the platform much simpler to use, therefore, what would be the "must have" filters?

Thanks very much for your feedback. We completely understand your skepticism and displeasure with the traditional lead vendor industry and we therefore appreciate that much more your time to provide feedback. I know you have heard this before, but we are really trying to come up with a new model where both can succeed.

Thanks!
nhagent
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Re: New lead model question - could cost per sale work?

Post by nhagent »

A fixed cost per sale could work, if priced right. They would need to be quality leads that generate enough premium to justify the fixed cost.
d's insurance store
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Re: New lead model question - could cost per sale work?

Post by d's insurance store »

I'm thinking, once again, you're missing some points and not maliciously, but just out of ignorance of the retail agency system and the audience that congregates here.

I'm not so stupid that if there were a vendor that could profitably provide me with 'ready and willing to talk' prospects who value the involvement of an agent in their insurance lives, I would subscribe to such a service in a heartbeat. As agency owner, I'll take responsibility for providing comprehensive and competitive markets and I'd be willing to pay at a break even level for someone who can make the introduction with a prospect who is aligned with what I have to offer. The overwhelming majority of small to mid sized agencies are probably of the same thought. I'd be happy to spend money to make money. As you point out, it is the historical results of insurance lead vendor's who have polluted the waters and have forced people like myself to incant a pox on their houses.

But, thusfar, no vendor that I'm aware of has cracked the code in a way that both they and I can make money and grow our businesses. Enter search terms like 'cheap auto insurance' or 'low rate auto insurance' into any web search device and you get 7 million hits, all promising low rates, great service, safe, strong, secure, blah, blah, blah.

Large legacy agency owner's don't hang out on this kind of web site. They're already involved in business models that dictate they don't even have to show up to draw a massive paycheck. Those are the kinds of business owner's who have the cash flow resources to just blindly spend for leads that may or may not work and they get their return on the laws of large numbers. On a forum and site like this is where you find the owner's who plug away day after day, usually profitably, but certainly with a hands on business model that requires careful expendatures that demand some return on investment.

If you're set on a business model of your own that forecasts promise in a revenue sharing model, then by all means, have at it. I for one don't have the time nor the resources not the inclination to modify my systems to cut you in on my action for any period of time. I look at your business product as an introduction service only and in the best of all circumstances, I pay you what I consider to be a fair price for a name and contact information of someone whom you've screened to be interested in what I have to sell in the insurance arena. If you guys are as good as you imply at providing that product, then figure out what you need to charge to stay in business and make a profit and put yourself into the marketplace. Pitch the small to mid sized agency models if you feel there's revenue to be had or pitch the large agency and direct writers if you think that's where you need to point yourselves in order to stay alive. Believe me, if you've found the Rosetta Stone of insurance leads and can price it to where an agency can make money, you'll have all the clients you can handle, and word will spread quickly.

This forum is littered with plaintive pleas from agency owner's wanting to know if there are 'honest' lead vendor's or if they are alone in feeling ripped off by lead vendor's, and the answer is always the same. No one has a referral that can be trusted.

Keep in mind that if names and numbers and the opportunity to quote is all I want, then I can take a stack of $10 bills, cut 'em in half and stand on a street corner and pass them out, telling people that I'll give them the other half of the bill to tape back together if they come in with a dec page and a willingness to get a quote. I don't need to pay $30 or more to a crappy lead vendor for what is probably less reliable data than that kind of promotion.
lonestar
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Re: New lead model question - could cost per sale work?

Post by lonestar »

A major reason why I am skeptical from buying leads, in addition to the reasons posted by "D's":

- The type of client that clicks on "Save on Auto Insurance" is usually the type of client that will change every 6 months for a $1 cheaper rate. This is NOT THE TYPE of clients agents want to do business with.

I don't know how you, as a lead vendor, can cull out this type of personality type from your offering, since only these types of clients(for the most part anyway) are the ones willing to click on adds that all claim to save, save, save.

If you can find a way to offer leads for clients that are not of this personality type, you can name your price for such leads, and I would be the first one in line to buy your leads.
Ravisseur
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Re: New lead model question - could cost per sale work?

Post by Ravisseur »

I always enjoy D's and Lonestar's insightful perspectives on these subjects. Here's mine:

I discovered online leads shortly after I opened my independent agency in South Florida just under 10 years ago while waiting for my first Yellow Pages ad to be published. That first year, YP still worked great for Auto but our ROI dwindled drastically every year after that until it was a negative proposition. We dove into the leads pretty aggressively then and had absolutely fantastic results. Not only was our closing ratio considerably higher than what came from YP, but it was better quality business using every possible measuring stick: more full coverage, more cars per policy, fewer cancellations and better renewal retention. At that time, in our view, people that searched on the internet for insurance quotes were more sophisticated buyers that wanted real coverage than those that came from YP. Perhaps more importantly, at that time, not too many agents in our area were buying leads. So even though by contract, our lead vendor could sell a particular lead to 5 agents or whatever, in truth, they may only have one or two agency buyers for it. There was less competition than with what came in via YP.

As with the Yellow Pages, this all changed very rapidly. These same lead vendors, as they became more successful and signed up more agents, really greedily bastardized the whole system. As we know, they started signing up affiliates instead of generating the leads themselves and started re-selling old leads. The number of completely bogus leads when we started was maybe 20%, which was manageable. After a couple years, it was well over 50%. We got our credits but it was a huge waste of time. This, and the demographics of the internet changed to encompass not just more sophisticated buyers but absolutely everyone. Thirdly, the obvious competition from the big boys that are marketing so aggressively solely on price.

Because we had such great success in the early years, I have tried to dip my toe back in the water a couple times in recent years after being told that new "safeguards" are in place to filter out bad leads but in each attempt, the lead quality (and I have tried virtually every vendor) has been even worse than before. It is simply a huge waste of time and energy that is better focused elsewhere.

All that said, would I be willing to pay more for real, high-quality leads that would replicate my success from 8 years ago? Absolutely, not that I think it currently exists. Would I be willing to pay a lifetime commission to a referral source, any referral source? Of course not.
indexcos
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Re: New lead model question - could cost per sale work?

Post by indexcos »

Thanks again everyone for the candid and helpful feedback.

It gives us a real "inside view" that would be impossible to understand from the outside.

That said, it now seems clear that there is no interest for various reasons to share revenue over time for leads we could deliver at no cost up front.

As mentioned, we viewed this as marketing financing which we thought would be very attractive - we would invest in the marketing, you only pay upon conversion and we would be paid perpetually. The idea being that we are both aligned to deliver long term clients that have as much long term value as possible - that's why payment would be perpetual. If we delivered only price shoppers that would leave your agency in a year, we would be losing money, too, as it would take us several years to turn a profit per client. It's hard to market online and compete with the big guys, but even harder to find good long term value clients.

But, if there is no interest in our marketing finance model with perpetual payments, that's OK and we can rather spend our time and energy to create a new type of bidding platform where agents and agencies can bid in real time for exclusive leads in an auction format, buying leads in blocks of 10, for example, for a price that is set by the market in real time with basic filters. We think that such a model could get us to the right price per lead upfront and offer the market a new type of higher value exclusive lead platform as opposed to the existing lead vendor model where you pay $10-15 per lead that is resold dozens of times coming off of a win-an-ipod scam.

That said, is there any downside that you would see to the auction platform concept? We would envision the filters being product, state and possibly one or two more - but the dozens of filters currently offered by lead vendors would not work in an auction because it would likely complicate bidding too much for not much added value - plus, the filters lead vendors offer (for example, credit score) are mostly fabricated and self-selected by the user.

As mentioned a few times, we are truly trying to take what we have now, a platform creating 500+ clicks a day for direct writers, and create a new type of lead platform for agencies that is truly unique, high quality and win : win for both sides. It seems that our initial vision was flawed, how about an auction platform?

What are your feelings as to downside and minimum filtering for an exclusive lead auction platform? What would make you want to use it? What are your minimum requirements? What would make you want to avoid it? We could also offer clicks and phone calls at a different price point, but we assume that complete leads would be preferable - is this accurate?

Thanks!
d's insurance store
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Re: New lead model question - could cost per sale work?

Post by d's insurance store »

Trust me, Indexcos, You guys come up with a lead program that can be customized with certain filters generic to broad agency requirements that actually delivers prospects who are awake, alive, don't live in cartoon land, have a need for an insurance product and actually remember pressing the 'send' button to have a constructive conversation with a licensed insurance agent about a policy need and you will have to send the Brink's Truck to your front door multiple times a day to haul the cash away.

I don't have to rehash the numerous postings about the lunacy associated with the current lead vendors and their shortcomings, but it's a clearly flawed system for individual agents trying to grow their businesses without what until nine years ago was a fairly consistent Yellow Page, Referral, hang a sign, sponsor a youth sport team business model.

Without trying to tell you your business struggles, the issue is how does a lead vendor take in enough 'quality' names, qualify them and then profitably sell them out to the marketplace in an authentic selling model, without the questionable business practices of a Bankrate or its affiliates. I haven't the foggiest how you do that. But if you had such a quality product, I'd be looking awful hard a purchasing it.

I will say this...in order to get someone as jaded and cynical as myself to give up my credit card digits, you're going to have to throw some freebie samples my way first, because I've heard every sincere pitch there is to be had and it has all turned out to be expensive lies.
indexcos
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Re: New lead model question - could cost per sale work?

Post by indexcos »

d's,

Once again thanks for the detailed reply and your candid comments. Very helpful.

As for what is different about us, we have built a network of over 10,000 individual insurance content websites that we control 100%. Each is a niche site about a specific niche insurance topic. It is the largest network of insurance websites on the web today and we continue to build more. We have further created a platform to deploy, manage and analyze results from this network, and lastly, collect and distribute clicks to our partners which we track after a user expresses interest in learning more. As mentioned above, we are now building a lead collection capability as well. 100% of our traffic comes from two places: natural ("organic", or unpaid) search and paid search.

As you know, Search traffic is the holy grail of Internet traffic. Implicit consumer intent. Of course, some part of this traffic could include price shoppers or people that need insurance because they didn't have it and just had an accident, etc. But, if one looks at the Search traffic volume for insurance related terms over time, it has become extremely large and continues to grow - it is not just the fringe insurance consumer that is probably not a good long term client for an agency - search has become totally mainstream and has essentially become the first step in the insurance buying process for a large number of Americans, especially those under 40. A few years ago a high volume phrase like "car insurance" would maybe produce 1,000 searches a month on Search Engines. Today, more than 200,000 people search "car insurance" every month on Google alone! That doesn't include, "auto insurance", etc. just the single phrase, "car insurance".

That said, Search is competitive. For natural Search (unpaid), there are only 10 results on the first page of Google, Bing and Yahoo and millions and millions of webpages indexed on the web. Getting to the first page in a big category like insurance is hard. Many have gamed the system to do this and have paid the price. Others are there legitimately, like us. Most major lead vendor sites are not performing well on natural Search because they have very little content and cannot compete well. They probably don't mind because they can access "easier" and cheaper traffic elsewhere that produces lower quality leads that they can still sell at a profit.

Paid search is even more competitive. If you would like to bid on "car insurance" on the Google platform with a paid search ad, you would have to be prepared to pay a minimum of $62 per click. $62 is probably more than most first year commission on an auto policy for an individual agent, and maybe even more than the entire agency's commission. And you are not converting 100% of those clicks obviously. Paid search for high volume terms is basically the largest carriers losing money on this traffic on purpose to box out smaller carriers and individual agents if they are directs. It is impossible to make money - for anyone to make money - at $62 per click.

The reason we can compete on both natural search and paid search and the reason we are different is because we compete well for a very large number of niche search terms that have less price and media competition. Competition is still there, but because our content is tailored, we compete well organically and pay much, much less in paid search markets. This strategy only works if you have a massive number of niche websites and content which in aggregate produces a sizable amount of high quality traffic. We are already producing 500 clicks a day for direct writers and plan to triple our network in the next three months.

Lastly, the more niche the phrase, the more qualified the consumer as longer phrases generally have more purchase intent and value. Think, "i need car insurance in white plains new york" vs. "car insurance". So, when you do this right - create a large scale network of niche web properties - you can deliver a sizable amount of Search-originated traffic without needing to access lower quality traffic markets (display, social media, etc.) or needing to deal with shady third party affiliates. We control the quality, 100%. That said, this strategy is really, really expensive. Most people know the cost per domain name and producing the content on top of this, plus building and maintaining the software and hardware to run it is a massive investment that takes a lot of time to pay back - which is part of the reason others do not do this and rather use the short cuts that the industry currently uses today. Not to mention that we can only determine which domains to buy through an algorithm we build with trail and error. There needs to be a lot of error (sites that do not produce enough traffic) to be able to create the algorithm - it takes money to make money. We also, by design, sacrifice absolute size because we will not be as big as the largest vendors because, although we access a large percentage of niche insurance traffic which maybe represents 10-20% of total insurance traffic, we do not compete for the "head" of the market, such as "car insurance" and we do not push through very low quality social media traffic. We are plenty happy with this strategy and still feel we will deliver enough volume and coverage to become a serious option in the insurance lead community - the lower volume, higher quality option.

Our network covers Auto, Home, Life and Health insurance.

So, the difference between us and lead vendors today, is that [insert any vendor name] essentially does two things.

1. They run a generic insurance lead website which pushes a massive amount of traffic from tons of sources through what is essentially a content-less form. The largest vendors push more than 300,000 consumers through their generic lead forms every single month. That is nearly as much traffic as branded, online carriers such as esurance.com. How can this be? That is a massive number of consumers all of which cannot be that interested insurance from a non-branded insurance lead website. Some of this traffic, the vast minority, comes from high quality natural search and some through paid search - but the majority comes from very low quality, high volume sources.

2. They run a very large affiliate network, which means third party publishers send traffic to them and they pay them per lead completed. Every lead vendor's proprietary traffic strategy is a little shaky, but this is where things really go badly. Affiliates use every trick in the book to get consumers to complete forms so they get paid their bounty, the vast majority of which is really, really low quality incentivized traffic (win an ipod). Of course, lead vendors try to catch this, but it is really hard to detect. It is also very hard to detect if this affiliate has resold the lead to many other networks. So it multiplies the problem.

Lead vendors then sell the leads they collect probably 4-8 times depending on the demand in the zip code for between $8 and $15 each depending on the filters applied and the line of business. And as mentioned above, for those they acquired from affiliates they may not be the only vendor. So, the lead is probably sold 20 times or more, maybe over many years..

This doesn't even get into the area of aged leads as they also enter the system regularly as a third lead acquisition source which compounds the problem even more - a lead sold 20x from 2003. You get the picture.

Lead vendors have made a lot of money for a long period of time doing this.

So, our plan is to address a smaller volume of much higher quality leads, 100% on our network, 100% from Search traffic. As such, and to do this profitably for all parties, we are not going to be able to sell leads for $8 to $15 each, even if we sell them multiple times. Thinking about the math used earlier, and the true lifetime value of the commissions generated on good leads with high conversion rates, it does seem that agents should be able to pay much more for truly high quality leads - and of course, we understand the skepticism as you have heard this before.

As we think we can produce the highest quality leads available, and as we know that these leads are in high demand from a very skeptical group of insurance agents, we can either offer them where we are paid over time, or in an auction format to find the true market price of high quality leads.

As mentioned earlier, it seems our thinking was highly flawed on the former, so we will now focus on the latter, the auction.

As such, the 4 remaining questions we have are:

1. Do agents want home, auto, life and health leads or only auto leads they can cross sell?

2. Can we filter only by product type and state only, so would high quality auto leads in Virginia be enough for agents in Virginia? Or, will agents in Virginia, as a rule, only buy leads within 20 mile radius of their office for drivers over 25 years old, etc. We know the latter is preferable, but could the former still be of interest? The more filters, the lower the inventory, the more complex the system and the higher the price. We'd rather keep it simple and more affordable.

3. How important is exclusivity? Obviously this is preferably - but if the auction price is much less for leads sold 3 times (which would be transparent) maybe agents would rather compete against each other and pay less per lead than pay a lot more for an exclusive lead?

4. Would agencies be interested in clicks to their own websites and phone calls to their agencies as well? Or, are completed, legitimate lead forms the best option? We can offer all three, but don't want to over-complicate this too much if not necessary.

Any thoughts on these issues would be very helpful for us.

And lastly, we do understand the skepticism out there. We would be happy to work with a few agents here to offer some freebies to get things going and to get your ongoing feedback as well. As mentioned, we believe enough in the quality of our leads that we are willing to be paid over time, so providing freebies to confirm quality is fine with us - try to get that deal with any lead vendor out there today :) Please message me if you would be interested in being a "beta tester" of our forthcoming lead platform at no cost.

Thanks again for everyone's feedback. The best feedback is the most candid and most critical. That's why these forums are so useful.

As mentioned, although it may be hard to believe, we really want to create a sustainable, win:win lead model for the insurance industry far different from what exists today. This isn't because we are altruistic or view this as a social cause. We view this as a business opportunity - we think the current model is a house of cards and will ultimately fail and we want to collapse it and create something better.

Thanks again for everyone's help.
d's insurance store
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Re: New lead model question - could cost per sale work?

Post by d's insurance store »

A big challenge for you is the current fractured and changing face of the small to mid sized retail insurance agency. The sun is setting on the 'main street' small agency business model and there can be debates on just how long that model can survive, the fact remains, there is a diminished role going forward for the stereotypical 'trusted insurance advisor' with a main street storefront and deep ties to a local community.

I believe that agency owners of the smaller and mid sized shops are very confused about just how to attract volumes of new prospects. Sure, the web is the way, but as you point out in your narrative, search PPC at $62+ per click doesn't work for any sized retail agency. So then what? Social media? OK, but just how many Tweets about raising the deductible or changing smoke detector batteries are really being read? And who on Facebook really cares if the agency owner gets up each morning with an optimistic attitude on the way to the gym and if one of their insured's gets a windshield replaced hassle free?

As you're demonstrating, niche marketing seems to work for search efforts, but for those of us who've chosen not to tightly specialize in two or five commercial areas like gas stations or apartments or doctor offices, general insurance search just isn't profitable. In addition, I also believe that search volume for retail insurance products is a number that varies widely from area to area in the USA. Large urban population centers with a lot of volatility and a younger wired population base can generate far more searches than retirement areas. Suburban areas with low turnover amongst residents generates less volume.

The factors that drive people to shop their personal insurance are also diminishing. When rates are stable and service attributes adequate, then the inclination to grab the keyboard (it used to be the phone) and ask the 'how much?' question are low. The antiquated situation of a work bound spouse tossing the insurance renewal envelope to a stay at home spouse with the directive to 'shop this and see what you find' is a thing of the past.

So, we as generalist agency owners are faced with questions about how to fill the prospect pipeline in a cost effective manner. Sure, we can set aside time to learn web SEO and copy your path to search terms localized to 'auto insurance on Easy Street in Pigsknuckle, Oklahoma' or 'homeowner insurance agency selling SAFECO in Smallville, Indiana', but really, how much expertise does the small agency owner have in the world of tech and web design? Or, as most here have done, and without success for all of your expressed reasons, we can purchase leads with the promises of tons of eager and interested prospects who've just logged off after giving up all kinds of tedious personal information about VIN's and driver licenses and names and birthdays and address and odometer readings and so on and so on...

I assure you that if your product really is a quality product, and can be delivered at a price that can project out to a positive return on investment, then auto, home, small business and life leads are all marketable. But the keys again, as stated over and over, are quality and price. Agencies vary in their ability to sell outside of their brick and mortar footprint, so as you speculate in Virginia, there will be some agencies that can sell all over the state and others that want only the possibility of a client relationship close geographically. The agency and clients bonds are always tighter when there's a physical proximity. But, clearly with the new era of commerce, the need to be right next door is shrinking. Fax, scans and the internet and all that is associated with it has opened up a whole new world of possibilities.
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