Written by Ari Greenbaum, co-founder of conXpros
The question is often asked, is an exclusive lead or a shared lead better for me as a home improvement or home services contractor? There is no obvious and simple answer to this question. The reality is that both options can be fantastic and at the same time both can also be terrible. There are positives as well as negatives for each, which is why it is important to understand the potential benefits and pitfalls of each. Armed with this knowledge, you as a business owner or key leader can decide what fits best for your company and is most likely to deliver the desired results.
Before we dive in into the comparison of home improvement lead types, we must first establish a crucial point; regardless of the number of people receiving a lead, LEADS MUST BE WORKED AND APPROACHED WITH A PROCESS THAT WILL LEAD TO SUCCESS!!! Just like in baseball, the pitcher can hurl one right down the middle of the plate, literally “serving one up” like batting practice. But, if you do not know how to swing or have the proper mechanics and timing, you will likely swing and miss. Success with online lead generation requires using the proper mechanics, timing, and process to maximize your return on investment and confidently hit for both average and power.
Now that we have established the common formula for success regardless of a lead being exclusive or shared, let’s get to the details for each lead type. First, let’s explore the shared lead model and identify the pros and cons for this type of lead.
Shared leads: Shared leads can be a great option for your company, but it is imperative that you have clarity of how they work to truly benefit from them. The overwhelming majority of lead generation companies in the home improvement or home services verticals maintain the shared lead as their primary service offering.
- Typically, the cost for a shared lead will be lower than an exclusive lead.
- Although it is not a “hard cap”, shared leads limit the number of bids/estimates a homeowner will seek to the number of contractors the lead is sold to (typically 4 is the magic number)
- Potential for more volume of leads due to the fact the lead is sold to 4 (or more) contractors at the same time, the room to maintain a reasonable profit margin and increase bidding for customer acquisition by the lead provider allows for more aggressive bidding. Typically, this will result in a steadier volume.
- There is immediate competition for the first contact with the homeowner. This is especially detrimental in the home services categories such as plumbing, electrical, pest control, or similar categories where the homeowner often will go with the first company in contact providing they are competitively priced and make a good first impression.
- There is a “false” competition created by encouraging 4 or more estimates. The national average number of bids a homeowner gets for a project is 3. Most resources (including Angie’s List) make the same suggestion. If a lead is sold to 4 contractors, more often than not, one of the purchasers of the lead will be left out.
- Creates more price shopping: when a consumer is programmed to get 4 estimates, there is an underlying psychology that leads to more price conscious buyers than value driven decisions.
- Competition influences pricing: Often contractors must lower their bidding to win the job and recover the investment for the lead(s)
- Homeowners with real needs get turned off but the barrage of phone calls, texts, and emails they receive immediately following the lead submission. Good jobs can quickly become no jobs in these cases.
Exclusive leads: Exclusive leads may be a perfect option for your company, but just like the shared lead model, you must understand the nature of the lead, how the homeowner got to you, and the reality of competing as a contractor to be successful with them. Very few lead generation companies offer exclusive leads, and of the ones that do, typically they prefer to steer you towards the shared lead option.
- Only one recipient for the lead: there is no competition to be the first in touch with the homeowner, contact ratios should be high.
- The quality is typically higher
- The homeowner can decide how many estimates they desire before hiring for the project.
- Homeowners are forced to choose who to receive bids from instead of the lead generation company choosing the 4 possibilities for them.
- The lead generation company does not benefit unless you as the only recipient of the lead benefits.
- More likely to have value driven buyers than with a shared lead. All consumers care about price, but without the pre-programming and bidding war created by a shared lead, the homeowner can decide what is the most important for themselves.
- Exclusive leads will typically come with a higher per lead cost than a shared lead
- Less likely for a large volume of leads as the available margin to bid for the homeowner interest is significantly lower than a shared lead
- The homeowner will still seek out other bids or estimates (rarely does a consumer get only one bid), which can include submitting their information on a landing page that will result in a shared lead and the negatives that come with that submission.
Both the shared lead model and the exclusive lead model can be a fit for your business. In fact, I have seen many home improvement companies succeed with both styles in conjunction with each other. As a lead generation company, conXpros chooses to only offer exclusive leads for our clients because we feel strongly that it is the best option for our clients. Beyond the pros & cons of each model, there are other factors to understand and consider. For example, what does it tell you the end user about the mindset of the lead provider that sells shared leads? Does it demonstrate that their priority is your success, or rather maximizing their own profitability? After all, selling a lead to 4 people, you will make more than selling it to only one. As a quick example to emphasize this point, let’s look at a roof replacement lead that would cost $180 as an exclusive lead (current pricing for conXpros roof replacement leads), or roughly $140 for the same lead if purchased as a shared lead (pricing does vary, but this is a fair average for the category). The company selling that lead to 4 end users will receive $560 in revenue from that single lead, when the company selling it exclusively will receive only $180. Let’s just pretend that to “win” this lead, the lead generation company will need to pay $90 for the lead acquisition cost. The shared lead seller will profit $470!!! The exclusive lead provider will profit only $90. Has the motivation question been clearly answered? This mathematical equation is also helpful to understand lead credits and how generous or stingy most lead providers are when it comes to granting credits. With the shared lead, even if 2 of the 4 return the lead as “bad quality” but the other 2 purchasers fail to return it, the lead generation company still has $280 in revenue and $190 in profits. On the other hand, when a lead is delivered to only one end user, if it is “bad quality” and returned, there is no revenue or profitability for the lead company. Who do you feel is more interested in YOUR success as opposed to their bottom line? Of course, I am a bit biased as an owner of a lead generation company that already has come to the conclusion that exclusive leads are far better for our clients (albeit, less profitable), than a shared lead model. Do your best to eliminate my bias and personal influences from your decision making. After all, it is your company and your bottom line that matter most. Just like anything in life, you must weigh the risks vs the rewards for any decision. My hopes are that this article has provided a starting point for that type of analysis and decision making. Whatever you choose, never forget the importance of having a proven process in place that will provide the springboard for your success, regardless of leads being exclusive or shared. The same process applies in both cases. Take the steps to ensure your success and you will reap all of the rewards that working with a lead generation company has to offer.