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Should I Buy Leads from Lead Generation Companies?

| Paid Search

A Race to Leads

If you look at a typical contractor or real estate agent forum, one topic dominates all others:  How do you get new leads?

Within this question is an argument that goes on to this day.  Should I buy leads from a lead generation service, or should I manage marketing to generate my own, exclusive leads?

The threads typically have no shortage of extreme opinions, mostly from those who got burned by lead selling services.

But there are reasons some businesses buy leads.  Lead selling services require little to no marketing effort from the business itself.  They are direct and fast.  You pay a fee and have hot leads placed before you.

However, lead buying can be expensive and offer a dubious ROI.  The worst problem is the lack of exclusivity.  A service that sells leads can’t turn a profit if they only sell the lead to one business.  This creates two problems.

First, you’re in a race to try to be the first to contact the lead.  The first contractor will have the best shot at closing the deal, while the last to call probably won’t even get the chance to bid.

Second, you get into an automatic bidding war.  Many consumers who go on Angie’s List or Home Advisor are price shoppers and tire kickers.  Also, some contractors are new and willing to underbid to win the business.

Within these contractor forums, you’ll also get occasional comments from contractors who claim that buying leads saved their business.   To be sure, if you don’t have any other channels generating leads for you, buying leads may be your only choice.

Generate Your Own Leads

On the other side of this is the process of building out your own lead-generation funnel by marketing your business.  This lets you develop your own brand, do a better job of pre-selling/qualifying leads, and nurture leads over a longer buying cycle.  Smart use of tactics like SEO and social media marketing provide no-cost traffic, lowering your overall cost per acquisition.

The big consideration when doing your own marketing is that it takes time to build momentum.  If you need leads yesterday just to stay afloat, SEO isn’t going to save you.  Marketing isn’t effective in an emergency, although, there are paid search and social media advertising tactics that can get you in front of leads quickly while jump-starting your entire marketing effort.

Think of business marketing as an investment.  You need to put in resources initially with the plan of getting maximum return once everything is dialed in.

Google Local Service Ads

In 2017, Google began to roll out a new type of paid advertising called Local Service Ads.  They’re pushing this platform for any type of service or contractor that deals with homeowners, including plumbers, handymen, painters, or HVAC.

The initial motivation for creating this service was a scam a locksmith company was running on Adwords.  A big part of LSA is a verification process that includes background checks on businesses.

However, this is also a pay-per-lead service.  Accounts are built on the LSA platform, and the number of reviews you have will impact your rankings in search results.

If you’re a service business that does onsite work on private property, you’ll will probably have to start using LSA in 2019.  In other words, you will have no choice but to buy leads if you want to do paid search marketing.

To Google’s credit, LSA creates a direct lead-to-business relationship, meaning that a lead is actually someone who contacts you by phone call or messenger.  This differs from some of the other pay-per-lead services we’ve mentioned, where you pay just to get the lead’s contact info and are in competition with other businesses to contact the lead first.

Note that a lead using LSA ads can make up to three contacts to request estimates, so it’s not like you won’t have competition, but you should at least be able to contact the lead and have a legitimate chance to win the business.

Tips For Success

If you plan to be in business for years to come, investing in your own marketing is, without question, worth it.  Between your own lead generation and your referrals, you should never have to buy leads again.

You’ll know your marketing is really working for you when you see your brand name become one of your most productive search terms.

However, if you’re a new contractor or perhaps relocating, you may need a boost from buying leads.  If that’s the case for you, here are some tips.

  1. Be ready to take/make calls.  The number one thing you need to do to win business when buying leads is to be the first to make contact.  Many people report that when they use services like Angie’s List, they just go for the first contractor to call them.  If you delay, you’re wasting your money.
  2. Work on your phone skills.  This is a skill you need no matter what, but it’s essential when buying leads.  You need to sell them on “you” on that first call.  Be prepared with questions you can ask about the project that will help you understand the main needs of the lead.  Then craft your pitch around those needs.  Also, do your best to keep it light and be funny.  If you can get the lead to laugh, you have a much better chance of winning the business. (Learn more about closing phone sales).
  3. Don’t undersell yourself.  Even when buying leads, the race to the bottom is not one you want to win.  Leads who price shop and drive bids down to the point the contractor is barely turning a profit are the worst types of clients.  They’ll nickel and dime you and will still never be satisfied with your work.  Then, they leave you negative reviews, making it harder to win new work.

Market Leaders Own It

The difference between buying leads and running your own marketing is analogous to renting a home versus owning one.  Renting is a fine temporary solution, but ultimately, you’re better off investing in the place you want to own.

If you’re ready to stop “renting” lead generation and instead want to invest in long-term marketing success, contact our marketing consultants to talk it over.  We specialize in helping small businesses develop marketing assets that pay off over a business’ lifetime.

With all the tools available today to market and advertise, no serious business looks at buying leads as a long term solution.

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