In one of my last posts I wrote about converting internet leads or as I called it, successfully navigating “Distrust Mountain“. I received a ton of response to that post via email and the number one question was “What is the answer, what are the tactics?” to this statement in my original post:
The ability to climb that first, nearly insurmountable, face of defense on Distrust Mountain is what separates the good loan officer from the average one who is struggling to earn a paycheck. I call it scaling the face. Scaling the face requires all sorts of special talents including building rapport, telling a compelling story, having a unique selling proposition, displaying excellence and professionalism, building on small commitments, and numerous others. The tactics for doing so is a topic for another post, but needless to say, that wall is there and needs to be scaled.
I’m sorry to disappoint, but I have no magic bullet. I am sure that you all suspected that to be the case; for there truly is no such thing – if there was we would have all seen the infomercial. There are no gimmies in the sales world (thank you for listening, choir). With that disclaimer out of the way I’ll do my best to outline the best practices THAT I HAVE FOUND help successfully close internet leads. Unfortunately it’s a long process and I’ll need to break it in to a handful of posts over the next week to keep your eyes from falling out of your head; but I will get through it — bear with me.
I think our approach works pretty well; I also know that there is room for continual improvement. I don’t purport this to be the best or only way to convert internet leads; but it is our way. Our un-audited results indicate that we receive a return of about 5 to 1 on our investment in internet leads; and we’re pretty happy with that. If you want greater ROI, you’ll need to do a better job than what is listed below. We have no name for the system, but I am hoping Russell can help us with that!
Here are the steps I’ll address in this series. Today I’m covering Base Camp and then I’ll follow up with the remaining phases of conquering Distrust Mountain.
I. BASE CAMP – Before you even pick up the phone
a. Understanding leads/filters
b. Pre-call prep and research
II. CLIPPING IN
III. FACE CLIMBING
IV. CRIMP
V. REACHING THE SUMMIT
—————-
I. BASE CAMP – Before you even pick up the phone
a. Understanding leads/filters — No matter where you receive your leads from – if they are internet-based leads – it is essential that you understand the filters set on the leads so that you know, in general, what type of lead you can expect each day. In order to accomplish this you need to understand the FICO score range, market areas, loan purposes, average loan-to-values, average interest rates, etc. of the lead source. Most importantly you must understand the dynamics of how the lead was solicited from the consumer (if possible). For example, you should know if the lead was generated from an email campaign or search engines. Was it driven by an offer of incentive, or not? Has it been or will it be validated in any way prior to coming to you? These are all important aspects that will help you define your approach once on the phone. Knowing these details is like having a map of the route you plan to take up the face.
As an aside, some brokers/lenders don’t disclose where the leads come from; they mask the lead source to keep their originators in the dark. They don’t want the originator going out and buying the lead source themselves. This is terrible logic and a huge liability to the originator (and their employer). By keeping the originator from knowing the intricacies of the lead source the employer keeps them from developing an effective sales presentation. I firmly believe that keeping information about lead sources from originators is a sure-fire way to instantly reduce their effectiveness on the telephone. But I digress.
As an originator you must know everything about the type of leads you are supposed to be receiving so that you can focus your attention on the best approach to use once on the phone. It will also dictate the general products and programs that may best suit your targeted market. This gives you an idea of where you should focus your time and effort when building your product knowledge. In addition, with enough information about the leads you’ll be able to identify some broad benefits and potential hot buttons of people in that target market band. You’ll have these ready to go before you even talk to someone.
Without lead source knowledge you have no frame of reference; you’re wandering in to a situation with no bearings. You might as well be walking in to a skit on “Who’s Line is it Anyway?” The frame of reference is one of your biggest assets in making the sale — make sure that asset is leveraged before even picking up the phone.
b. Lead-by-lead pre-call work — As I mentioned in my baseball-analogy-post, you only get so many leads (at bats) each day (game). These opportunities are the lifeblood of your pipeline; they are your chance to win business and put food on your table. They should be treasured as such. When you get a new lead you are ready to depart base camp and begin the assent of Distrust Mountain. It’s cold, windy and treacherous, are you headed up unprepared?
Before you pick up the phone you must review the lead — and do it very quickly. Look at the following elements and perform the following macro-analysis:
Borrower Name — Can you pronounce it? Does it sound familiar to you? Can you say the name smoothly? Is there a nickname? Determine how you are going to address the potential customer. I always go with Mr./Mrs. but that is just me. I know many successful people who are casual in their introduction.
Address — Do you know the area? Are you familiar with it? Pull up the home on Zillow.com and pull up the home in your title search. I do both because I like seeing the home in Zillow.com and I like the sales data from title.
Rate, loan amount, cash out requested, loan purpose — All too often I hear originators say “So, what are you looking to do with this loan?” HELLO?!? They already filled it out on the lead form. Did you not read it or did you not care? Either way you look careless — not a great first step, Junior. A better statement is “Mr. Smith I see that you are looking to take approximately $25,000 in cash out of your equity; is this to pay off bills or for a project you’ve been meaning to accomplish?” Let them know that you have paid attention to the information they’ve already provided.
Credit rating — How do they rate their credit? While it may not be accurate, it at least gives you an idea of where they think they are in their financial life. This should give you some guidance on how to approach their situation until you have a better understanding of their needs based on a review of their credit history.
Previous notes — Make sure that this person has not requested to be placed on your company do-not-call list or other similar action prior to picking up the phone. There is nothing like getting an ear full from someone who already told the guy in the next office that they weren’t interested.
General impressions — Is there anything that jumps out at you that can give you a foot-hold in rapport-building? Know someone from that area, past clients, friends, etc.? Know anything about their profession (if given)? Is there anything you can glean from this lead that will help you build a connection on a personal level with this person? You’re going to need to do that to win, you might as well start looking for hints early.
NOTE: This all has to be completed in about 25 seconds. You only have that much time to review the lead before you need to be dialing. Why 25 seconds? Well, hopefully you are accessing your leads through a lead management system (LMS) that is designed to pump these internet leads straight to you the instant they are submitted by the customer. (If you don’t use a LMS you’re working at a huge disadvantage; because people like me are.) Once that lead gets in to the lead provider network at least 4 companies are going to be attempting to reach that lead simultaneously. Whoever reaches them first wins.
OK, that last sentence is a lie. It’s not that simple, but is sure is close. To prove it to ourselves we hired a grad student studying for their PhD in statistics from the University of California, Irvine to study our leads and originators. We asked him to provide us with metrics on the performance of our originators and our lead sources. He took 3 months worth of data and for about $300 came back with gold. You can do the same with your local college grad students. Try an ad on craigslist.org and you’ll have a couple ready to analyze your entire operation.
What we found (while confirming some common sense) was astounding. We were 30% more likely to win the loan if we were the first company to contact the borrower. We had an even higher success rate if we were the first to conduct a complete interview. We’re talking huge numbers. So when your lead comes in, and you are prepping for Distrust Mountain, remember John Wooden’s adage “be quick, but don’t hurry“. It’s up to you to glean information quickly so that you have a shot at being the number one contact; but you must do so in a way that you don’t sound unprepared when the customer picks up the phone.
That is my BASE CAMP primer. In the next installment I’ll talk about CLIPPING IN, the mechanics of the first call, the methods for best reaching a customer; and moving from contact to interview and beyond.
What are your pre-climb rituals? What did I miss? Where do you win before picking up the phone?
Bill Rice says:
I loved your last article and the mountain climbing analogy is great.
Your notion of base camp and the lead review is crucial, as you mention. Unfortunately, I have seen many a lead management methodology, whether it be email, spreadsheet, or (biggest sin) lead management software that doesn’t even have the requisite data you describe on the lead sheet or screen.
Next, to your point of being first to the lead, we commissioned a similar study, but from the reverse perspective–the consumer. In this study the surveyors filled out mortgage lead applications and banner advertisements. Here are some tidbits:
-40% or so of the time it was a consistent set of lenders that contacted them back.
-90% of the of the time the call back was greater than 4 hours after the inquiry was submitted
-95% of the time if we indicated interest, but said we couldn’t talk at that moment, we did not get a second call
Obviously, it shouldn’t take a lot of effort to be first and there are a lot of bad practices that need to be improved by reading this series.
May 24, 2007 — 12:06 pm
Brian Brady says:
First in usually wins (or last).
The prep work is often overlooked. The originator who addresses the specific concern that the customer notes is apt to win the business.
Jack Davis would have an originator qualify more by asking the customer to “rate’ the severity of their “problem” on a scale of 1-10.
You’re system is excellent.
May 25, 2007 — 12:10 am
Lee Howard says:
While I agree with letting the loan officers know where the leads come from, e.g. internet, email, telemarketing, I think it’s best to mask the lead provider name if multiple lead providers are being used.
From what I’ve seen letting the loan officer know the source of each lead reinforces bad behavior. They will try harder on specific sources and not others. While this works for sources they like it doesn’t give others a fair shake. You should want the loan officers to work each and every lead like it’s the potential next closed loan.
May 25, 2007 — 9:53 am
Morgan Brown says:
Hi Lee,
I agree with your comments on the “cherry picking” predisposition of loan officers and internet leads. Their perception of the lead quality will automatically influence their efforts to convert the lead.
So I would agree with you that as long as the method of generation is discussed the exact source is not necessary. Great point.
May 25, 2007 — 11:14 am
Morgan Brown says:
Brian,
You’re right being last in is a huge advantage as well. Being somewhere in the middle is usually the purgatory that needs to be avoided. I was going to save this for the next part, but being first and last is really where the win is for the originator. To be prompt, gain some recognition and not have to be short-circuited by the customer are reasons to be number one; being the last memorable conversation is a great reason to be last. They’re not mutually exclusive and both important to winning the business.
May 25, 2007 — 11:17 am
Morgan Brown says:
Bill – Great points about your study. A lot of the lead companies bandy about a stunning figure that people are not contacted within 4 hours of submitting the lead. It led me to ask the question “What time did the person submit the lead?” Usually that was not a consideration. I would argue that those numbers are a bit misleading because leads submitted outside of regular business hours sit much longer than those filled out at 10:30 AM.
This also points to a great opportunity for originators. If you can be working when everyone else isn’t then you have a much greater chance of winning the business. It amazes me to this day how few originators work earlier than 9 AM and later than 7 PM. Lastly it amazes me how so few work Saturdays. Saturdays are money making days in my opinion.
May 25, 2007 — 11:20 am
Bill Rice says:
Morgan,
I would agree with you on the off hours, but we took that into account and made sure the study submissions were core “mortgage” hours 10am – 6 pm EST. I think the issue (bigger than you might imagine) is that the majority (some of our lead partners tell us from 60-80%) of the Internet lead buying market is still using email or emailed spreadsheets as their primary means of lead receipt. Then, they need to wait for the lead manager to distribute (email them) to the sales force or format and load the dialer–don’t get me started on dialers and fresh, real-time Internet leads–might as well be throwing your leads in the trash. The integrity and speed of the lead receipt process is a big problem that many lenders don’t seem to always grasp. Good for guys like you!
As for working the fringe hours, you are spot on. When I was running sales teams at Quicken Loans my top producers were on the phones and taking apps by 7 am and on Saturdays I had a full teams making money. Take your day off on Friday. You will make more money with that move alone, guaranteed.
May 25, 2007 — 11:34 am
Morgan Brown says:
Great points Bill – you are spot on that many companies have the most amazing inefficiencies when it comes to managing their leads.
Thanks for your valuable insight. I hope originators who depend on internet leads heed your advice and raise hell if they have managers and marketing departments that delay the delivery of leads to their desktop.
May 25, 2007 — 11:45 am
John Taylor says:
Excellent article Morgan. You’re the first one I’ve seen that has hit upon this subject.
As someone who has never purchased mortgage leads before, two key questions I have are what would you consider an acceptable conversion rate? I know there are a number of variables but what is realistic for the average guy with halfway decent telephone skills? I think I heard someone say the average conversion rate for LendingTree leads was around 5 to 6 percent.
Next, what will a typical lead cost and I’m sure again there are a number of things that go into the pricing. An example of what you are experiencing would be helpful.
May 25, 2007 — 1:26 pm
Bill Rice says:
John, I will give you a good resource: http://www.morinsight.com another marketing and lead manager, like Morgan, from a large Internet mortgage originator. He takes about all sorts of specifics around the types of questions you are asking.
I will also submit my own websites: http://www.kaleidico.com and our companion site that supports the Lead Marketwatch Widget: http://www.leadmarketwatch.com.
May 25, 2007 — 6:17 pm
John Taylor says:
Bill, thanks for the other links. At Kaleidico those application rates were very interesting. It appears the 5% to 6% conversion rate may be right in the ballpark. I’d like to get some feedback from Morgan and others if this is what they are experiencing or if they are getting higher results.
May 26, 2007 — 12:02 am
Bill Rice says:
John, Absolutely! As a new Internet lead buyer get as much information and education as possible before you start. Doing otherwise can be very expensive and frustrating.
Couple other points I would suggest:
-Really dig in an find out how the leads are generated. This will give you insight into not only the potential quality, but even more importantly what the consumer experienced before you got the lead. Making that as smooth a transition as possible is a big conversion impact. I used to have different scripting for each lead channel that was specific to their inquiry process.
-Be prepared to really work these leads (that means a lot of calls). Most equate this to the quality of the channel. I correlate it to why the customer used the channel–convenience, for them. They don’t want to call a bunch of 800 numbers and sit in the queue. They want people to come to them. So, whatever you do don’t just call one or twice or only once a week and assume no contact means they are not interested. It means that it is not convenient. A lead never dies (except DNC) it should only transition into another sales or marketing process.
Hope this is helpful. I hate to see someone go into this very productive channel with bad information or expectations and then abandon the long-term opportunity.
May 26, 2007 — 7:36 am
Morgan Brown says:
Hi John,
Our experience with internet leads put our conversions at between 4-6% based on lead source, month, location, loan type, credit range, etc. Anything less than 4% and you begin to see very thin returns on your investment. When you get down in to the 2% range you are probably losing money on that lead source.
You are right – the prices range all over the board but as an example for a California, good credit, refinance transaction with a minimum loan amount of 100K and LTV below 90% you can expect to pay around ~$45. Again, totally dependent on lead source, etc.
Hope that helps!
May 26, 2007 — 9:58 am
John Taylor says:
Again, thanks guys for the information. I really appreciate it. Here’s some interesting info I found that I’d like to share.
I’ve been searching online and looking at the different lead companies and see a lot of them advertising conversion rates that I know are unrealistic. Here are some of the lead sources I’ve found and quoted conversion rates either in their FAQ or testimonials. Please note the last two lead sources:
“Your application ratio may be as high as 85%. Some customers report 40% closing ratios.” callprospect.com
“The closing ratios according to feedback from our customers are ranging from 4-21%. We have several that have exceeded 20-30% fundings and others that collect full 1003’s on 15-23% during any market.” mleads.com
“I averaged 30% closed on my first order, and 45% on my second… Needless to say I’m not looking forward to ANY new brokers (competition) getting leads in my area! Keep those closers coming!” name given mortgage-leads.com
“Lenders/brokers who use LoanApp.com close 8% of their leads on average, which is significantly better than most other providers.” loanapp.com
This is where it gets interesting. I then find clientshop.com which has a decent looking site. Here are some of their glowing testimonials which also include names and company of the buyer:
“The first time I ordered from clientshop I ordered 3 leads and closed 1, which more than paid
for the advertising through clientshop. Then I ordered 14 more and closed 8.”
“I got 3 direct sales out of the five leads you sent. Then one of these leads sent a referral that ended in a sale. That’s four sales from 5 leads– an 80% ratio!”
“I closed three of the twelve leads I received. I’ll take a 25% percent ratio any day!”
“I am closing between 5 and 8 clients out of each 40 leads not to mention the referrals from each client.”
“Jon, what can I say your lead generation system is amazing. I’m over 40% closing ratio.”
The clientshop.com homepage states they get their leads thru multiple websites. I then clicked on the “Mortgage Leads” link and it goes to a page with the testimonials. On this page there is also a description of how their program works. It says the client comes onto the internet and finds 4lowrates.com. They say they drive traffic to 4lowrates.com by internet ads and search engine placement. So I guess 4lowrates.com is just one of the many sites they use to get these “high converting” leads from.
Next I go to 4lowrates.com. Nothing special about it and I run a check on the traffic this site gets through a program I use and find it gets very little.
I then spot 4lowrates.com has an affiliate program and I click on that link. Lo and behold what comes up:
“Become a Loanapp.com affiliate and start earning commissions”
I’m guessing without doing further research, loanapp.com is the main company behind clientshop.com. The program I used showed about 16,000 unique visitors to loanapp.com in April so this site is getting reasonable traffic whether thru natural search or ppc marketing.
I couldn’t find any prices at clientshop.com and their “visit our FAQ page” suprisingly doesn’t have any link to click on. You either have to email or call them.
What I might do next is try to run down some of the people that supposedly gave testimonials and see what they have to say now.
In any event, it’s interesting what you find out when you do a little digging.
May 27, 2007 — 3:54 am
John Taylor says:
Morgan, I’ve got a question for you and anyone else who buys leads. How do you handle the cost of the leads when deciding on what you need to make per loan? What I mean by that is if for example it costs $800 in leads to close a deal that has to be factored in somewhere. Do you then up your fee say from 1% to 1.5% (or some other percentage)?
Or do you just go from say 1% to 1.25% on all loans you originate including referrals and past clients to cover the cost of the leads? Obviously, what you pay for the leads has to be accounted for somewhere. Just trying to figure out what would be a fair way to go about it. Thanks.
May 29, 2007 — 1:57 am
John Taylor says:
Where did everybody go?
May 30, 2007 — 12:24 am
Bill Rice says:
John,
This might be helpful, considering your questions on metrics:
http://leadmarketwatch.com/metrics.php
Also, feel free to contact me directly if you have any other questions. I think this post is growing too old for people to still be watching the comments.
Bill
734.782.0808
bill.rice@kaleidico.com
May 30, 2007 — 7:38 am
Morgan Brown says:
Hi John,
Sorry – busy playing catch up coming out of the long weekend!
In regards to your question about fees we DON’T take in to consideration the cost of the lead when charging a customer for our services – EVER.
We’ve chosen internet marketing as our preferred vehicle for generating business and to us it is a cost of doing business. Like all costs, from electricity to postage, that goes in to our overhead.
So we don’t change our pricing on a case-by-case basis based on the lead source that they came from or how much that particular lead costs. We just build our marketing costs in to our budget and profitability target.
With some lead sources like LendingTree they received a percentage of the closing fee. We don’t use LendingTree because of that reason and therefore couldn’t talk to internet lead sources that charge a percentage at close. I would imagine that shops using LendingTree have to factor that percentage in to their cost scenarios.
Hope that helps.
May 30, 2007 — 8:21 am
Morgan Brown says:
John –
I just wanted to add one thing about the testimonials that you posted from the web sites. Working with internet leads in any way that resembles the one-off nature described in the testimonials is a sure-fire way to failure with them.
Buying 4 leads and expecting to close any business is unrealistic. Internet leads are just like other marketing sources. You have to build traction and consistency. Buying 3 on Tuesday, 1 on Friday and 5 the following Wednesday will likely net you zero business.
It has to be a consistent, committed approach to the medium to find success.
May 30, 2007 — 8:24 am
John Taylor says:
Bill & Morgan,
Glad to read your posts again. Don’t want to drag this on too long since there are new topics I’m sure coming up but I’ve got a last few questions to throw out if someone would like to reply.
1) Are the exclusive leads worth the added cost?
2) Are the live transfer leads worth the added cost?
3) How many leads should I buy at one time from any one
source in order to be able to make a decision on how
good the leads actually are?
Thanks again guys for your insight and knowledge on this. I’ll hold off any more questions until the topic comes up again in another post.
John
May 30, 2007 — 12:56 pm
Bill Rice says:
John,
1. My experience has shown that exclusive leads are rarely really exclusive and if your lead management practices are sharp typically competing on a lead is rarely why a lead does not convert–it is more often lack of real intent on the buyers part, qualification issues, current product issues in a refi, or other similar barriers or non-contact–in that statistical order too
So, probably not. IMHO.
2. I will answer that with an explanation of what purchased live transfers typically are: Generally, they are leads that are remnant, returned, or underserved leads (refi in OH, purchase in RI, etc) meaning lead providers don’t have a reasonable market or they have been returned for a variety of reasons. They are given to live transfer call centers who then pay the lead provider for the lead (at a discount) if they get someone on the phone, which is when they sell it to you.
So, my opinion is that you can set-up just as effective a process in-house using a contact team that does nothing but contact and pre-qualify live leads and transfers them to you LOs. With this process you have a wonderful training or retraining ground for new or struggling LOs.
3. This has a lot to do with the size of your shop. I would start with the number of leads you need to provide your LOs (we suggest from 3-7 per day). I would suggest buying a typical allocation based on your capacity and you will have two major benchmarks: one, immediately you will begin to get feedback on the leads from the calls. If you are getting consistent I filled out an Internet form a month ago, or what are you talking about I never asked for a mortgage, or invalid phone number you may have hooked into a bad lead provider. Otherwise, your second and most probably benchmark is work the leads through a normal monthly production cycle and see the production that you get and run the numbers.
All in all you are probably, for a small shop, talking about at least 50-100 at minimum to get a statistically significant test.
May 31, 2007 — 3:12 am
Morgan Brown says:
John,
What Bill said 🙂
May 31, 2007 — 7:49 am