Beyond Cost Per Click. Moving To Cost Per Lead.

replycom.jpgThere’s a number of ways to find customers online. Traditional marketing via TV, Radio, Bill Boards, Print Magazines or Online. Paying for placements in Search Engine results – which could be paying for each click on your advertisement. Of course good old word of mouth is an option as well. Other ways to find leads are of course mining social networks such as FaceBook, LinkedIn and Jigsaw (the later is not a social network).
Recently I was clued into a new marketplace by Reply.com which focuses on helping you find qualified leads for your business.
According to Reply.com’s press release, While anyone can click on a website, whether or not they are interested in the products or services offered, a single click offers extremely limited potential. Clicks don’t walk into your store or call you on the phone.
A lead, on the other hand, represents an interested party that wants to be contacted by a service provider. For online marketers, this has always been the promise of the Internet.

Reply.com, at this time, has four available lead types:

  • Automotive: New Vehicle Purchase, Special Finance
  • Real Estate: Home Buyers, Home Sellers
  • Mortgage: Purchase/Finance, Refinance, Home Equity Loan
  • Insurance: Home Owner, Automobile

Paying for clicks on your online advertisement is better than just paying for branding. But paying for qualified leads, leads you much closer to a sale. What’s interesting about Reply.com’s model is YOU set the price you will pay for a lead, via an auction.
One scenario, to give you an idea of how this works is a local car dealership. I think the scenario, provided by Reply.com, might be a bit too optimistic but the principle is relevant:


Joe works for a Ford dealership, and he wants to see how his closing percentages and ROI vary for leads received from different distances around his store.
Joe creates two lead buying campaigns; he sets one campaign to only receive leads from his city, and he sets another campaign to receive leads from up to 50 miles away. All other filters between the campaigns, including quality rating and lead age, are the same.
Joe learns that his closing ratio is 15% for leads within his city and 9% for leads outside his city. Based on his closing percentages and resulting ROI, Joe realizes that in order to keep ROI constant he should be paying different amounts for leads received at different distances from his store.
Since Joe now knows he’ll close a higher percentage of leads from his own city, he increases his bids and his budget for his “city” campaign to maximize his volume. He then adjusts bids for leads coming from outside his city and immediately recognizes an increase in ROI while knowing lead volume may go down.
Joe’s success inspires him to create additional campaigns and measure variations in his closing ratios based on filters used. While Joe is a Ford dealer, he decides to pay $5 for any Chevrolet lead generated within his city, expanding his buying filters beyond the Ford brand. He also decides to pay $5 for Ford leads that are from anywhere in his state, expanding his market reach beyond traditional means. Closing ratios prove to be 2% for these campaigns, but at $5 per lead, Joe is seeing a nice ROI on his $250 cost-per-car-sold.
Joe goes on to test lead quality ratings, lead age, and other factors to fully optimize all of his 18-and growing-campaigns. After optimizing his campaigns, Joe is able to retire at 33.

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Ramon Ray, Editor & Technology Evangelist, Smallbiztechnology.com . Editor and Founder, Smart Hustle Magazine Full bio at http://www.ramonray.com . Check him out on Google Plus, Twitter or Facebook