9 Tips for Vetting Lead Generation Services

If you are new to marketing a home services business, you have probably considered using lead generation services offered by sites like Angie’s List, HomeAdvisor, Houzz or Porch, and you’ve probably noticed they have a lot of critics.

While many contractors have reported great results with these lead generation services, many have also reported poor experiences.

HomeAdvisor Inc is currently being sued in federal court (Airquip Inc. v. HomeAdvisor Inc. et al., No. l:16-cv-1849) by three contractors unhappy with the quality of its leads. The lawsuit seeks class action status on behalf of all contractors who bought leads from the company after Oct. 1, 2012.

ANGI Homeservices, the company that has owned HomeAdvisor since May 2017, has said it “believes that the allegations in this lawsuit are without merit and will continue to defend vigorously against them.”

“I personally no longer use HomeAdvisor, and I dropped them as soon as I could keep my schedule filled without them,” wrote Dan Perry in an extensive review of HomeAdvisor on Handyman Startup. “I view this service as a tool for jump-starting a small business but not as a long-term marketing tool.”

You can get a taste of contractors’ experiences by searching for “contractor reviews” of specific lead generation companies in any search engine.

“Lead generation companies are a decent way to try and get some quick business, but more often than not, the amount of time and money you have to dedicate to these systems isn’t worth it,” concluded an article published in 2015 by OutboundEngine’s then product marketing manager.

Mike Stone, who helps general and specialty contractors boost profits, has long argued that contractors can generate much better leads for less money by investing in their own websites and social media.

“The cost of developing a website has dropped considerably in recent years,” Stone wrote on his MarkupandProfit.com blog in 2015. “It’s now significantly less expensive than buying leads, and you have better control over your content.”

FitSmallBusiness.com has curated a list of 25 lead generation ideas for home improvement businesses.

Still, if you need to generate leads quickly, lead generation services can be very effective. Perry said HomeAdvisor helped him build a client base from nothing when he launched his handyman business. That bought him time to work on long-term lead generation initiatives.

Tips for vetting Lead Generation Services

If you do decide to outsource lead generation, just be sure to vet the lead generation services the same way you vet any employee or potential business partner. Never join one until you’ve searched the terms of service to see what the company says about some of the topics below. If the language is unclear and you are still interested, call the customer service line and ask for details. Make sure you write down the name of the individual you spoke with and the date.

• How does the service define leads? One of the most common complaints about lead generation sites is that they pass along dated or unqualified leads and even phone numbers that have been disconnected. Some services may offer different tiers of leads, so make sure you understand which you are paying for and how they are qualified. Some services, for instance, use automated calling systems to verify phone numbers. Porch’s “Lead Buyer Agreement” notes that some of its leads may pertain to business properties rather than homes.
• How many times does the service sell a lead? CraftJack says it will never distribute a lead to more than four contractors, while Porch says that it generally sells “non-exclusive leads” to up to four buyers and “Warm Transfers” and “Direct Phone Leads” to only one buyer.
• What will I pay per lead? Fees vary depending on your trade, the markets you select, exclusivity and type. For instance, as mentioned above, Porch offers Direct Phone Leads (where homeowners call Pros directly using phone numbers tracked by Porch) and Warm Transfers (where Porch transfers live phone calls directly to Pros). HomeAdvisor charges 50 percent more for leads when they come from homeowners who have asked specifically for your company. In his 2015 blog post, the product marketing manager for OutboundEngine reported contractors he spoke with were paying $15 to $120 for leads from these services with conversion rates of five to 10 percent. “General consensus is that somewhere in the middle (close to the $60-$80 range) is typically going to land you a good lead,”  he wrote. Stone urges his clients to keep their lead costs well below their profit margins. “How can you afford to pay five percent of the sales price of a job if you aren’t even making a five percent net profit?” he asked.
• What does it cost to join? Some services charge deposit fees, some charge sign-up fees, some charge monthly subscription fees and some just charge per lead.
• How will I pay for the service? Some services will bill you monthly via a credit card, while others will deduct payments directly from your checking account every time they send you a lead.
• How will the service use my name? Lead generation services generally require you to authorize them to market your business online so they can drive traffic back to their sites. That’s fine until the service sells leads generated in your name to other contractors, a practice outlined in this lawsuit filed against HomeAdvisor by contractors in 2018.
• Can I limit or suspend the service? Lead generation services charge for leads whether you use them or not, so make sure you limit the number of leads you get per week or month and find out if you can suspend a service if you have a significant backlog. HomeAdvisor allows Pros to do both, but notes that your exact “spend target” may be exceeded for multiple reasons.
• What is the service’s refund policy for bad leads? Most lead generation services claim they will reimburse contractors for bad leads, but the devil is in the details. Porch lists seven reasons why a Pro can reject a lead, including if it leads to a non-working phone number or fictitious name or leads to someone who is not authorized to hire the Pro, such as a renter. Warm Transfers can be rejected if the homeowner and Pro are connected on the phone for less than 30 seconds, and Direct Phone Leads can be rejected if such calls last less than 60 seconds. Porch also says it will credit a rejected lead to a Pro’s account within seven days of delivery and before the end of the monthly bill cycle.
• How long does it take to cancel the service? Contractors have complained to the Better Business Bureau of lead services continuing to deduct membership and lead fees from their checking accounts after they’ve canceled the service. So make sure you understand what you need to do to discontinue the service.