Should You Pay for Customer Leads?

Using lead-generation services can be effective if you take the right approach

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When, if ever, should you pay for a customer lead?

There is certainly no shortage of lead-generating services out there — all ready, willing, and chomping at the bit to take our money. But do these services work? Are they worth the cost? Can they be an effective strategy for a drain cleaning company to generate consistent work?

Our company has dabbled with lead-generation services. We made this decision partly out of curiosity and theoretically as an “insurance policy” for slow days. The results have been mixed, but we’ve learned some great lessons.

Before digging into these lessons, let’s first define a paid lead. Technically, if we pay for any marketing we are “paying for our leads.” So where is the line?

For our purposes, a “paid lead” is a customer inquiry generated by a third party. They get customers to their website or app promising to help them find a drain cleaner. In turn, they charge for connecting you to that customer.

Say a customer goes to a search engine and types in “Drain Cleaner Near Me.” They get a lot of results back. Some results will be paid and others organic. Some companies will show up at the top because of hard work and diligence with their web marketing. Some companies pay to show up at the top. The list goes on and on, but inevitably somewhere near the top you’ll see a few lead-generation websites too.   

The consumer, not knowing who to choose or trust, may want further guidance in their buying decision. That’s when they click on the lead-generation website.

The frustrating thing about these services is that they take up valuable (and expensive) real estate at the top of searches. Their team of internet experts use every trick in the book to knock you out of first place on search, so that you can pay them to get to that customer instead. They made themselves a middle man.

Some may see this as a positive — they are leveling the playing field for smaller companies who have no hope of reaching the top organically. Others find it an annoying intrusion into the buying process.

The truth is, just like drain cleaners, some of these services are better at their jobs than others. You have to be armed with the right information to make a good purchase decision for your company. 

Which Customers Are Using Lead-Generation Services?

A certain kind of shopper will feel comfortable going through these websites and apps. Here are some of the reasons:

  • They want social proof. Whether they are new in town, a recluse, or a born researcher, these people either can’t or won’t ask for a word-of-mouth referral from a friend. Yet, they still seek some sort of proof that you are a good company to work with.
  • They want the best price. Many customers use these services as a way to receive multiple bids or estimates for a job. Unless you can knock their socks off from the get-go, these customers will often go with the best bargain.
  • They don’t trust search. Most of these websites work very hard to create some level of trust beyond the search engine. Maybe they promise that they have “vetted” the companies in some way or that the companies aren’t paying to be at the top. Once we all recover from the collective eye roll, we have to accept that these are skeptical customers who may need some hand-holding.
  • They don’t know what they are looking for. One thing that these services do well is to get to the top of search for weird, long, and rambling search terms (called long tail keywords). We might not, as smaller entities, naturally pop up for “Why is my water heater making that sound when I run my dishwasher?” But lead-generation services have the resources for that. In turn, the customers might not even have realized what kind of company they need to come check on it until this website encourages it. 

You’ll have to decide for yourself if these customers interest you enough to compete for their business. 

Factors That Matter, Aka Good Questions for Sales Reps

Every one of these lead services firmly believes that they have a secret sauce that makes them totally different from their competitors. Some may even argue that they aren’t a lead-generation service at all. Regardless, you are probably talking to some poor cold-call sales rep sitting in a cubicle. They have a hard job, but you want to make it harder by being a curious and informed consumer who asks hard questions. Here are a few factors to consider when choosing a lead-generation service:

  • Volume in your area. Just like some areas of the country tend to use mustard-based sauces on their barbecue while others prefer tomato-based sauces, website and app trends change depending on locale. What might be a good service in South Carolina may not be in Kansas. Good Question: What is the monthly search volume in my area?
  • Competition. Even the worst lead service can give you good results if you are at the top of the list every time. If you can get in early, you can dominate. Good Question: How many of my competitors will be given the opportunity for the same lead?
  • Cost. You have to pay for these leads. That is the whole point. Knowing how you are going to be charged, when, and whether there is any conversion guarantee matters. Good Questions: How much will I pay per lead? What is the typical conversion rate in my area? Will I be charged when I book the job or when the customer information is sent to me?
  • Control. We all have busy days and slow days. You might be more willing to pay for a lead when the phone isn’t already ringing. No one wants to pay for phone calls they can’t service. Depending on how many other consistent job sources you have, you may require more control over the volume and timing of the leads than a particular service can offer. Good Question: Do I have control over when and how often I am sent/charged for leads?
  • Process. How the leads are delivered, when, and at what stage of purchase matters. Some companies are practically subcontracting you — delivering a guaranteed job to your inbox. You typically have less control over price but more guarantee of work in these cases. Conversely, some lead services are a race to contact the customer. If you barely have time to return phone calls as it is, these services might not be a good fit for you. Consider the lead process before you commit. Good Question: What is the process for getting me a lead and does it realistically work for my business?

Advice for Lead-Generation Service Users

Oftentimes, lead-generation services are a better fit for new and small companies. They tend to have fewer internal resources to manage marketing and don’t mind if the work is somewhat inconsistent.

These smaller and early-stage companies can often afford to charge a bit less too, meaning that they can get the value shoppers. If you don’t know how to go about creating an online presence and can’t pay someone to do it for you, these services may work out for you.

But buyer beware — even if the customer and workflow factors are good, that doesn’t make the lead-generation service a good fit for your business. You have to understand the fine print of the deal. Here are a few business factors to take into consideration before taking the plunge:

  • Is there a contract? Getting locked into a year — or three — can be dangerous before you know if it is a good fit. See if the company will let you do a 90-day trial before purchasing. A contract agreement isn’t necessarily a deal breaker, but you should be very confident before you sign. Find another vendor in your area that uses the service and call them for honest feedback. If you aren’t comfortable talking to your competition, try an electrician or HVAC company you are friendly with. 
  • How are the fees structured? Often you can either pay a fee upfront and pay less per lead, or pay nothing upfront but pay more per lead. Don’t gamble with money you aren’t willing to lose. If cash flow is a problem for you, don’t promise to pay a monthly fee with no guarantee that you will book work. Remember, a lead is not a sale. You often end up paying for leads that don’t convert into sales. Have a plan for managing that expense.
  • Is there a clear (and easy) process for disputing charges? You will inevitably pay for a “lead” that is spam. You should know upfront how easy it is to mark a call as “bad” and not get charged for it. If the company makes this process unnecessarily difficult or cumbersome — to the point that you don’t have time to mess with it — you will end up wasting money.
  • Is a basic listing free? If so, start there. See if you get any calls from just a free listing before you pay to increase your presence. You may not get a lot of calls from a free listing, but it can give you some indication of the type of customer and volume you would be dealing with.
  • What is your loyalty plan? The best paid lead is one that you don’t pay for the second time. Make sure that you create a connection with the customer, leave behind materials that make it easy to get in touch with you directly next time, and give them a compelling reason to be loyal to you in the future. This way, you aren’t paying for leads forever.

If you decide to use a lead-generation service, you should track your return on investment carefully. Keep a tally of the customers and revenue attributed to the service. Track how many calls you are getting versus how many jobs you are booking. Even if you aren’t being charged for those calls, you don’t have time to waste on a bunch of looky-loos. That is a hidden cost you want to factor into the value.

Paid leads are neither “good” nor “bad.” They are simply a tool like any other. Caution, wisdom, and asking good questions along the way will help you make the right decision for your company. 

About the Author

Anja Smith is managing partner for All Clear Plumbing in Greenville, South Carolina. She can be reached at


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