Cost per lead or cost per contract for judging a vendor?

Question

I do underwriting for other people and I've been asked to look at prospecting vendors for the first time, which is a different shape of problem than a rent roll. The two vendors both quote per lead, roughly $80 and $115, and the cheaper one has more volume.

Cost per lead is the number you can actually verify. It's on the invoice, it's countable, and you can compare vendors on it the week you start. Cost per contract is the number that matters to the buyer's return, and it takes months to have a sample large enough to mean anything, plus it's contaminated by how well the investor's own acquisitions person converts. If the closer is bad, a good vendor looks expensive.

So I can measure the wrong thing quickly or the right thing slowly, and in between I have to make a recommendation. For anyone who has actually hired one of these, which number did you sign on and which one did you wish you had signed on.

luis_carrera · Answer

I've spent months building models on this kind of thing without hiring anyone, so take the shape of the argument rather than the experience. The problem with cost per lead is that lead is a word the vendor gets to define. One vendor's lead is an owner who said maybe in six months. Another's is anyone who didn't hang up. Until the definition is identical you're comparing two different products at $80 and $115 and the spread tells you nothing.

That's why I'd lean toward cost per appointment. An appointment is harder to fake because it either happens on a calendar or it doesn't, and it comes early enough that you get a sample in weeks instead of quarters. Sextant, if you can get both vendors to agree to a written definition of what counts as an appointment, including what happens when the seller no-shows, you'd have something comparable that doesn't depend on the client's closer being any good.

Cost per lead or cost per contract for judging a vendor?

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