Cap the buyers per market or sell to everyone who shows up

Question

Numbers first. I've got a small seller lead product running in four metros. Right now every lead goes to three buyers at once for $95 each, so $285 a lead. Two of those buyers have told me they'd pay $340 for the same lead exclusive, which is $55 less than I make now, but they'd take more volume and they'd stop complaining.

For anyone new to the term, exclusivity means a lead goes to one buyer only. Shared means the same seller's information goes to several buyers who then race each other to the phone. Shared makes more revenue per lead. It also makes the seller's experience worse and the buyer's close rate lower, because four people call the same tired homeowner in an hour.

My close rate data is thin. Buyers self-report, which I don't trust. What I can see is churn. Shared seats churn at roughly 20% a quarter. My two exclusive test buyers have been on eight months without a word.

So: less revenue per lead, better retention, harder to scale because each market only supports so many exclusive buyers. Or more revenue per lead and a churn treadmill. What's wrong with how I'm framing this?

bmoreno23 · Answer

Doesn't the seller getting four calls in an hour eventually hurt you? Word gets around and your response rate on the next campaign drops.

derekj19 · Answer

@ember not naive at all, that's a real cost and it doesn't appear anywhere in ledger's spreadsheet. If shared leads burn sellers faster, your acquisition cost per lead creeps up over time and you'd blame the channel, not the distribution model.

mitchell_ray4 · Answer

20% quarterly churn is brutal. That's the whole seat base turning over inside two years.

monica_tran3 · Answer

You're comparing revenue per lead when you should compare revenue per market per year including the cost of replacing 20% of your buyers every quarter. What does it cost you to land a new seat? If it's four hours of your time and some ad spend, put a dollar figure on it and rerun the $285 against the $340. I'd bet the gap closes and might invert.

ryanmck27 · Answer

Is there a middle option where the lead goes exclusive for 24 hours and then opens up to the other two if the first buyer hasn't logged contact? Seems like you'd keep most of the revenue and most of the buyer goodwill.

angela_burke · Answer

@halyard that's how I've seen it done and it works, with one catch. You need the buyer to actually log the contact, and buyers lie or forget. So you end up needing call tracking or a click-to-confirm that they'll ignore. It's a product problem, not a policy problem.

mikeoconnell7 · Answer

ledger, the exclusivity model also caps how big any one market gets for you, which @thatch's math doesn't cover. Four metros times maybe two exclusive buyers each is eight relationships. Losing one is 12% of your revenue. Shared spreads that risk across more accounts even if each is flakier.

nataliehsu · Answer

How do buyers even know they're getting a shared lead? Do you tell them?

tonyv88 · Answer

@plumb you tell them, and the ones who don't ask find out on the phone when the homeowner says you're the third call today. That's the moment the seat churns. ledger, I'd take the $340 exclusive with the two buyers who already asked and hold the shared model in the other two metros for a quarter. You'll have real comparison data instead of self-reported close rates, and eight months of no complaints from a buyer is worth more than $55 a lead.

Cap the buyers per market or sell to everyone who shows up

9 replies