Lead generation is one thing, but making sure that you’re getting the best value for your dollar out of your advertising budget is just as important.
When we first started our proven system for helping roofing and solar contractors get the leads they need to expand we were astonished to see just how much the average contractor was paying per lead.So, the question for most of us is this: are you paying too much for your roofing or solar leads? Read on and we’ll show you how to figure it out and what you can do about it.
Calculating Your Lead Generation Costs
Marketing is a numbers game, especially if you’re involved with the digital side of things. Your metrics are everything in the end.
For any given lead source, you’ll simply want to divide the amount spent by the number of leads generated. It’s a straightforward equation.
What you’re really concerned with, however, is the conversion rates of those leads. Everyone in the world can schedule an inspection with your company, but if no one buys in the end you’re just out a ton of advertising money.
Leads vary in quality depending on their source, often by quite a bit. You can calculate your ROI by seeing how much revenue was generated through the source you’re calculating compared to the advertising cost.
For instance, if you sink $10,000 into a new campaign on Google AdWords and net 50 new leads, you’re spending $200 per lead. If half of those leads pan out into $500 dollar jobs, you’ve spent $10,000, made $12,500, and a 25% ROI.
The low ROI indicates you’re probably going to need to tweak that campaign a little bit.
Keeping down the costs of leads is the best way to increase your final ROI and make sure you have the revenue needed for more growth and a more profitable business.
The Industry Averages
Both solar and roofing contractors tend to face the same problems. Before we touch on that, however, let’s dive into the usual costs per lead:
- Roofing leads generally run from $50 to $200 depending on the source used.
- Solar leads run $200+ in most cases and are area dependent. The cost of a solar lead in California, for instance, runs around $2,000 while across the border in Oregon the price drops to about $415.
If you’re paying more than that, you’re already off to a losing start. These numbers can be cut down much further, however, by using the right advertising strategies.
The sad part is that for most contractors these costs aren’t only high… they’re also working with a low conversion rate. 7% is average, for instance, in the solar industry with some areas tending as low as 4%.
High cost-per-lead and low conversion rates are a losing proposition for everyone but the person being who’s distributing the leads.
The failure isn’t always on the contractors either, but instead comes from where those in the roofing and solar business tend to source their leads.
The Usual Suspects
Both of these industries have one big thing in common: they tend to use the path of least resistance when it comes to advertising.
There are two main sources of leads used through the construction industry:
- Google AdWords
- Third party lists(ie: Angie’s List)
They’re pretty much a constant and they’ve given many people a dim view of digital marketing as a whole. It doesn’t have to be that way, while both of these are easy to use for those without a ton of experience marketing on the web they also both tend to drive up your cost-per-lead.
Other areas we’ve seen people losing money in include the following:
- Television advertisement
- Radio advertisements
- Advertising in print
The problem with all of these is twofold: they’re require a hefty up front investment and they’re almost impossible to track unless you make sure to implement a way of doing it. While offline marketing is still effective it’s falling out of favor with many businesses since it’s nearly impossible to track accurately.
Third party list services were the biggest offenders for wasted budget in our research, with Google AdWords coming in close behind.
Why These Services Fail
The concept of a website like Angie’s List seems great. They list local businesses, people pay them to view, and everyone wins. You get leads, the customer gets great service, and the website makes money for their service.
In actuality, we have examples like a $2,500 advertising budget being turned into 25 leads and 2 customer contacts.
That’s kind of crazy, right?
Even worse? That website sold those same leads to every other contractor in the area as the potential customer was checking out the companies in the area. Sites like this really only help contractors who have deep enough pockets to consistently underbid the competition.
Google AdWords suffers from much of the same problems. While the CPL is generally lower, you’re still paying for every click on your advertisement. Anyone who’s comparison shopping will be clicking on more than one of those ads and likely scheduling estimates with more than one company.
There are much better ways to get ahead when it comes to lead generation.
Reducing Lead Cost By Examining Your Sources
Hopefully, you’re ready for just a little bit more math.
You need to take your lead sources and figure out the conversion rate from each source. Divide the number of leads by the number of sales and you’re right on track to figure out what can be removed.
If you’re still uncertain, calculate the cost per sale. Divide the revenue derived from the source by the amount sold.
Reducing your overall advertising budget will usually end up increasing your ROI and you can even keep the same overall budget and just slide money to those channels which perform better.
All leads should be examined. A good lead is ready to buy and waiting eagerly for your call, a neutral one is on the fence, and a bad one has probably called everyone in the area already and will end up going with the cheapest service they can find.
Conversion rates are really what matters in the end, digital advertising is easy to scale no matter what venue you’re working with. It’s just a matter of putting more money into the things that have proven to work.
These calculations can take some time but having the hard numbers in front of you will disabuse you of any illusions you might have.
Your advertising budget should serve you, it shouldn’t only be serving the company bring in leads. A low, or negative, ROI is a growth-killer and should be trimmed.
Cheap Leads Don’t Need to Be Low Quality
Just because a lead is more expensive doesn’t necessarily mean that it’s more likely to convert. Indeed, some of the highest priced services out there are notorious for creating negative ROIs for the people who use them.
With the right strategies you’ll be able to bring in leads at much lower costs… and increase your conversion rate.
Sounds too good to be true?
It’s not. Here’s the thing: in many ways the construction industry hasn’t quite caught up with technology yet. Third party lead generators and simple PPC ads like Google thrive for blue collar industries because they’re simple to use and seem quite effective at first glance.
We both know your numbers probably tell a different story once the math is done with.
Instead, there are a variety of avenues which are left virtually untapped and can generate cheaper, better quality leads for your business. You’ll still have to sell the customer, but the more calls you’ve got in the sales office the better off you’ll be.
What you need is a service which knows the industry and has a proven system for generating high-quality, low-cost leads through different channels than the usual fare.
Cutting the Fat
If you’re looking at the numbers and wondering why you’re even paying some of these people, you aren’t alone. Low ROI and leads that just don’t seem to convert are common problems across the construction industry as a whole.
The first step to getting on track for some serious growth is to start cutting out those parts of your budget that aren’t giving you a good return. For most people, anything under 200% ROI is unacceptable, but really you should be pushing higher.
Of course, once you’ve trimmed away that which doesn’t serve you’ll have some extra revenue.
So what do you do with it?
A Better Way to Get Solar and Roofing Leads
High-cost, low-quality leads don’t need to be your reality.
In some cases our service has gotten leads down as low as $7 each. Even better, these are exclusive leads, unique to your company.
We have proven results in the field, working with fast-growing solar and roofing companies across the US.
If you’re interested in seeing how we do it, then check out our free case study.