Another look at performance-based leads services: What are the boundaries of good value?

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servicewhale
Servicewhale.com offers a pay-if-successful revenue model, but is it a good deal for contractors?
Servicewhale.com offers a pay-if-successful revenue model, but is it a good deal for contractors?
Servicewhale.com offers a pay-if-successful revenue model, but is it a good deal for contractors?

A few weeks ago, I reported on renovatesimply.com, an IPhone application that allows consumers to obtain ballpark cost estimates for renovations and if they wish, to receive a referral to a single renovator contractor who, if successful, pays a 5 per cent commission on the order.

This concept seemed fair enough to me: The contractor isn’t required to pay for and chase dozens of crappy leads for which he pays (and competes to win.) And the sales commission/referral fee, while significant, isn’t in my opinion too bad, considering it is an exclusive lead without direct price competition.

There’s another organization with a similar pay-if-successful model, but it has a few differences. Servicewhale.com is expanding in a variety of US markets with a slick ratings-fuelled website (it appears to grab ratings from Yelp if there isn’t enough direct contractor experience with its own service.) Like renovatesimply.com, the contractor pays if successful, but there are a few differences: Servicewhale requires contractors to commit to pricing at least five per cent before their standard pricing, and it takes a 10 per cent commission. I realize “standard pricing” can be manipulated — but if you were to use Servicewhale as a leads provider and you wanted to retain your margins, you would need to budget five to 10 per cent HIGHER prices — not lower ones.

As well, as Michael Stone observes, Servicewhale advises consumers to consider quoted prices as “negotiable” — yep, you can expect your clients to push you to lower your prices even more.

renovatesimply.com
The renovatesimply.com contractor landing page. this page isn’t visible without some searching as the organization says it isn’t actively recruiting new contractors for its commission-paid-when work committed model.

There are some advantages with the service, of course. In theory, the estimating and initial communications costs for contractors are much lower; and since contractors set the criteria behind their price quotes (and can either automatically or conditionally accept them), presumably they can build enough margin into the work to handle the cost factors — while saving money and avoiding up-front lead generation and marketing expenses.

But these factors reduce your control, visibility, and ability to truly manage your business.

As Stone advises, I’d be very careful in signing up with this service (and I wonder if renovatesimply.com, if and when it scales up from its current Texas base, will find it necessary or tempting to change its service conditions and rates to more closely reflect Servicewhale.com.)

Conclusion: If you want to offer a ballpark estimating function online, why not do it yourself? You probably can contract with an offshore application developer to build the basic framework for a few thousand dollars at most. Then you can offer the service under your own brand identity, in your own community, and the revenue you receive from inbound inquiries/leads will presumably be much better without paying the third-party commissions.

You know your average job size and business volume. If you have to pay between five and 15 per cent or more per sale — how much would that translate in annual business costs; and how much would it cost for you to create and test your estimating application? Calculate the difference and you’ll see that some up-front work and the risk of not getting the application right at first shot probably is offset by massive savings and much better control over time.

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1 COMMENT

  1. I’d say that 95% of the time it is the lead generation company that is the winner. I typically spend less than 2% of my revenue on marketing, I would still have to do my own marketing if I signed up with these companies. Right off the top I would have to increase my price by 5-10%. One of the implied, if not stated benefits that these companies promote is that customers will get a better price by using them. Whoever gets the job would have to raise their price to pay for this service if they intend on staying in business. What they are really doing is adding a middle man that causes renovation prices to go up. Another fallacy so often promoted by these companies like renovatesimply.com is one of needing to compete as much; “We want contractors to get great jobs, not compete with each other.” Anybody looking for a renovator will at the very least peruse other lead generation websites and get names and so there is competition.

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