Lending Tree Predictably Changes Pricing Model
If you and I have ever talked candidly about the lead-gen model, you know how opinionated I can get at the prospect of placing your customer acquisition eggs into someone else’s basket.
Well the sharp folks over at LeadCritic reported on some impending pricing changes being implemented by Lending Tree, and they come as absolutely no surprise over here. Here’s a direct quote from their article:
While I am on the topic of LendingTree, I might as well mention that they removed their closed loan fee from their fixed filter leads. No more will lenders need to pay their hefty fee for every closed loan, but that does not mean the leads just got cheaper or your ROI is going up. Instead the up front fees went up to compensate for the change. Prices are now range from $20 to $100 per lead. Now let us not forget that you are paying for a long form lead, so with the premium prices you are getting additional data and hopefully a consumer with strong intent to borrow. This puts LT in a the same boat as their competitors with regards to upfront risk of buying a lead. Prior to this change a lender would have no problem paying a fee for a loan they profited on, but now to pay a premium with out the guarantee of closing the lead makes LT look a whole lot riskier for the new lenders coming aboard their network.
1) Lending Tree is abandoning the fee their clients pay when they close a loan (I’ve heard this fee can range from $700 to more than $1,000!).
2) Instead, they are increasing their fees on the front end. LeadCritic reports a range from $20 to $100. My guess is that for any type of quality, you’ll pay closer to $100 than $20, and that lead is STILL being sold to your competitors at the exact same time.
So let’s analyze the motivation behind this change, shall we? Do you think Lending Tree’s pricing change was created to benefit them or their clients? I’ll go out on a limb here and postulate that this pricing change will ultimately benefit Lending Tree. With the prospect of higher mortgage rates in 2010, it stands to reason that a) refinance activity will drop off a cliff and b) their volume of quality leads will decrease. The question becomes: how will Lending Tree adjust for this lost revenue? Better product or higher prices?
I’ll finish this article with a quote I wrote in a July 2009 article entitled “My 12 Month Outlook On the Mortgage Industry and Beyond”:
If you’re dependent on Lending Tree to fill your pipeline every month, and you haven’t been reinvesting into those relationships, you’ll be feeling the pain in your stomach that kept you up at night only 12 short months ago. Who is Lending Tree looking out for anyways – you or them?
I think we have our answer to that question. Again, if you are a lead gen shop and you’re doing a poor job deepening relationships on the back end and you think you’ve got things figured out – chances are good that you’ll struggle mightily in 2010 and beyond. Call us at Top of Mind and begin the shift from purchased leads to organic business. It won’t happen right away, but if you make minor changes in your marketing investments and behaviors today, you’ll look like a genius in 2011 and beyond.