Strategic stumbles lead to opportunities

Brian Smith of Comparison Engines has pointed out that customer service at comparison shopping sites is terrible. No doubt this is because customer service is seen as a cost center rather than a profit center. And no doubt, because of the conditions industry-wide, there’s no real pressure to improve across the board.

Running a successful comparison shopping site is not easy, and the number of competitors entering the space (latest is cash-back Jellyfish, which is like a Yub.com with the crap thrown out) is small, so maybe the comparison shopping sites figure they won’t have to improve on customer service. But this is a strategic error, and eventually someone will devote enough resources to support to steal a march on their competitors.

A similar situation is developing in mortgage-lead-generation. The refinance market is cyclical and now that refi volume’s down, the bigger lead generators and aggregators have started selling the leads five times instead of four times, a pretty big break with standard industry practice. I’m sure the demand is there – just because refi volume drops doesn’t mean the demand for leads drops. Lots of brokers out there who staffed up on loan officers when times were very good. But selling leads additional times means more competition for the lead, which is as good as a reduction in lead quality – both mean lower conversion rates for the lead.

(Aside – I’m not entirely sure why a company would axe its lower-quality affiliates while simultaneously bumping up the number of times a lead can be sold – trying to balance out quality while optimizing for revenue, maybe, since affiliate leads must be paid for while that fifth match is just gravy.)

Although it’s hard to do right, it’s a lot easier to start a lead generation business than it is to start a comparison shopping site. Any steps taken by the bigger lead generators to lower lead quality just increases the chances that clients will shop around, and find an upstart that delivers a higher-quality product. So this is another strategic error. Especially when many parties (including – plug time – the Root Exchange) are changing the infrastructure to make it easier for buyers to get together quickly with new sellers of their choice.