To Refund Or Not To Refund – A Lead Generation Company’s Dilemma

Refunds are something that every lead generation company must address at some point.  Who has not heard “your leads are bad” or “these leads suck” from a client at one time or another?   While it may seem like a minor aspect of a lead generation company’s overall business, ambiguous or non-existing refund policies can lead to client dissatisfaction and ultimately hurt a company’s reputation in the marketplace.  However, presenting potential buyers with a clearly-defined refund policy reflects your company’s professionalism and desire to provide buyers with a quality product that you stand behind.

What is a bad lead?  Ask 100 people and you will receive 100 different answers.  To a lead seller, every submission is a valid lead.  And you will find buyers across all verticals that will say a lead is “bad” unless the buyer can pitch the prospect.  Being stuck in the middle, it is the lead generation company’s responsibility to remove the ambiguity and set expectations on what leads will, and will not, be accepted for a refund.  boberdoo.com has seen it all when it comes to refunds and we discuss the risks and benefits of the 4 most common refund policies below.

Open or Non-existent Refund Policy

This is the unofficial policy of many lead generation companies, and it is easy to understand why.  The temptation to not address or avoid discussing refunds is high, especially with commissioned sales reps.  Refunds are a hard topic to discuss so open refund policies often lead to more initial lead sales.  This method also allows a lead generation company to address clients on a one-off basis and negotiate specific policies for specific clients.  However, an open or no refund policy can often lead to refund abuse (we have all seen the lead buyer that refunds 90% of the leads received), ambiguity among clients and ultimately lead to unhappy clients down the road which can hurt your reputation.  More importantly, this method requires company resources to process the refunds and makes it harder to calculate the true cost of leads.  It can also make it more difficult to attract quality lead sellers if the refund rate has a high variance.  These risks are acceptable for many lead companies and ultimately built into the price of the leads but for others, ambiguous refund policies lead to decreased profits.

“No Refund For You”

Like the soup nazi from Seinfeld, every lead company would secretly like to simply say “No refund for you” and be done with it.  The benefits are fairly obvious, it is easy to calculate the true cost of leads and is attractive to lead sellers.  However, not offering any refunds may turn off potential first-time lead buyers and can make the pitch more difficult for sales reps.  Also, every lead company experiences a run of bad traffic eventually and must address these issues when they arise.

Percentage-based Refund Caps

This method of addressing refunds allows lead generation companies to reduce the ambiguity and presents potential buyers with a policy that shows you stand behind your leads.   Experienced lead buyers know that a certain percentage of leads are always going to be “bad” and can factor it into the overall return-on-investment of the campaign.  It also allows the lead generation company to minimize the resources required to process the refunds (or eliminate that cost altogether by automatically approving them if you have a boberdoo.com system) and accurately calculate the effective cost-per-lead.  However, as you may guess, allowing a buyer to refund up to a certain percentage of leads pretty much guarantees that the buyer will refund the max allowed, regardless of actual lead quality.  This effectively becomes a price reduction for your leads.

Narrowly-defined Refund Policy

Companies that clearly and concisely define a set of reasons for which refunds will be approved are the most likely to find the “sweet spot” between satisfying lead buyers requirement for a quality guarantee and lead sellers need to know what leads they will, and will not, be paid on.  The key to this method is to develop reasons that can be quickly proved or disproved.  The most common refund reasons that fall into this category are: phone is disconnected, email is returned undeliverable and lead is outside of the qualification parameters.  These reasons can be verified with a single action and do not require many resources to process.  Avoid reasons that require multiple attempts to verify, like not interested, as they force the lead generation company to actually speak with the lead before the refund can be accurately processed.   With a boberdoo.com lead distribution system, you can customize the refund reasons you allow on a lead type-by-lead type basis, giving you maximum flexibility to find the right balance for your lead generation company.

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Refunding leads is an important topic for lead generation companies and one that must be addressed upfront to ensure long-term success.  Be proactive and develop a policy for your business that is clear, concise and allows you to maintain a profit margin across all of your buyers.  boberdoo.com produces lead distribution systems that allow you to track, manage, route and bill leads based on custom business rules you create.  If you would like to learn more about refunds in the boberdoo.com system, please click on the Contact Us tab or call 800-776-5646.


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