atom42 - 12:07 pm on May 21, 2011 (gmt 0)
I would just add to this the importance of getting a test period into your contract. Test's allow you to not only check the quality of the lead they are sending you, but also your ability to close them, and finally (perhaps most importantly) the levels of service you're going to get from what might just become one of your most important suppliers.
Regarding the cost - it's worth spending a minute to understand the mindset of a lead generator who is happy to take on the cost of the media activity.
Imagine yourself in their shoes. Their goal is, understandably, to make as much money as possible out of the relationship. This means:
1. Spending as little on each lead as they can
2. Charging as much on each lead as they can
3. Doing the above in the most time efficient way possible
The times when I've seen these sorts of relationships go sour, is when the buyer of the leads wants more volume. To get more volume, you might need to be more aggressive with your PPC activity (by either bidding more on your keywords to get higher rankings, or buying new keywords which might convert at a slightly lower cost per lead).
Whilst both of these options might work for the recipient of the leads, they don't for the lead introducer (who loses out on point 1, and arguably point 3 of the above list).
Given the nature of your business, you might only be able to actually handle a certain number of leads yourself, which means you might not be that troubled by volume. It really depends on your capacity.
If however, you are in a volume game, you might want to consider offering them a tiered payment structure, where by the amount you pay per lead goes up as volume goes up. This means that they will continue to be motivated to drive increased volumes for you.
As a final point - I would suggest you ask for a fair amount of visibility. Introducer's often shun this, as they feel that they might be giving away their own intellectual property, or leaving them open to you just learning from what they're doing and then trying to do it yourself. If you're greeted with this response, assure them that you have no intention of doing this yourself, but that you simply need to know where your traffic is coming from to make sure you're not going against any regulations which may exist in your line of work. I'm no expert in that space, but I imagine your messaging will need to be fairly closely controlled. You might also request that they run Google Analytics tracking on all their links, and link the adwords account to your analytics so you can have full visibility.
I'm waffling. In short:
1. Get a test period in the contract
2. Try to have a rolling monthly / quarterly contract
3. Calculate how much you can afford to pay for a lead, based on your AOV, LTV and Conversion rate
4. Offer them a tiered payment model so they can earn more for more volume
5. Request as much visibility as possible in all their activity...
6. Don't be too worried how much money they're making, as long as you feel that you're making more :)