Once upon a time, in a land far, far away, there was a small wooden cottage in a forest. This was home to the sales fairy.
Thanks to the internet the sales fairy was able to sell lead gen services to hopeful business owners. Signing them up to unapproved mailing lists she was able to spam their Inbox until a few finally said Yes.
You’ve experienced it, haven’t you?
If there’s a wild west of sales and marketing, lead gen is it.
Why do you need lead gen?
Every business is dependent on lead generation. Bringing in new customers is the lifeblood of the business. In tough economic times it’s likely that existing business slows down, making new business even more attractive.
Nobody questions the benefit of generating leads, the question we’re tackling here is how you go about it. These seven questions will help you answer whether paying for a lead gen service is the right thing for you.
1. What’s your lead gen objective?
To answer this question you need to dig into your transaction type. If your business comes mainly from loyal customers then lead gen will be less important to you.
On the other hand, if your product or service is bought in a random and infrequent pattern then you might need to proactively generate leads.
Say you provide branded baseball caps and pens to other businesses. These are mainly one-off transactions. You can imagine the instruction to the person placing the order:
“Who did we use last time? Oh, don’t worry if you can’t find it, just have a look on Google..”
You need to be front of mind when that conversation happens. If you haven’t figured out exactly what your lead gen objective is, either you waste time and money targeting the wrong people or you have the agony of missing opportunities like this.
2. Who is your lead gen targeting?
This too is a critical question that needs a granular answer. If you’re targeting solicitors within 20 miles of your office you can probably create a list of relevant firms.
Yet who exactly would make the decision to buy your baseball caps? Would it be an office manager or a partner? If so, which one? Which companies use promotional items and which don’t?
Lead gen “experts” will promise to provide you with a list. But there’s a difference between a list, any list, and a finely tuned, filtered list that identifies your real decision maker.
What if your new “lead” only agreed to speak because they were hassled by the lead gen company into agreeing an appointment? The lead might be worthless, but you’re still paying for it. Agreeing a definition of quality is really important.
The more nuance there is in the answer to this question, the harder it is to blitz a long list of email addresses. You might find the answer more easily by connecting with people and having a conversation.
3. How expensive is lead gen?
The important thing to remember with lead gen campaigns is that they are competitive. You won’t be the only business trying to target those solicitors. The more people targeting, the higher the cost.
If the current economic crisis makes you more inclined to try lead gen then this factor is really important. You won’t be the only one with that plan, likely resulting in inflated prices for digital services like Google Adwords or Facebook advertising.
The key consideration when evaluating cost is how much you need to spend to deliver a quality lead. You need to take into account all the failed links and emails and the time spent persuading reluctant leads to convert into customers to establish this.
You’re likely to be surprised at how this adds up.
4. How effective is lead gen?
This follows directly from the question of cost. Consider how efficient your sales process is when you’re introduced to a potential client, or when you bump into someone at an event and open up a conversation.
The effectiveness of this is likely to be many times better than your conversion rate from cold lead gen sources.
Lead gen as a service might deliver you one customer in 100 contacts. That’s not a problem if you have the time and money to service all those contacts.
But contrast this with the effectiveness of personal introduction: One client out of every two conversations? Maybe even better if the referral is a really warm one.
5. How important is new business anyway?
This is the proverbial elephant in the room when it comes to lead gen.
There’s a very approximate rule of thumb we apply to companies opening up new channels or markets: It costs twice as much as you expect and takes twice as long.
That’s probably an under-estimate.
One survey after another demonstrates the financial efficiency of keeping your existing customers ahead of recruiting new ones. Yet many business owners apply their focus the other way round. The results are expensive and – too often – disappointing.
For many businesses the most effective form of new business is selling new products and services to existing customers.
Because the relationships exist you have a ready-made research panel, lots of goodwill and the opportunity to test out ideas before you spend too long on development.
6. How damaging is lead gen to your reputation?
If you just think of lead gen as a numbers game (and this is how many people selling the service think of it) then why care about your reputation.
If you’re happy to take a flexible interpretation of GDPR regulation and blitz a thousand target companies you might be happy with 10 proper leads. 1%.
Perhaps you’re not concerned about your company name being associated with this sort of spamming. Perhaps you should be.
If the other 990 companies simply ignore your message then there’s no harm done.
But it’s well known that bad news travels faster than good. It only takes one or two people to object to your unsolicited approach and you can find yourself in front of industry regulators or called out on social media.
Too often these lead gen providers focus only on the results they get you, not the reputational damage they leave behind.
7. What’s my alternative to lead gen?
Ask yourself where your business comes from. Maybe your industry or offer makes lead gen a really viable proposition.
But for many businesses sales comes from introduction and referral. Someone who rates you introduces you to someone else and the magic starts.
That’s not always a quick way of building business, but it’s cheap and it’s highly sustainable. Instead of chasing needles in haystacks you’re building a community.
How can you increase the rate of referral? Can you ask for introductions more openly? Can you extend more invites to mailing lists and grow connections into leads over time?
To summarise, lead gen is an unregulated industry.
The sales fairy might come knocking with her siren calls and promises of easy money, but please make any decision to fly away with her an informed one.