How Not to Buy Leads

Posted by Dan McDade

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on Dec 12, 2017 4:28:44 PM

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Last week a prospect told me that he needed higher quality leads than were currently being provided by two third-party outsourced solution providers.

His definition of a lead was the loosest that I have ever heard. An employee of a targeted company needed only to download some content to be qualified as a lead. It did not matter if they were ready to buy – or even qualified to buy. As long as they worked for XYZ Company and downloaded the content they were a lead.

When I challenged him on the value of these so-called leads he said that the recipients of the leads were interested in having a relationship at any level in targeted organizations.  

Candidly, I doubt that is actually how the lead recipients feel.

Here, in my opinion, is what is wrong with this approach to lead generation:

  1. Lower-level workers are 2.5 times more likely than higher level executives to download content. Lower level workers give up their digital body language (score points in marketing automation) while more senior executives do not.
  2. Not every deal has to be sold to the President or CEO. However, it is much easier to navigate from the top down than it is to navigate from the bottom up. The lower level employee that downloaded the content is likely the last person you want to start a sales cycle with.
  3. Finally, the lead definition was being driven by the objective to reduce cost per lead and not by the objective of providing real value to sales.

During another PointClear prospect call, the contact stated that his source of leads, appointment setting, ended up with just four out of every 10 leads delivered being qualified. The cost of an appointment was $900.

More than half of the appointments generated weren’t qualified, so that means the cost per qualified appointment was actually $2,250.

It is highly likely that this buyer would never have agreed to spend $2,250 per lead – but he agreed to spend $900 per lead with 60% of the leads being disqualified—a waste of both money and sales’ time.

Neither one of these marketers were buying leads for low-cost commodities. In both cases the they were intelligent and cared about their jobs. They both sold relatively expensive software solutions. In the first case, the maximum allowed cost per lead was $125. In the other case, it was $900 per lead (with an effective cost of $2,250 per qualified lead).

In both cases the sales rep receiving the leads would follow-up on the first and maybe the second batch of leads and then disregard every subsequent lead that came from those sources. I estimated that the qualification rate on the $125 leads was about 9% and we know the qualified rate on the second source of leads was 40%. No sales rep is going to follow-up on leads where only one of 10 of them is qualified. They probably aren’t going to follow-up on a source of leads where two out of every three are disqualified. 

Want to know how much a lead should cost? Go here and find out.


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