Good marketing costs. And where confidence to do it in-house wavers, we answer the question, "...should I buy leads."
In our years of small business consultancy, one of the most contentious topics of discussion has been "...should I buy leads."
In alot of ways, it would be much easier for marketers to sell leads rather than solutions.
Leads are ready now.
A solution could be ready tomorrow, if you are willing to invest today.
There is a big difference, and herein lies the issue.
Whereas the decision comes down to the individual, we aim to provide a little food for thought to help you arrive soundly at your destination.
- 1 Things to know before you decide to buy leads...
- 2 When we first started...
- 3 Characteristics of a sales lead
- 4 Sales cycle & buyer readiness
- 5 Lead brokers and buying leads
- 6 Buy PAYG leads vs. credit account
- 7 Exclusive leads vs. non-exclusive leads
- 8 Alternatives to buying leads
- 9 Cost comparison: buy leads vs. lead generation
- 10 Long term ROI calculations
- 11 Market share ownership vs. buying leads
- 12 Brand equity
- 13 Exit value
- 14 The sum up...
Things to know before you decide to buy leads...
The prerequisite for every sale is a lead.
Yet, there are many ways to receive leads.
Traditional paid methods of marketing such as advertising and PR are costly and by experience, 'hit and miss'.
Too many hard to reach variables involved: timing, positioning, prominence, readership etc.
Whereas generating leads by organically growing the market visibility of your brand is investment intensive.
This requires real patience.
But, as always, there are ways to cut corners.
One such 'short away round' the process of generating sales leads naturally, is to simply buy leads from a business which already has them.
Buying leads is a well known short cut for business growth.
A growth hack 1.0, if you will.
But buying leads comes with its own pros and cons.
These ought to be considered before making a decision, either way.
Within this article, we address the practical advantages and disadvantages associated with the question asked by so many business owners, "...should I buy leads?"
When we first started...
When we first started our business in the small business marketing space 8 years ago (2010), things were a lot less steep online.
Google's ranking software was a lot less sophisticated and new comers had a lower hurdle to cross upon getting in.
Some early wins...
Exact match domains were golden for the advantage they gave businesses and the keyword long tail was largely unexplored.
There were many quick wins available. Low hanging fruit was much more abundant and easy to come by.
ROI was much larger and swifter returns which meant SEOs could demonstrate their worth far more persuasively.
Whilst SEO was never quite the main string to our bow, we definitely learned to leverage its benefits for our clients.
Early results were game changers.
Start-ups working from scratch were able to go from 'nought to...tens of leads per week' within a couple of months, with relative ease.
Our main challenge was digging around until we found soft enough ground to make our impression.
Once we found our 'in'....we set our aim on the targeted keyword and simply chipped away until we hit that 1st page, with a minimum of 2-3 pages within the top 5 results.
Local area landing pages in particular were a highly successful method of achieving gains online for local service provider clients.
With such landing pages, within a matter of minutes from indexing them on Google Webmasters we'd have the phone ringing with ready to buy customers for our clients.
All was going well until Google got smart-er and updated it's software.
Things changed suddenly online...
As the shutters came down on many a campaign built upon thin, duplicate content things got harder to bring in the results.
These results were once staple bread and butter.
Coupled with this, we particularly found that within our very competitive space of small business marketing, tech start-ups like Hubspot began saturating our favourite niche search terms.
Such 'little earners' previously kept our sales funnel filled.
Soon enough they proved unfruitful and left us having to search further and wider in tougher territory for our gains.
From day dot of start up, we always had a mix of paid leads vs. organic leads.
We tried over time to reduce our 'paid' bill by employing profitable organic tactics.
But as quick organic advantages became to slide off, we felt greater dependence upon paying for leads.
We simply began to buy leads...
Lead brokers became our 'go-to' paid marketing channel.
We thought buying leads would be less speculative than advertising.
We favoured the benefit of being able to pick and choose projects by description or RFP.
This way we could line up the prospects we thought would offer the most ROI.
Dropping the prospects we felt failed to match our strengths.
At our peak in using lead broker services, our average cost per lead would have been £20.00 per lead.
Our average conversion rate of 'leads-to-sale' would have been around 6-1 (6 leads to 1 sale).
Our core service offered was web design back then.
We found it was the ideal entry point for selling our online marketing services.
Our marketing packages, like SEO or content development, were upsell.
Metrics with buying leads for our web design business...
...having bought the lead for £20.00...
...yet spending £120.00 overall (6x leads) to convert one sale...
...our initial service ticket price of £750.00...
...made us £630.00 gross profit per sale...
...any ongoing digital marketing was additional profit. This sometimes totalled up to £4k+ over 18 months.
This simply worked for us and we therefore didn't try and fix it.
Then things changed with buying leads...
However, over time we found the effectiveness of this approach faded out dramatically.
This really knocked our business.
This made us re-evaluate the value for money prospects of us buying leads.
You might ask the question...
What affected the quality?
Were the leads validated, prior to receiving notice?
Yes...(the odd phone number rung out at times, however, this was expected and accounted for in our ROI calculations.)
Were the leads received for projects we wanted?
Were they big enough projects, which would pay enough?
So, what attributed to the drop in quality?
Why did buying leads begin to backfire for us...
It affected so much, that the channel which once gave us a steady flow and was our main source to new business literally dried up overnight.
Our challenge was many sided.
We found the following were the main contributors:
- Web design providers increased exponentially
- ...increasing popularity of CMS products like WordPress...
- ...lowered the barrier to entry and attracted many new entrant designers...
- ...more web designers signed up to buy the leads, which meant first come first serve lead brokers got inundated.
- The mid range got rushed
- ...middle of the road jobs for providers like us (who were not developers, but could customise existing themes) got squeezed out...
- ...nobody wanted the starter projects of minimal value...
- ...unless you had genuine developer level advanced skills, large jobs were simply out of reach.
- Customers became more uncertain
- ...with the market awash with many more web development providers...
- ...professional web designers became devalued in the mid-market...
- ...design projects seemed to be more in demand than web designers...
- ...clients became more choosy.
- Free web design platforms
- ...many business owners saw the investment of a professional web design as a trade off...
- ...professional design vs. a freebie DIY effort...
- ...you often were competing with the thought in the back of the customer's mind to do it themselves...
- ...we had to become more persuasive over the issue of ROI (...remembering that their time is resource invested.)
With all these factors weighing in to suppress our ability to sell, we became pressed to examine our lead generation strategy.
This began at the root.
We first broke down the characteristics affecting lead quality and then began to build up a strategy of achieving this.
Characteristics of a sales lead
The following are characteristics contributing to the overall quality and therefore ROI potential of a sales lead, from our experience:
- The source of the lead generated
- ...what was the identity which the lead made contact with?
- ...what was the value proposition from the outset?
- Expectations set leading up to 1st contact
- ...what were the communications given at the point of enquiry?
- ...therefore what expectations does your lead contact have when speaking with you for the first time?
- Enquiry details collected
- ...how thoroughly qualified was the lead enquiry at the source?
- ...do you have enough detail to make worthy preparation for a solid proposal at 1st sales contact?
- Timeliness of enquiry
- ...how much time has elapsed between the enquiry at source and your notification of availability?
- ...what level of responsiveness will you be demonstrating to the lead contact?
- Mode of contact (i.e. email, phone etc.)
- ...what was the means of contact by which the lead contact made enquiry?
- ...if 2-way conversation, how much of the detail was verified?
- Number of providers lined up to contact
- ...how many providers are either likely, or scheduled to approach the lead contact?
- ...if there an order of preference which is set for reaching the lead contact?
The points above, from our experience, are major factors contributing to the quality of a lead.
We're not suggesting that the points above dictate the outcome, but rather provide a yardstick for estimating likelihood of successful conversion.
Related issues - should you buy leads, rather than generate them yourself...
a) ...if the source of the lead generation has an identity which conflicts with the value proposition of your own business brand - your 1st sales contact could be a steep uphill climb.
b) ...if the expectations set by the lead generator is out of sync with your service levels, then your first sales interaction will involve alot of reshuffling or repositioning in order to get talks into full swing.
c) ...if the enquiry details are lacking in any way, then the 1st sales interaction may be less prepared for.
d) ...if the lead contact perceives your responsiveness to 1st sales contact as sluggish, then you might lose in the stakes for setting a good first impression.
e) ...emails are 1-way communication, whereas the phone is 2-way. 2-way communication enables you to ask questions and verify facts. 1-way does not. Sometimes lead sources offer email leads, rather than phone verified leads. The quality difference is remarkable.
Sales cycle & buyer readiness
The term 'sales lead' refers to an enquiry made by a prospective customer with a service/product provider.
For it to qualify as a viable lead by definition, the enquiry has to be related to the service/product.
But not necessarily about buying.
The sales cycle is a theoretical process of steps which a client will typically go through before making a purchase.
The earlier in the sales cycle, the more investigatory and speculative the enquiry - potentially less ready to buy.
The later on in the sales cycle, the more able, willing and prepared the enquirer is for making a purchase.
Businesses typically value enquiries which are towards the end of the sales cycle, rather than early sales cycle.
Customers who are more prepared to buy, tend to buy more readily.
It's as simple as that.
Whilst we wanted to score points with ready to buy sales leads, we also wanted more inquisitive (window shopping, or top of funnel) approaches too.
This we thought would help our brand recognition.
In our research we found examples of businesses becoming more marketing savvy.
More than often they emphasised on 'whole cycle' strategy by way of a technique called content marketing.
Within such a strategy, businesses seek to be the first source of credible information on anything relevant to their area of expertise.
This established brand trust with audiences much early on.
Prepare your customers for buying and they'll most likely buy from you.
Lead brokers and buying leads
Lead brokers sell leads.
Therefore, they are integral to the question, "...should I buy leads?"
Some specialise in a particular niche.
Others span many industries and niches.
The idea behind lead brokers is identical to financial brokers.
Liquidity providers, package up consumer market deals and offer credit lines to broker organisations to make such products and services widely available to end users.
Search engines like Google provide liquidity to market participants allow ease of access.
Search engines are awash with leads brokers using Adwords (Google's proprietary advert auction platform) to reach the mass market.
Leveraging Google search results enables lead brokers to gather up large market share of web visitor traffic.
This traffic is then expertly translated into sales enquiries (leads).
This is done via professionally optimised website landing pages on broker websites.
Leads brokers will receive newly generated lead contacts by email or phone.
The contacts are then readily made available to service/product provider clients.
Buy PAYG leads vs. credit account
There are generally two predominant types of payment arrangement offered by lead broker, in our experience.
Pay as you go, or a credit account.
Pay-as-you-go (as the name signifies) is a simply an arrangement to buy leads upfront as they are made available.
Service/product providers get the opportunity to pick and choose the leads they desire.
Leads are typically verified by the broker who offers assurances of a standard of quality.
A credit account arrangement means: a prescribed quantity and type of lead set in advance. You're billed monthly.
Miss a payment and you accumulate debt. Fast.
In our experience, business development built upon debt is a recipe for disaster.
A sure way of digging a hole for your business before it even begins.
We advocate both living and trading within your means.
Exclusive leads vs. non-exclusive leads
Each sales lead presents an opportunity to make a sale.
Any particular need of a customer can only be satisfied once.
If leads brokers only sell an individual lead once - this is an exclusive arrangement.
If simply means once sold, a lead cannot be sold again. This is a better arrangement if you can find it.
The advantage with exclusive lead buying arrangements is the that lead broker is promising that you're first to try.
Effectively, each lead comes tailor-made just for you.
The ROI yield from exclusive leads is generally much greater.
Fewer options to choose from would suggest, as long as the need exists, prospects would simply settle to buy from the single provider they spoke with.
This is the conventional thinking behind exclusive leads.
Remember, there are no leads as exclusive as the ones you generate yourself.
Alternatives to buying leads
The alternatives to buying leads i.e. lead generation methods, are investment heavy.
A longer lead time to bearing fruit.
The risk of lead generation campaigns not fulfilling their potential is real.
Building a lead generation campaign yourself comes with the prospect of a deferred reward.
From experience, it is harder to resist the pressure to invest in immediate returns when bills and debts are mounting.
If you hold out for investing in long term lead generation strategy which proves successful, you'll find ROI many multiples of times over.
Just one campaign, if maintained over the long term, could produce hundred or thousands of leads.
The lump sum cost for developing your own lead generation in comparison to the cumulative cost of buying hundreds, if not thousands of leads, is but a crumb.
However, leads are ready made for convenience. They are there, ready, when you want them.
Whereas campaigns carry significant upfront cost and also run the risk of proving loss making.
Having said that you could probably afford to lose 20+ campaigns before striking gold and still produce more long term profit than buying leads.
Cost comparison: buy leads vs. lead generation
Let's breakdown an example cost comparison between buying leads and investing in your own lead generation campaign...
Your b2b business, specialising in let's say...corporate training, is diversifying into serving a new niche e.g. health and safety regulation.
You are looking to speak with 100 decision makers in your new niche over the next 6 months.
Scenario 1 - Set Up Content Marketing Campaign
...your 100 sales interactions would be generated from 10,000 targeted web visits (an onsite conversion rate of 1%)...
How will you generate these web visits?
...a range of 150 keywords is shortlisted, each generating and average of 300 searches per month in total search traffic...
...a Google ranking of position 7, according to industry research studies, produces an average click through of 3.5% of all traffic estimates related to any particular keyword...
...multiply this by 6 months of campaign duration...
...the total market estimate related to the selected keywords is 270,000 web visits...
...on average if you estimate to rank an average of position 7 on page one Google for the selected keywords, the estimated click through which your website should achieve is 9,450...
...[limitations & assumptions: not all keyword targets would rank in the desired position; even so, articles will need a while to mature and to settle into their stable positions - but we've simplified for the purpose of this illustration; your articles would also rank for a variety of other long tail keywords which would multiply your ROI on original traffic estimates]...
...achieving an onsite conversion rate of 1% (i.e. 1 web visitor in every 100 submitting and enquiry with your business) would produce approximately 95 enquiries to your business...
...with good sales follow-up, you gather an additional 20 new business accounts, from this campaign...
...if opening each new business account brings in £1,000.00 initial income, the revenue generated is £20,000.00...
What about the cost??...
...writing, designing and developing 150 blog articles @ the cost per article of £18.00 = £2,700.00...
...£20,000.00 - £2,700.00 = £17,300.00 profit (6400% ROI) within 6 months...
...however, ongoing, those articles mature and continue to rank online bringing in a steady stream of new business enquiries day by day...
...on average these blog posts bring in year-on-year 35-40 new business accounts per annum (£35,000.00 - £40,000.00 new business revenue, all for the initial lump sum start-up investment of writing 150 well targeted blog articles).
Scenario 2 - Buy leads
You approach a leads broker with the same need. They specialise in the type of contacts you want to talk with...
...their price per lead is £20.00 upfront (this cost is also known as cost per acquisition)...
...the leads are not exclusive, but offered to a limited panel of providers...
...you begin buying leads and convert approximately 1-in-10 leads into sales...
...to secure 100 leads, you paid £2,000.00 in broker fees (100 leads x £20.00 fee per lead)...
...the revenue generated was an average £1,000.00 initial revenue per new account opened...
...total revenue generated £10,000.00...
...ROI from buying leads = £8,000.00 (800%)...
Long term ROI calculations
The ROI comparison is really incomparable.
If you buy leads, the value of the lead perishes with the using of it (in our example above, 800% ROI within 6 months - one-off only).
Once converted, you need to put in further investment to continue filling up your sales pipeline with more opportunity.
If you invest in your own lead generation campaign, like the content marketing campaign above, you have recurring and ongoing returns into the long term future (in our example above, 6400% ROI year on year).
Buying sales leads is a tempting offer when you're desperate.
Now rather than later has it's advantages.
But long term, sustainable, ownership of market share is always the wiser & longer lasting choice.
Recap on the example above if you need persuasion.
By serving your market with services and products, you have planted your stake in it as valued participant.
It is reasonable, therefore, both for benefit for your benefit and also for your customers, that you ought to own and nurture a share of the market.
A market really belongs to it's participants.
Buyers and sellers only.
Intermediaries are not directly adding value. They improve liquidity, but offer no vital function.
After all, buyers and sellers can interact together without a go-between.
But where sellers lack the confidence to to dig deep and invest in gathering an audience, middlemen thrive.
Middlemen, or brokers, often leverage large capital borrowings in order to ramp up major swathes of market share in target industries.
You get this especially where sellers have not fortified their occupation of the market.
Sellers who lose out in owning market share find themselves having to borrow access to their own market from brokers.
In borrowing access to their market, sellers (providers) lose out on the following benefits:
- brand equity
- clearer messaging
- stronger value proposition
- lower (long term) cost per acquisition
- long term ROI
- greater WoM marketing (WoM = word of mouth, referrals and recommendations)
Every business wants to be known for doing well at what it does.
Your business brand is your unique identifier by which customers will know you.
It should positively set you apart.
Your marketing collateral gives your brand reach to communicate key messages to customers.
When customers get value from coming into contact with your collateral & can identify it as yours, your brand equity increases.
In other words the value gained from customers receiving your company's collateral is transferred back to your brand in customer awareness, interest, desire, action and therefore sales.
Where you occupy market share competently, your brand value grows and so will your sales.
Where intermediaries occupy your share of the market, your brand value decreases and so will your sales.
So in summary, the answer to the question, "...should I buy leads?" should be considered with long term ROI in mind.
ROI...not only during the tenure of your business ownership, but also beyond.
Exit value (i.e. a premium lump sum received by an exiting owner when selling a business) is intrinsically linked to cashflow...
...which is linked to profit...
...which is linked to revenue...
...which is linked to sales...
...which are linked to leads.
Buy leads from a leads broker and you could make returns for today only.
Invest in lead generation and your returns are long lasting and add substantial ROI to your bottom line even beyond exit.
The sum up...
Buying leads gives instant satisfaction to a business seeking growth, or rapid start-up activity.
However, buying leads offers no more value once leads are consumed.
The value evaporates the moment it is converted.
However, an online lead generation campaign continues to generate business value (i.e. profitability) long after you've converted the first lead.
Serious business, even serious small business, invests today to hold long term value for tomorrow.
How are you currently investing in the long term value of your business?
Do you have a sustainable method of generating your own sales leads?
Are you dependent upon 3rd party intermediaries for market exposure?
Have you researched your lead generation options?
Feel free to comment below...