Leads Have No Value
Leads have no value. More precisely put: leads have no intrinsic value.
Glengarry Glen Ross made this point rather emphatically. The value of a lead depends tremendously on its origin.
About 100 years ago I ran the “alternative media” program for a good sized cataloger. The goal was to collect names and addresses that we could add to our mailing list. Gathering names and addresses is simple, the phone book is full of them, but as any cataloger knows “mailing the phone book” is a disaster because the names haven’t been qualified in any way. They’re not worth nothing…they’re worth less than that.
So, we used alternative media: package inserts, blow-ins, bind-ins, tip-ins, bang-tails, card decks, you name it. We’d target a demographic, get a “request a catalog” postcard in front of folks who looked like our prospects and hoped they’d request a catalog.
We learned something early on: if the postcard is postage paid you get a whole lot more names than if you make people pay for postage. However, we also learned that the quality of the leads was so much worse when we did this that we were far better served forcing the people to apply their own stamp.
We also learned that people who checked our name off on a long list of catalogs they might be interested in receiving were even worse prospects.
The point is: how the lead is collected impacts the value of the lead tremendously.
Advertisers who base their online marketing objectives on lead generation need to be mindful of this fact. A cost per lead efficiency metric requires constant monitoring of lead value.
Indeed, tricks used in “conversion optimization” need to be carefully evaluated not just by the ratio of leads to visits, but by the quality of the leads captured. Making the “call to action” clearer can help capture more leads, but may also depress the quality of those leads somewhat. Giving incentives for people to sign up will almost certainly have a huge impact on lead value and should therefore impact what an advertiser is willing to pay for that lead.
MEASURING LEAD VALUE
This requires lead-gen firms to carefully assess the value of leads gathered from different marketing channels, different types of keywords, during different times of the year or different days of the week, and using different pitches to capture the contact info.
Some of this can be accomplished by effectively tying the sales resulting from those leads back to the source, indeed back to the click(s) in the online world.
However, folks will often protest: “My sales cycle is so long, there’s no way to know how the value of leads collected today will compare to the historic averages.” That’s true, but there are mechanisms to at least get a good sense of their value fairly quickly.
With robust data, one should be able to calculate by source, by channel, by type of keyword, etc, the fraction of leads that close within X days of first contact. X will be larger or smaller depending on the business and the volume of leads being divvied up. The point is, while it may be true that half of the leads close more than 180 days after the initial contact, some fraction will close within the first week, or two weeks or month, and the comparison of those fractions by channel, by date, by incentive type may give a very accurate read on their relative value and how those values compare to average.
Gauging these values early allows marketers to make smarter decisions about how much to pay for each type of leads, and whether that new landing page design with the higher conversion rate is actually helpful.
The farther the success metric is from dollars in the bank, the harder it is to employ data driven marketing techniques wisely. Some use that complexity as an excuse to throw up their hands. We say it’s an opportunity for the smart analyst to make a big impact.