In Part 1 on lead generation, we focused on emphasizing how lead generation (leadgen) is the key to your business whereas in part 2, I wrote about how critical it is to measure all your leadgen sources. Part 3 of this series on leadgen is about what to do when your lead generation just hasn’t been working.
Are Your Current Lead Generation Programs Working
First, let’s talk about what we mean by “not working.” Hopefully, you know, or are working on knowing, what lead sources all of your clients came from and what that lead program costs you. This is called the cost of acquisition. Another good thing to know is how much money in profit you make from a client once you land them. In this article, I am going to talk about what happens when the cost to acquire a client is more then what you make from that client.
Not a Simple Process
This isn’t a simple exercise. One of the businesses I have requires a lot of different lead generation programs because it is in a very competitive marketplace. In that business, our cost to acquire a client is typical $4,000 per customer. The $4,000 is the average cost if I take all my leadgen channels and I divide it up by how much we spend in advertising. That $4,000 is also what the industry standard, which means that is generally the acceptable cost within the industry. However, when I look at all our leadgen campaigns, I see that one channel costs us $12,000 and another costs us $1,500. The $1,500 cost to acquire a client is a very acceptable cost but unfortunately, I can’t get many more leads out of that channel.
If I understand the cost of each leadgen channel I can decide if I can use the money I spend on poor performing campaigns and put it elsewhere. This might mean spending it on either better performing campaigns or on new campaigns that I am considering but have yet to try.
How Much Should You be Spending on Lead Generation
In general, adverting costs should be about 10% of revenue however every industry has its own measurement for what the ratio should be. In another business I had, I benchmarked against a few of my competitors by calling them up and asked them if we could share some data. It may shock you to know how many businesses are open to sharing. Another good source is your industry trade associations because many of the people working at them are from the industry.
Experiment and be Creative
After several years with one of my companies, I have tried so many leadgen approaches that we are having to be even more creative and experimental. It appears that our competition is just using the same old, same old advertising channels. Nevertheless, there might be opportunities that haven’t been worked or thought of. These might bring our cost of acquisition down
Strategic Partnerships are Win/Win
One such example of this new approach is strategic partnering with other companies that call on the same clients as we do but don’t compete with our service. Now, strategic partnering is of course not new. I have wanted it to work for decades but it never seemed to be effective. Recently, we had a major success with a strategic partner because we just didn’t give up. After the 10th call over a 12-month period, the owner finally gave our idea a try and we closed two good clients in the first month. The leadgen costs that we paid in referral fees were a fraction of all the other leadgen channels.
The lesson we learned here is that strategic partnering must be an ongoing initiative. This doesn’t mean moving onto new strategic partners when the old ones are not responding. Our new attitude is that strategic partnership takes time to develop. Also, that initiative comes from a high-level executive at our company. There certainly needs to be something sizable in it for our strategic partners. It may be a referral fee or customer referrals that we might use to make the partnership work. Don’t get discouraged if it takes months or years to land that great partner. In today’s age of email and the internet, doing business with PEOPLE to PEOPLE can be a powerful leadgen strategy. Additionally, it’s one that your competition might never try.
Go where others haven’t
Another area we are looking into is online ad placements on places like reddit, Quora and other unusual locations. These sites might not cost that much to advertise on and may turn out to be a great hidden leadgen channel.
The net amount of all this is to keep at it. Keep measuring the effectiveness and cost of your campaigns and decide if it is worth continuing. If not, it is time to move onto a new channel. The process is very frustrating, and it might take all your creative energy. However, once you find the leadgen channels that work, your business will run smoother than you ever thought possible.
Written by Stephen Halasnik, Cofounder of Financing Solutions which provides lines of credit to businesses and nonprofits. Mr. Halasnik has built several successful companies in the $5-$20 million/yr in revenue range. This includes a company on the Inc. 500 fastest growing list.