Every B2B business needs some kind of lead generation strategy, but not all lead generation strategies are created equal. If you spend too much time or too much money on your lead generation, you’ll end up completely sabotaging your return on investment (ROI).
So how can you tell if your lead generation strategy is cost-effective? And what steps can you take if you’re spending too much time and money on leads?
The Lead Dilemma
Lead generation presents a complex dilemma for business owners. You’re going to have multiple competing objectives, struggling against each other to find balance. Ultimately, your business is going to have three goals to maximize the effectiveness of your lead generation, but those goals don’t always work well together.
- Get high-quality leads. First, every business wants to get high-quality leads. it’s not enough to generate a high volume of leads. You’re looking for people who are either actively interested in your types of products or are a good fit for your brand. The more likely a person is to eventually buy from you, the higher the quality of the lead, so it stands to reason that better leads will ultimately make your lead generation strategy more effective.
- Get lots of leads. At the same time, you do want to optimize for lead quantity. Assuming every lead you generate has an equal chance of becoming a sale, you’ll be incentivized to generate as many leads as possible. If you spend enough money, this isn’t necessarily hard, but you’ll need to keep this objective in balance with the next one.
- Curb spending. Your other objective is to minimize your spending. If you spend a billion dollars, we should be able to generate enough high quality leads to keep your business busy indefinitely, but spending that much money would be absolutely foolish. Keeping spending as restricted as possible, while maximizing your other objectives, will ultimately lead you to a more effective approach.
Audit Your Lead Generation Tactics
Take the time to audit your lead generation tactics. You’re probably trying to generate leads through a number of different channels and with a number of different approaches. How are these working?
For example, you might use a combination of B2B email marketing services, pay per click (PPC) ads, and cold calling to generate leads. Which one of these strategies seems to be most effective in targeting high-quality leads? Which one leads to the greatest quantity of leads? How expensive are these strategies?
You might find that your tactics excel in different areas, which is a good thing. What you’re looking for here are underperformers – tactics that don’t hold a candle to the other tools in your arsenal.
Do your best to calculate the ROI of each one of your lead generation tactics. Start by figuring out the value of a converted customer and work backwards. If a new customer is worth $10,000 and you convert 10 percent of the high-quality leads you generate, each high-quality lead is worth an average of $1,000. If it costs you $500 to generate each high-quality lead, that’s a return on your investment of $500.
This equation will get more complicated depending on the number of variables you want to pull in. Your estimate will gradually get more accurate this way, but it will also get more complicated.
Compare to the Industry
Lead generation bears different costs in different industries. Once you figure out what your ROI is and how your lead generation strategy is working, make sure you compare it to your peers. Are they spending less on a better tactic? Are you in line with industry expectations?
How to Boost the Cost-Effectiveness of Your Lead Generation
You can also use these tactics to boost the cost-effectiveness of your entire generation strategy.
- Weed out the underperforming strategies. Pay attention to the strategies that simply aren’t working out. Don’t be afraid to ditch them, and don’t fall victim to the sunk cost fallacy if you’ve been using them for a long time.
- Experiment and measure. Try a wide variety of different channels, tactics, and approaches. Use objective metrics to figure out which ones work (and keep them).
- Reduce manual labour. Try to limit how much time you spend on your lead generation strategy; automation is one of the best ways to accomplish this.
- Get to know your audience. Better targeting and more relevant messaging will help you achieve far more.
Once your lead generation strategy is more cost-effective, you’ll be able to make more money in your business and spend less time doing it. This is a long-term process that can’t be mastered overnight, so keep a close eye on your marketing and sales metrics and keep pushing for more improvements.