Beware of the “False Economy” of Low-Cost Leads

To fill their funnels, B2B marketers need leads—so much that sometimes they are willing to forego quality in order to hit their targets. And to satisfy mostly meaningless KPIs like cost per lead, marketers are constantly tempted to go with a cheap, high-volume approach. But no matter how low-cost the leads are, if they don’t convert, what’s the point? Focusing on the more relevant KPI of cost per conversion helps bring the “false economy” of low-cost leads into much clearer focus.

Two ways low-cost leads result in higher long-term costs

What is a false economy? It is something that costs less at first but ultimately results in higher costs in the long run. The false economy of low-cost leads will result in higher long-term costs in two ways:

1. More false positives or “dead ends” = higher cost of conversion: If the bulk of cheap leads you buy is made up of individuals who have no interest in buying your solutions, your cost to convert becomes unmanageable very quickly.
2. Wasted time, resources and human capital: According to MarketingProfs, bad prospect data can cost sales departments up to 550 hours in wasted labor and up to $32,000 for each sales representative. These are very real costs that your organization cannot recoup.

It doesn’t end there. Buying low-quality leads that don’t convert can also result in hidden costs that can damage sales and marketing trust and brand reputation.

Determining lead quality

Demand in your market is finite and when providers sell you low-cost leads, they are most likely not real leads at all, but merely names on a spreadsheet. In order to determine lead quality, you must be prepared to ask your providers the right questions. To learn more about the true cost of bad leads as well as a detailed checklist on essential questions to ask your lead providers, download the new white paper What Are Low-Cost Leads Really Costing You?

More resources to help you understand the organizational impact of bad leads

Here are 3 additional resources that demonstrate how low-cost, low-quality leads are damaging your business:

1) The Staggering Cost of Chasing Bad Sales Leads—John Ternieden—InsideSales.com

Altify discovered that salespeople with $1 million quota and $100,000 average deal size lost $218,000 a year by pursuing the wrong leads and opportunities.

2) Why Measuring Success on Cost Per Lead is a Huge Mistake—Dan McDade—PointClear

Cost-per-lead, according to this useful blog, is not the correct metric for measuring marketing initiative success. It incorrectly emphasizes volume over quality, cost over ROI, and creates inaction in sales. Read on to discover the right marketing KPIs.

3) 3 reasons why your leads are bad & how to evolve the way you deliver for sales—John Steinert—TechTarget

The concept of “leads” was adapted for B2B back when everyone was just trying to figure out how demand gen could work in the industry. This article covers how B2B marketers now have both the learning and the tools to move beyond leads to a more effective approach that can deliver higher yields with less total expense.