Lead Generation

Lead Generation, or Lead Acquisition, is the single most important aspect of online marketing, yet it remains the least understood by most businesses.


 

"Lead Maximization Theory"
Matt Collins, James Shore - ©2007

Description: Matt Collins (Thunderbird MIM and Lead Capture Expert) and James Shore (Lead Conversion and SEM Expert) have literally invented a discipline. "Lead Maximization Theory" examines best practices and common mistakes relating to online Lead Capture, Lead Conversion, and Lead ROI. These lead management pioneers bring over 14 years of Lead Maximization expertise to bear in this 65 page primer. Quite possibly the best $15.00 you'll ever spend.
 
Chapter 1 – The Building Blocks

When a prospective client tells us “we want more leads from our web site,” we always start out by probing to find out what is actually meant by this statement. And in all cases we find what is actually meant by this request is that the prospect is looking for more transactions and transaction-related revenue (no real surprise there). So, the desire for "more leads" is not due to an intrinsic value in leads themselves, but rather each lead’s potential to turn into a sale. At a conceptual level, the client sees it like this:

more leads = more transactions

And, all things being equal, this is true enough. The more leads you field, the more sales you can expect. So, when we speak of “wanting more leads,” it would be more accurate to say we are looking to increase sales-related revenue.

more leads = more transactions = increased revenue



But if we really want to be 100% accurate, we would say "we want to increase the net profit from our websites (since sales revenue and net profit are often found to be distinct)." Borrowing heavily from Eliyahu M. Goldratt’s The Goal, the Goal is to maximize profit. If we agree on this principle, then when we say “we want more leads from our website,” what we really intend to say is “we want to maximize the profitability of our website.”

While this is all very academic, it is more important than just a semantic correction. Restating the desired outcome in this manner (from "we want more lades" to "we want to maximize our profitability") is meant to focus us squarely on “The Goal” and the purpose of all profit-driven corporations: to maximize profit. Our analyses of how businesses should proceed always focuses on how best and most efficiently to accomplish the objective of maximizing profit from online activities. Without keeping this Goal in mind, Interactive Marketing can quickly turn into a bottomless pit of resources dedicated to chasing phantom "opportunity."

Saying “we want more leads” when the actual objective is to maximize profitability is problematic, as we are exponentially less likely to achieve the ends we desire if we are not clear about what we are ultimately after.

A much clearer question to pose your Interactive Marketing vendor is this: Our goal is to maximize the profitability of our website. How can you help us achieve this Goal?

To this we say, “You have come to the right place. Pull up a chair and let’s see.”

The First Principle of Lead Maximization Theory: If you wish to maximize your leads, the first thing to do is to embrace the First Principle of Lead Theory:

Every single inquiry from your web site should be viewed as a viable lead!

Yes. We concede that some "leads" are complete junk. But you can typically spot a crappy lead from a mile off… and it usually takes all of about 2 seconds to discount and ignore it. For instance, if a lead comes from This e-mail address is being protected from spambots, you need JavaScript enabled to view it it is likely complete junk. But “leads” like this are far and away statistical outliers. Meaning, they are not indicative of the quality of leads you receive in the aggregate. In keeping with this line of thinking, you should expect to receive junk leads on occasion... but if you think an outlier lead tells you anything about the overall quality of your leads (in the aggregate), you would be dead wrong and tempted to discount the amazing opportunity for profit they represent.

So, our first task is to throw away all of the old, tired arguments that do not acknowledge the foundational principle that every single inquiry from your web site should be viewed as a viable lead. And you need to resist the temptation to conclude otherwise. This means killing off self-defeating and patently false sentiments, starting with the following:

a) "internet leads are all junk"
b) "a lead is a contact that is ready to buy today"
c) "people shop the Internet so they can remain anonymous"
d) “internet leads don’t make sense in my industry”

Our experience as pioneers in the realm on online lead capture and conversion points overwhelmingly to the sad fact that most “objections” to onlin eleads are invariably born of frustration and apprehension rather than based on reason. And why would this be so? Where does this frustration and apprehension come from? It comes from the simple fact that most professionals have little clue regarding how to properly field, much less convert an Internet lead into a sale. Most people are simply not proficient in selling to Internet prospects. And this goes doubly for traditional salespeople who are well-versed in selling to prospects acquired from more traditional channels. Our experience tells us that even great salespeople, who meet with nothing but success when it comes to converting traditional prospects/leads, are by-and-large less than adequate when it comes to closing internet leads.

 



So, if you've tried to close an Internet lead and failed, it would be a major mistake to conclude that Internet leads can’t be sold. The hard truth is that the disappointing results you may be suffering on this front likely has more to do with your approach to fielding internet lead inquiries, your methodology for follow-up and close, and the personnel responsible for these activities, than any issue with the leads themselves. But fear not! This is actually very good news, because what it means it that the opportunity exists to get it right. If you really want to maximize the profitability of your site, you need to acknowledge that:

a) closing an Internet prospect requires a distinct set of sales skills than the skills required to close a traditional prospective customer, and
b) the overwhelming number of leads garnered form your website are viable and have the real potential to be closed.

Think of the bogus “leads” like forwarded chain-emails sent from good friends and you won't be tempted to swear off your internet leads altogether. We have yet to meet anyone who has sworn off their email despite receiving forwarded emails of this nature from time-to-time.

The Second Principle of Lead Maximization Theory:

All things being equal, there is a positive relationship between quantity of leads captured and transaction-related revenue. That is to say, all things being equal, if every inquiry is a lead and every lead has potential, the greater the quantity of leads captured, the greater the number of sales that will result.

If we put this in plain English, at its most fundamental level, sales-revenue from leads is a "numbers game." It is worth mentioning here that this fundamental truth is understood by most business-owners at an instinctual level. If we were to write it mathematically, it might look something like this to a Sales Manager:

More traffic = more leads = more sales = more sales revenue

As explained, all things being equal, this is true. If your current analytics software indicates you are receiving 1,000 unique visitors to our site every month, and that for every 1,000 unique visitors you capture about 10 leads, and that you convert 1 out of 10 leads into actual sales, it follows that if you double the unique traffic through advertising and/or organic SEO you can expect to close 2 interactive leads per month.

And, if we were of the mind that quantity of leads alone (and the resulting sales revenue from them) was the Ultimate Goal, we could argue that Pay-Per-Click and SEO makes sense in all cases. Yet, we can tell you from years of experience that if this is the way in which decisions are currently being made within your organization with respect to your Internet Marketing strategy, you will consider things quite differently after finishing this book.

The Third Principle of Lead Maximization Theory:

Maximizing Profit is the Preeminent Goal of Lead Maximization Theory. No other objective (other than maximizing profit) is legitimate unless it lends to achieving this singular Goal.

Again, this may seem self-evident. But let us revisit the example above relating to how decisions are often being made and real money is being spent. Let us now return to our equation and modify it thusly:

More traffic = more leads = more sales = more sales revenue



The simplistic mode of thinking that gives birth to the “line of reasoning” represented by the equation above can be very, very expensive… and unnecessarily so. The following equation more accurately takes into account the Third Principle of Lead Maximization Theory (the Goal of Maximizing Profitability):

Increased Advertising Expenses + Onsite SEO Expenses + Ongoing SEM Management Expenses + Ongoing Marginal Sales Expenses = more traffic = more leads = more sales = more sales revenue

The old adage that a business can “go out of business doing more business” holds true. That is to say, any wise manager will tell you that it is possible crank up sales revenue and go out of business doing it. For instance, if it takes you one more employee to participate in 3 more transactions, and you scale the business expenses to revenue in this manner along a continuum into the future, you will likely go out of business in a short period of time. Lead Maximization Theory and the models herein assume solid decision-makers are at the helm, that understand this concept. And so, Lead Maximization Theory makes no consideration for bad management, but rather assumes rational decision-makers are involved in making decisions about how best to apply Lead Maximization Theory to their respective businesses.

The long and short of it is this: Revenue is not the same as profit. Driving more traffic through PPC and SEO efforts can be, but is not always, the most prudent manner in which to conduct business. There is a time a place for spending money on these activities, to be sure. But there are more ways to go about maximizing your website’s profitability than pumping more traffic through a less-than-optimized pipe.

Reaching the Goal: in terms of Lead Maximization Theory, there are 4 basic approaches to maximizing profit from web-born leads. This will seem a little like Economics 101. So we apologize in advance... but our intent is to shift the popular vantage point.

1) Increase Quantity of Leads - There are several ways in which to increase the Quantity of Leads you are getting from your site. Chief among them are the following strategies:
  • Lead Capture Optimization (LCO) - The interactive discipline which optimizes a given website’s design, user-paths, and calls-to-action in order to maximize site visitor to lead conversion ratios.
  • Cross-promotion of your web site - by infusing your website address and the site's value-proposition in your traditional marketing outlay, more traffic will result. And, as mentioned, all things being equal, more traffic will amount to more leads, more sales, and greater sales-related revenue.
  • Search Engine Marketing (SEM) - includes the disciplines of PPC and On-site/Off-Site Search Engine Optimization (SEO). As with Cross-promotion, SEM is about driving greater amounts of traffic.
Note that SEM is not first strategy on our list. In fact, SEM is the very last of the three. This may seem odd at first. There is a solid reason why we have included SEM on the bottom rung of the list. But if this is the case, why is SEM/SEO are the most well-known of the strategies?

The answer is simple... and it relates directly to supply and demand. As previously stated, people understand intuitively that all things being equal, more traffic equates to more leads. And most professionals understand that, all things being equal, more leads will result in more sales and sales-related revenue. And while most professionals have heard the buzzwords “PPC,” “SEO,” “Landing Pages,” and “Link-Building” tossed about a million times in the last year alone, very few have spent a whole lot of time on the issue of whether or not these strategies make sense for their website in the here and now. “Lead Capture Optimization (LCO)” and “User Path Optimization” are far lesser-known disciplines… though in most cases less-expensive and more immediately impactful relative to maximizing profitability. Additional considerations, such as and “eye-tracking” studies, are even more obscure to the average professional. “SEO” and “PPC” vendors benefit greatly from the popular perspective that these are the only techniques to achieve the Goal of “getting more leads.” What’s more, most SEO providers have no inclination to drive business away by mentioning that there might be less-expensive, more efficient, and more profitable ways in which to conduct business and make decisions. They are more than happy to oblige. So when someone calls and says, "I want more leads. I need more traffic," it is unlikely they will be turned away. Ignorance and opportunity to make a dollar conspire... and it is the business footing the bill that suffers from this zero-sum game.

Most professionals are unaware that SEO and PPC strategies are not necessarily where they should be spending their resources and efforts. And this is problematic because there exist myriad techniques in addition to SEO and PPC that maximize profitability and require substantially less investment of time and resources.

This is absolutely NOT an attempt to dissuade people from engaging in SEO and PPC strategies. SEO and PPC have their place, to be sure. However, like any other endeavor a business engages in, it is only diligent to engage in these strategies when it makes prudent business sense. For instance, does it make sense to drive a ton of traffic to a website that is nothing more than an online billboard… with no mechanism in place to effectively convert visitors into leads? To assume that it does is nothing short of questionable decision-making. Essentially, you get what you ask for. And if you don’t know what you’re asking for, why you’re asking for it, or when it makes sense to ask for it, you shouldn’t be very surprised that “it” doesn’t make as much sense as you thought it would.

Nevertheless, can pay to get more traffic, end up with more leads, do nothing to change how you handle your leads, and end up with more transactions and more money. Whether or not this is a prudent direction to go in depends squarely on ROI… or, if you prefer, maximizing your website’s profitability.

To prove the point that there are numerous way to skin a cat, consider how the following strategies differ in approach from LCO and SEM: Keep in mind, Lead Capture Optimization is concerned with capturing more leads from your existing site traffic, while Search Engine Marketing is concerned with driving more traffic to your site, without regard given to whether your site is lead capture optimized. Also, keep in mind that maximizing profitability is the only legitimate goal.

2) Increase Your Sales Conversion % - Assume the diagonal line (below) represents your current lead to sales ratio AND assume the quantity of leads you are getting from your website is unchanging (static). If you were to increase your sales conversion ratio, all things being equal, more transaction dollars will result.

3) Increase Net Profit per Transaction - Of course, you could also work the margins. This approach is more applicable to traditional retail businesses, but it still holds. You could, theoretically, increase your margin per sale AND not change any other aspect of how you field leads AND completely ignore trying to increase (optimize) traffic to your site and still make more money.

4) Decrease per Lead Overhead - the same as increasing Net Profit per Transaction… but from the opposite angle. We won't bore you with the details.

Chapter 1 Synopsis: In Part 1, we covered:
  • the fundamental principles of Lead Maximization Theory.
    • Every single inquiry is a lead
    • There exists a positive relationship between quantity of leads and transaction-related revenue.
    • Making more money through transactions is the Goal.

  • the four principle means to achieving the Goal
    • Increase Quantity of Leads
    • Increase Conversion %
    • Increase Net Profit per Transaction
    • Decrease per Lead Overhead
The bottom line is that a proper combination of all of the above activities will ensure you achieve more sales and make more money. It is imperative that each business assess what makes sense and to move cautiously, though deliberately, toward achieving the ends of maximizing dollars realized from their leads.

Chapter 2 covers Lead Maximization Strategy “Musts” (the components necessary to ensure a successful implementation of your Lead Maximization Strategy), and also outline a strategy “Implementation Roadmap” (covering the stages of evolution of a solid Lead Maximization strategy).