Lead Generation: Quality vs. Quantity

Lead generation can be tricky. Managing an effective lead gen channel requires ongoing scrutiny and an intent focus on program goals and core key performance indicators (KPIs). Because each program is a bit different, there is no silver bullet to managing a lead generation program, except for one core principle: Quality over Quantity.

Though simple, this concept often goes overlooked by many companies in their lead gen efforts. Many times, I’ve seen companies make the same fatal error: “Sales are down! Revenue is sliding! We need more leads!” Too often, to combat these shrinking sales, the solution for many companies is to find cheaper lead sources and open up the lead ‘fire hose’ on their sales team. More leads equal an even greater opportunity for sales, right? Not necessarily.

Lead generation is like anything else. You get what you pay for. Leaning on lower quality resources can get you more leads for your money, but at what cost to your backend? Take the example below:

Resource Spend Total Leads Cost per Lead Conversion Rate Conversions
Source 1 $9,000 1,500 $6.00 30% 450
Source 2 $9,000 3,000 $3.00 10% 300

Both sources have identical spend, but Source 2 is half the cost per lead as Source 1, yielding twice as many leads. The biggest differentiator here is quality. Based on the number of conversions, we see that Source 1 has three times the conversion rate than that of Source 2, actually yielding more workable leads. If we assume average revenue per conversion at $100, Source 1 ends up grossing $150k more revenue than Source 2, for the same spend. With this current mix, total revenue would equal $750k.

Here’s where the problem becomes magnified. If the aforementioned company decides to move their advertising dollars from Source 1 to Source 2 in an effort to get more leads for their money, we end up with the following:

Resource Spend Total Leads Cost per Lead Conversion Rate Conversions
Source 1 $18,000 6,000 $3.00 10% 600

Again assuming an average of $100 revenue per conversion, this example now yields only $600k in total revenue and they’re now digging themselves into a deeper hole.

Compare this to shifting those same dollars from Source 2 to Source 1, instead:

Resource Spend Total Leads Cost per Lead Conversion Rate Conversions
Source 1 $18,000 3,000 $6.00 30% 900

Now we’re looking at $900k in revenue, and moving the needle in the right direction.

In this example, it would be most important to focus on the quality of the resource over the volume of leads. Keeping a close eye on conversion rates, and average revenue per conversion can help get this company’s revenue back under control.

Discovering how to monitor quality is the most important aspect of managing a lead generation program. Make sure your key KPI are tied directly to your program goals, and monitor them closely. Many times, shifting your advertising dollars from source-to-source is necessary to max out the quality percentage in the program. It may be cliché, but quality really does trump quantity when it comes to lead generation.