Buying Leads vs. Paying for Leads: Cold Hard Facts

If you run a heavy sales heavy organization, then I’m sure you know that a consistent flow of leads is essential to the life of your business.

And unless you live with your head buried in the sand, I’m sure you’ve been approached by lead generation companies asking you if you’d be interested in buying leads.

Here’s the age old question that I’m sure you’ve asked yourself: “Should I buy leads or generate my own leads?”

Of course, if someone asks, my answer is this: YES, you should generate your own leads… that’s if

  1. You know how.
  2. You can do it cheaper than a lead generation partner can.

 

Internet Marketing is Insanely Complex

Yes, promoting yourself online can be fairly challenging, especially if you’re doing search engine marketing, PPC, or any form of paid links:

With each of those “spokes” in the internet marketing diagram above, there are literally thousands of topics we can delve into.. and there are LOTS of spokes.

To be a “player”, you need to understand the basic concepts:

  • Pay Per Click
  • Search
  • Display
  • Contextual
  • SEO (free traffic)
  • Linkbuilding
  • Content building
  • Content Syndication
  • Conversion Optimization
  • Split testing
  • Time testing
  • Medium testing
  • Landing page testing
  • Social media
  • Everything applies
  • Email marketing
  • A/B subject testing

Are you aware of the difference between CPM, CPC, RPC, eCPM, eCPC, CPA, CPL, CTR, etc?

Do you realize that, on Amazon.com alone, there are over

  • 2,900+ books on “search engine marketing”?
  • 4,700+ books on “email marketing”?
  • 7,300+ books on “social media marketing”?
  • 29,500+ books on “internet marketing”?

Yes, ladies and gentleman… lead generation via internet marketing is not a walk in the park.

On top of the “topic”, you have to be familiar with the rules of engagement for each of the players in the industry.

For example.. in 2008, there were 80 ad networks I’ve personally known.

In 2012, there were over 350 still in business.

Each one has its own rules, quirks, standards, etc… and they’re changing daily.

Let’s face it… if you knew how to generate your own leads online, why are you even reading this blog? *badabing*

 

Focus on what you do BEST, outsource the rest

I’m a proponent of people and companies doing what they do BEST.

If you’re in business of selling services or products, get good at what you do… selling the best possible product or service, not lead generation.

Let lead generation specialists do what they’re good at: generating leads.

To me, when people say that they want to do their own lead generation, what they’re telling me is that they want a bottle of wine.

What they’re telling me is that they want to buy their own farm, grow their own grape trees, learn the art of wine making, build a wine cellar, juice & ferment the grapes, build a factory to build the wine bottles, and put wine in their own bottles… just so that they can enjoy a cup of wine at home.

How about instead… buy a wine at your local wine store?

See, a wine maker has figured out a way to

  • buy the right piece of land in the right area with the right climate
  • hire the right people, including their salary, health benefits, and scheduling
  • pick the right seeds, plant them with their crazy (and very expensive) farming tools, harvest them at the right time, and juice/distill them just right
  • store the wine bottles until they are “good enough” to drink and sell

 

Then, the transport company has figured out all the logistics and hired the right people to move the wine bottles to a distribution point.

Then, the wholesaler company has figured out all the logistics and hired the right people to move the wine bottles to the retailers.

Then, the retailer company has figured out all the logistics and hired the right people to put the wine bottles onto the shelves and let the consumers know that they got the stuff on sale.

Then, the advertising company has figured out all the logistics and hired the right people to let you know that you can get these bottles of wine for X dollars.

All this work, just so that YOU don’t have to do all the work in enjoying a bottle of mine.

Only catch? The wine is priced so that per bottle, enough money goes around to everyone in the wine making/distribution/marketing channels.

Are you an experienced wine maker, distributor, retailer, and advertiser?

If not, why would you even waste time doing it?

 

Still not convinced that doing your online lead generation is not the best use of your time?

Ok, some like doing it themselves. Good for you.

But before you decide to go that path, take a look at the breakdown of costs associated with doing your own online lead generation:

(Note: Solar One Media is exclusively an online lead generation company. So these facts/stats are skewed for online lead generation)

Generating Your Own Leads Buying Leads / Partnering with Lead Generation Company
Pro Bottom line: Quality control.You get consistent marketing message all the way from initial contact to closing.On top of that, You control the lead source so you don’t need to worry whether or not your company is seen in “bad light” Bottom line: Faster and cheaper.Perfect analogy is making your own cookies vs. buying cookies at supermarket.Can you make cookies? Of course, you can. But how much money do you spend on buying ingredients and slaving away in the kitchen?If you want to just enjoy cookies, just buy the cookies. Duh.
Con Bottom line: You need to hire your own team.If you generate leads online, you need a team of specialists and those specialists aren’t very cheap. (See the breakdown below.)Remember, if you hire, your company’s overhead, not to mention management responsibilities, will go up. Bottom line: Quality is sometimes inconsistent.The odds are that your lead quality will sometimes be inconsistent.How do you work around this?Work with a lead generation that sells exclusive leads, or better yet, are working with you on industry exclusive basis: i.e. your company is the only one in your industry that they are working.. like <shameless self promo>Solar One Media</shameless self promo>

If you search the web, there are PLENTY of blogs and companies that advocate generating you own lead..

But, heed my warning.. their opinion isn’t quite totally objective.

Why? Because they’re selling DIY (do-it-yourself) software service or something similar.

They want you to do your own lead generation because once you start, you will be on their hook for their monthly subscription service.

 

Cost of Generating Your Own Leads

Here’s how much it’s going to cost you

*Note: These salaries were taken from “averages”. These costs maybe different for your city/state.

  • Copywriter = $40k / year + performance incentive
  • Senior PPC analyst = $70-130k /year + performance incentive
  • Direct response landing page designer = $60 – $80k / year
  • Graphic Designer = $40 – $60k /year
  • Media buyer = $50 – $90k /year
  • Analytics/Optimizer = = $40 – $60k /year
  • —(Capable) Programmer = $70-100k/year
  • Manager  = $50k/year + bonus

Ok, if your head is not spinning by now… here’s the summary:

  • Total Payroll Cost = $420k – $610k/year + performance incentive
  • —Total Payroll + Benefits (30%) = $546k – $793k + performance incentive

To be fair, let’s look at the cost on cost/lead basis (which is what your lead generation partner is quoting you anyway)

 

Cost analysis assumption

  • —In between $546k – $793k , say $670k.
  • Your business is in quite “expensive” industry where product/service cost is high, which means that the cost/lead is probably high too. Let’s say they’re $100+ lead with  —variable media/advertising costs in $25 increments.
  • Team is able to produce between 1000 and 10k leads per year.

 

Now, are you ready for the shocker?

Unless your team is able to consistent generate MAXIMUM leads at the lowest possible cost per lead at 100% of the time, your cost/lead will be quite insane.

All I gotta say is.. your lead generation team better be motivated 24×7, 365 days a year! Not to mention, I hope you like managing a big team.

Actually, this stat is for the home solar panel industry where the revenue per sale is anywhere between $15k to $50k, and Solar One Media is consistently producing leads on the lower side of the cost spectrum.

There you go.

To answer “should I buy leads or should I generate my own”, you need to ask yourself

  1. Am I willing to grow my own team, pay their salaries, manage them, and consistently motivate them to produce?
  2. How do I deliver the most value to my customer? Focusing on what my business does best or generating my own leads?

As a believer of “rugged individualism”, I am a proponent of people and companies at least trying once to see what it’s like.

But in the end, it’s all about BEST use of your time. Remember, there are only 24 hours in a day.

If you can do more by leveraging a lead generation company, your ABSOLUTELY should.

taewoo

taewoo

TaeWoo is founder of Solar One Media, a solar lead generation company. With 10+ years of experience in internet marketing, web development, and online advertising, TaeWoo brings his expertise and pioneering spirit to solar lead generation.

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