ROI Case Study – Exclusive Leads vs. Shared Leads
What is the one thing that you’ve sucked in high school?
For me, it was chemistry. Gosh, if you can be given a medal for being crappy at a subject, they’d give me medals, parades, and heroe’s welcome for my chemistry.
And what did I suck at the most?
Chemistry labs – Especially diluting solutions.
What’s the concept here?
Dilute (i.e. add more water) to some chemical “stuff” till you get the right concentration of “stuff”.
Shared leads are equivalent to adding “water” to a pot of exclusive leads.
Buying Shared Leads = Buying Water
We have a solar customer who were buying solar leads from some traditional lead generation company at $65 bucks a pop.
They tested out with 100 leads, so at a cost of $6,500.
So, what was their ROI?
No one bought anything and they ended up losing $6,500.
In another words, they bought water.
Water, something that they can get for free…
So what happens when you buy expensive water?
Nope, you don’t make any money.
You just get wet.
Why did these leads not work?
Who knows, but some likely reasons are:
1. the leads were stale – leads were interested at some point MONTHS ago but lost interest or went with some other solution provider
2. the leads were incentivized or co-registered – i.e. “sign up for solar and win and iPad” – so had little or zero intent to purchase (and there are other lead generation practices that you should know about)
3. leads were sold over and over to various other companies – i.e shared leads
Shared leads are like cheap crappy shoes – They are cheap, but they don’t feel good.
Imagine calling a lead and finding out that you were one of 5,7,10, or even 20 companies that called them about their expressed interest in your product.
If you were on the receiving on this phone call, would you welcome it?
Nope, probably not.
In fact, you’d hang up and ask you to never call him/her again AND ask you to remove his/her contact info.
Even if you sold ONE product/service on these shared leads, I bet your ROI sucks. (You are measuring your ROI on your paid leads, right?)
Exclusive Leads ROI is KING
The customer I mentioned above did about $2.25 million dollars in revenue in 7 months on about 1,100 leads.
Let’s look at revenue PER lead.
$2.25 million / 1100 leads = $2,045 / lead.
For sake of argument, let’s say that the shared leads were sold 5x and the quality was just as decent as the exclusive leads.
In another words, the purchaser of that lead has about 20% chance of closing the sale, so requires 5x as many leads to make the same sale.
Revenue per lead = $2.25/ (1100 x 5) = $509 / lead
Now what about ROI?
In the exclusive case, the solar customer spent approximately $140k for those 1,100 leads.
$2.25million / $140k = 1600%
The shared leads at $65/lead, on the other hand,
$2.25 million / (65 x 1100 x 5) = 630%.
Now, some of you might be thinking… 630% is still pretty damn good, right?
1) These numbers are on GROSS, not NET – In another words, the chance that you’ll make money on shared leads is pretty slim, if not zero, if your COGS (cost of goods sold) represented over 70% of your gross sales amount.
2) This doesn’t include overhead like salary and such. Would your sales team spend MORE time and money because you had to call 5x as many people? (Answer is yes, in case you thought i was asking a hypothetical question.)
Exclusive leads = $$$
Shared leads = Empty dinner table.