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Okay, Wednesday, you want to do this? Fine, let’s do this.
It is not so much a question of where to get leads as much as a question of how. That is really what people are asking when they ask about finding quality leads. In a previous post we outlined the difference between the process of acquiring leads versus the actual source of leads versus what one does with those leads. As a result, this will help us better focus the discussion on only those activities that will get leads into your lead gen process.
There are several factors to consider when pursuing any lead acquisition program. First and foremost however is the marketing objective. What is the audience you are seeking? How many leads do you need to capture? Are you testing a market or mining an existing market? Basically this is the who, how many and why behind your lead gen program. Once you have that in place, you can evaluate options based on cost, yield, effort, timing, reach:
Cost - What does it cost in aggregate as a program and also per lead acquired. That second cost measure usually gets forgotten, but you need that in order to get a sense whether a program falls into your CAC (customer acquisition cost) range. Cost is obviously a huge factor in any decision, but even in pre-funded startups, do not let free blind you. There are many creative and useful ways to leverage paid acquisition, especially when testing tactics and only focused on small numbers.
Yield - How many leads would a particular tactic generate? You want enough leads so that you can achieve a decent conversion rate (thus getting an accurate reading on program effectiveness), but not so many as to flood your process and have leads drop out. Note however that it is not always about volume of leads that are generated that is important, but the quality of the leads that are generated.
Effort - Startups operate pretty lean, even when funded, so it important to deploy limited resources into programs that will be worth the “human capital cost” committed. There are options however to mitigate this cost by using more inexpensive labor pools such as interns, freelancers, outsourcing providers, or mechanical turk, particularly with time intensive tasks such as research, event staffing, or creation of promotional materials.
Timing - This is when you get leads. Sometimes it is an upfront acquisition like events and purchased lists and other times it is a slow drip such as advertising and referrals. Depending on your objective and process, you may want all leads at the start or balance out the acquisition over time. The best however is a mix, that keeps acquisition and lead conversions steady, but can be accelerated at certain times to accentuate campaigns and broader business objectives.
Reach - How far and wide does the acquisition tactic reach and does it tap into the right audiences? The importance of reach also impacts the cost factor because you want to measure the effectiveness of the tactic, in other words the percentage of total reached versus actual leads generated. A program may yield a large number of leads, but only because the spread was so wide. You want to focus on the impact of a particular acquisition tactic.
No one factor should sway any decision, but rather use all four in concert to come to an informed decision on a particular lead acquisition tactic. This begs the question though, what are some of those tactics? I posted a rather generic slide in the previous post in this series, but below is a more thorough breakdown of various tactics one could employ organized by category. I personally find it more useful to think at the category level to determine the value of a particular tactic before diving into specifics.
Paid Names - This is paying for names and contact information. This is the most direct method and can often be the most cost-effective and time efficient solution. All you need to do is plug the list into your lead gen system and press go. The downside however is that most lists are utter crap so you are at best paying for 50% of the names you believe you are buying. The more industry specific though the better the results as the data is refreshed much more often. The other problem with paid names is that there is the tendency to spam the list as opposed to using a more personal and targeted approach.
Paid Eyeballs - Most people would call this advertising, but I like the visualization of eyeballs. The reality of all advertising is that there is no direct engagement with people. What you are effectively buying are eyeballs (or ears) and these eyeballs are an amorphous audience loosely defined by a few demographic parameters. This is the least direct method while conversely being the most costly whether you are talking about offline or online ads. That does not mean it is ineffective, it is simply that in a cost analysis basis, you are not usually going to get much bang for your buck. Therefore for most early stage startups, this is a poor choice for acquisition until you get to a point where you are ready to scale out the business.
Event Marketing - This is also in many ways a paid eyeballs game. The benefit however is that you can at least directly engage with interested prospects and capture their contact information. Whereas advertising is expensive in the aggregate (you are buying placements over time), events are usually a big one time, upfront cost that also sucks up people resources to prepare, travel to, and staff the event. That all needs to go into the cost equation when budgeting for events.
Promotional Marketing - In between events and outright advertising are promotional tactics. Everything from sponsorships to t-shirts, anything that displays logo/branding is promotional marketing. It is often integrated into events while seeming to be an advertising play. The difference is that you are not paying for a targeted audience or distribution with the same goals in mind as other paid marketing. For example, sponsoring charitable events does have an “audience”, but the goal is more reputational than acquisition focused. Still, the net of these tactics is to expand the breadth of the brand/name to a much broader network which can eventually turn into leads.
Targeted Research - On the opposite spectrum to paid acquisition there is research. This is generally free or at least low cost, but takes quite a bit of time to gather all the names. The benefit of course is that the quality of the information gathered can often be of better quality than a paid list. The most effective way to use this method is to come up with a targeted account list, which essentially is a list of companies that you are most interested in reaching based on various criteria such as industry, revenues, number of employees, products owned, geography, brand equity, etc. Note that to get to actual contact information, you often need to pay for access to databases or tools that provide this data which could be things like Data.com or LinkedIn or SalesLoft.
Direct Referrals - The best quality leads across all possible methods are referrals. When someone or some organization can pass you onto a decision maker, that instantly establishes credibility and removes the issues of gatekeepers that arise in many cold outreach methods. This includes direct contact to an executive, a partner referring to their contacts in a company, or some other relationship that yields a relevant contact into an organization. While it may seem like this would go into the deal/opportunity bucket, it is still important to think of this as a lead for both measurement purposes and because it is still officially a lead until someone in sales qualifies it as having near-term potential.
Networked Acquisition - Under the umbrella of social networks, network effects businesses, and various online discussion venues would be networked acquisition. The benefit is that these are free acquisition methods, however the counter is that they take a significant amount of time to foster in order to bear fruit. This is one reason that business models with built in network effects are so interesting, because the value of the network increases as more users join the network. The network creates a bandwagon effect where everyone joins while conversely creating lock-in as other options become significantly less viable. Another important aspect of networks is the ability to do research like above and create various follow strategies to gain the attention of certain target audiences. It should be noted however that from a pure volume perspective, this would be about the lowest yielding of the tactics.
Organic Discovery - When people come to you, whether by word of mouth or through a web search, that is the most effective marketing of all. What is great about it is that it is absolutely free at least transaction wise, but it is always the result of a lot of work in the beginning to build a great product and being persistent in promotion. Discovery does not happen by accident though (the proverbial “build it and they will come strategy”), especially when there is an ocean of options available for customers. By leveraging the other acquisition methods, over time serendipitous discovery and casual referrals can become a regular source for leads.
There is a lot here to consider as you create your own lead generation program. The point is to at least think strategically about lead generation. It is often tempting to grasp at any promising method that comes your way, and I have seen this happen all too often with startup founders. However, the only way you develop a healthy program and thus a healthy pipeline and predictable revenues is to have a sound approach to lead acquisition. When your lead acquisition is humming, you often find that many of the other issues in the sales pipeline smooth themselves out.
“Competition" by Rob Go
Thanks Kevin for posting this. I wrote about competition and startups a while back ago and it’s always worth revisiting the topic. Rob Go makes some excellent points, especially when it comes to focusing on great execution. As I said on many occasions, you should be tangentially aware and myopically driven. You compete not by focusing on what others do, but by being better at what you do.
I recently had a conversation with an entrepreneur about what type of salesperson to hire first, a hunter or a farmer. As a bit of background, the startup in question has a heavy service component with fairly long implementation cycles. So I was glad that at least this person was thinking more broadly about the question of what type of role is more important rather than default to hiring a VP of Sales or some prototypical sales jockey. Still, I was troubled by the distinction between hunters and farmers.
I was planning on launching into a longish series on the leads process. However, the question of sales hiring is quite relevant when thinking about lead generation. At some point you are going to have to staff that process and success will largely rest on whether you hire the people with the right skills and temperament to handle what is a high-stress, high rejection role that often seems thankless and unrewarding for most folks.
Back to the question of hunters and farmers though. When presented the analogy of hunters vs. farmers in sales, it immediately calls to mind particular traits. Hunters are the risk takers, the aggressive ones, and the type to pounce on any opportunity. Farmers are the patient ones, the analyzers, and the type to cultivate relationships to develop opportunities. As such, many companies staff their new business “closers” with hunters while those that manage existing client relationships are staffed with farmers. The thinking is that the hunter profile is better suited for “hunting” brand new customers and the farmer profile is more suited to longer term relationship building activities that open up new opportunities with existing accounts.
Frankly, this type of thinking is sorely outdated and potentially disastrous to your sales objectives. The flaw is apparent when you consider that such an artificial construct:
In essence, those “hunters” are about the worst characteristics you want on a sales team if you are trying to foster a customer-centric, consultative selling environment. Particularly in startups, you need sales to not just seal the deal, but also take ownership for driving the success of the solution implementation. These are your account managers! Whatever they sell beforehand is what they are on the hook for during delivery. It also ensures that customer have one person to reach when there are difficulties or issues to be addressed. Call it the proverbial “one throat to choke”.
The other thing however is that those folks that are both closing deals and managing the process post-sales are highly skilled, high priced, high value resources. What these people do, when they do their jobs well, can literally accelerate the growth of your startup beyond anything else. They are bagging the big deals and making damn sure that it is a win-win for both your company and the customer. Therefore, it is important to understand that making these folks cold call and prospect is about the poorest possible use of resources ever.
If I ever do drop down into the “hunters” and “farmers” analog, it is in explaining what lead generation is and how it is different than field or inside sales. The latter close deals and own customer relationships. The former however research targeted accounts, churn through leads both inbound and outbound, and qualify leads before passing the promising ones off to sales. These folks are drowning in rejection day in and day out in the hopes of finding enough high quality leads that could eventually be converted into closed business. They are the true hunters of the sales organization. This is not to say that sales reps do not prospect, but that tends to be a small amount of time. The bulk of the leads should originate out of the lead gen team.
But what about the question of who to hire first? Do you hire the farmer or the hunter? Instead of relying upon false archetypes, let’s frame the question as sales rep or lead gen rep. If you are really early and only have a handful of customers, get a sales rep, one that is not just about closing deals, but can also have a consultative mindset. Face it, there is no point in lead gen if there is no one around to close the deals that come in. Soon after closing a few more deals however, it makes sense to get someone that can help generate leads to feed the first sales rep. If your team is closing deals just fine however, you might consider bringing on a lead gen person to build up the pipeline till you have enough business to bring on a sales rep.
The lesson here is not to simply fall into the simplicity of tired models used to describe sales. Figure out what exactly you need help with, then hire to fill that role. And remember that as a startup, whoever you hire needs to be super resourceful as well given the constraints on money and staff and time. That consideration alone should sway you from the false “hunters vs. farmers” dichotomy. What you don’t need is a “whine and bitch salesperson” when you are really looking for a “get shit done” salesperson.
So where does one get leads? That is where I left off last time in the series. It is critical topic to cover as we delve further into the sales process. Because it is such a big topic though, it is best to tackle it by breaking down the parts. People often just refer to leads, but that obscures the full picture. It is more than just the lead itself; it is the process of finding leads, properly identifying leads, and knowing how to handle leads.
When the topic of leads comes up, most non-sales people picture the movie Glengarry Glen Ross and Alec Baldwin waving a bunch of index cards in the air. I have personally worked with customers in the not so distant past where the process was not too dissimilar. The way sales often worked involved buying lead lists of dubious quality, scouring phone books, or even going door-to-door.
Obviously the situation has improved immensely with the Internet and more sound and proven marketing practices. However, the mechanics around leads are not all that different. There are three components to consider when discussing leads:
Why is it important to make such distinctions? Because it helps us to think strategically about lead generation. It is far easier to simply think in terms of quick wins and near-term tactics. While the ability to be flexible and change gears quickly is beneficial for startups, it can backfire because it results in disjointed efforts that waste precious time and money. Often this becomes an issue with startups that are lured into dubious events, programs, and the like that offer very little in the way of relevant leads but often end up costing a bundle. Without a strategic marketing vision, it is easy to fall into these traps. That includes the seemingly “good programs” that are supported more by myth and “sound wisdom” than actual results.
I am here to tell you that I haven’t a clue which method is best for you because it depends on your business, your industry, and your solution. Anyone that tells you otherwise is a charlatan. The best ways of acquiring leads depends on what works for you at your particular stage of growth or strategic direction. All I can tell you are the programs and methods to avoid because time and time again they have proven to be of low value. The only way to know the “best” methods is to test and measure, test and measure, and repeat that over and over again. Thus, this exercise of separating out acquisition, source, and execution is simply a means to help lead us to that test and measure mentality.
I will probe more into details of each over the next several days, but for now I have provided the above chart to help list out just some of those acquisition tactics, sources, and execution methods. It is simply illustrative and some things may meld into each other as I touch upon earlier, but hopefully this helps you to start thinking strategically about your own lead generation process and how you will measure effectiveness. Remember, a large part of this exercise is to improve upon what you are doing and as the saying goes, if you cannot measure it, you cannot improve it.
"Management: Tasks, Responsibilities, Practices" by Peter Drucker
In many ways, I think enterprise tech has it all wrong from a sales & marketing perspective. We build massive sales teams, spend inordinate dollars on marketing, and yet the ROI on those investments barely eeks out any profit. Just look at the profit numbers (or lack thereof) for public SaaS companies if you do not believe me. It is the classic spray and pray model and it is broken. Maybe we are thinking about it all wrong.
Thanks to Jerry Neumann for reminding me of this quote.
“Swatting at a Swarm of Public Relations Spam" via The New York Times
For that matter, you can ask the same about any mass-emailing bombing campaign. If you are not intelligently targeting your audience and your messages, you are heading for a massive fail. This is the main reason why most email marketing campaigns get such low open/click-through rates.
Phil Terry. “Never ignore your customers”
The most powerful context for that in business is to put senior executives in front of their customers. As long as you are running good observational research (not focus groups, etc.), then the painful and powerful experience of watching your ordinary customers attempt to interact and use your products and services will disabuse you of your commitment to sacred cows and misguided assumptions.
Some will tell you that a lead is a lead is a lead. That is especially the case in early stage startups where it is hard to get anyone to notice, much less respond. In this state of desperation, it can be easy to fall head over heels for any prospect that returns a call or responds to an email. How awesome it is that you got the attention of a real buyer! But just like the dangers of falling in love too quickly, often these short term romances turn sour. You see, not all leads are the same and not every lead is deserving of your love.
Leads can come in all sorts of shapes and sizes and directions. Some common examples include:
These are all valid lead sources and each can have the potential to generate solid opportunities. There are a lot of sources however, so the challenge becomes determining which sources provide the biggest bang for the buck and how to best prioritize one’s limited time.
If the above chart is any indication*, there are some pretty wide ranging degrees of success when converting leads when measuring by lead source. Word of mouth and referrals are far and away better sources than tradeshows and social media (at least in the case of Marketo where this chart originated from). While this will differ based on industry and business model (for example, social media might be much more important for a mobile consumer app), the point is that some lead sources produce significantly more gold than others.
What this means is that you must treat leads differently based on the source, score these leads according to importance/priority, and capture this information in a system. There is no logical reason for a highly paid sales rep (or in the case of a very early startup, the CEO) to call or email website leads in most cases. That should be the job of a marketing intern or assistant. Likewise, referrals and inbound calls would be better worth the time of the sales people. By using a simple scoring mechanism, you can more easily distribute the work to focus time on the high quality leads while still nurturing other, less urgent leads. The point is that with limited resources, time is the most precious resource, so it pays to build your early lead generation and sales processes with efficiency in mind.
Besides scoring each lead however, it is imperative that you capture the lead source. How else are you going to understand what lead generation programs and marketing activities are providing the best return on investment? With limited dollars, you can ill afford to spend cash on events and other pricey programs without clearly understanding the return. And you cannot know what that return is without tracking leads with rigor, and that included capturing lead source and tying that back to lead scoring, lead-to-opportunity conversions, and eventually closed revenue.
At this point, you may be asking yourself whether this is even worthwhile. A lot of startups generally get early leads through existing connections and referrals within the founders’ networks. However few leads you may be receiving though, it is good to get into the practice of rigorously capturing and measuring leads as it will provide the basis of your lead generation programs later on. Still, you are probably scratching your head as to how to even find enough leads to be picky or to build any sort of “program”. While the above list is a good start at some sources to mine, how does one even start? That is what we will talk about next time as we learn how to “prime the pump” to get our lead generation activities kick started.
* From the book Predictable Revenue by Aaron Ross and Marylou Tyler
Saw this piece shared by Fred Wilson this morning:
48% of sales people never follow up with a prospect
25% of sales people make a second contact and stop
12% of sales people make more than three contacts
2% of sales are made on the first contact
3% of sales are made on the second contact
5% of sales are made on the third contact
10% of sales are made on the fourth contact
80% of sales are made on the fifth to twelfth contact”
I am not entirely sure where the data comes from, but I have seen similar statistics in the past. However, I can tell you from experience that this is not too far off the mark.
Sales is not as much of an art as it is a science. It is the process of identifying interested buyers and leading them through a defined process towards close. Sometimes this does not always work out, but that is why you need so many prospects at the start of the process. In well run sales and marketing organizations, this happens in a very measured and purposeful way. That means execution is king. If you are not rigorously following up on prospects, you are losing out on a ton of opportunities.
Lesson here for sales teams is to follow up, make it repeatable, and make it religion.