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Why Lead Gen Is Bad for Business

August 17, 2018 - Lead generation, Marketing, Metrics, Practitioner Marketing - , ,
By: Chris Riley

When you get right down to it, deals are made when you have the right contact information from the right person who has a budget and a need. All this stuff we do in marketing to build credibility, awareness and brand needs to boil down to market qualified leads (MQLs). For some organizations, rather than relying on all the marketing minutiae to get to an inbound MQL, they turn to cost per lead (CPL) campaigns for what seems like instant outbound leads. Why mess around, right? The problem is that CPL campaigns eat organizations from within, and what seems like a quick hit usually results in a downward spiral of complacency and ineffectiveness. That’s right, lead gen is bad for business.

Downfall #1: Is It Even an MQL?

Lead gen services and campaigns promise MQLs, and some percentage can do this. But the chances are low that the leads you get are even MQLs. Here’s why:

  1. The vendor does not correctly explain the MQL persona. In technical fields where demand generation teams are responsible for identifying what a good lead is, this is especially true. They may not even fully know the persona.
  2. Even if the MQL persona is defined correctly, the demand gen service does not really understand the difference between a developer and someone buying computers. So they lump their criteria based on subjective previous knowledge and hope that it is correct.
  3. When you have guaranteed lead campaigns, often, the original sources do not pan out. Thus, there is a reliance on secondary and tertiary lead sources—and they degrade in quality as you go down the chain. That pressure to produce a name (any name) means that the quality of later leads captured usually drops.
  4. Once you get a lead, there is a chance that the data is not current (and probably not valid).
  5. There is not a lot of incentive to check leads. The lead-generating service or demand gen team have little incentive to audit the leads that come in, mostly because they are under so much pressure just to deliver the numbers. Most lead campaigns are reactive; therefore, the faster they can turn over a name, the faster the pressure is let off.

Downfall #2: Issues with Fidelity

Lead gen services will tell you that the leads are not tainted (meaning they have not already been contacted by 10 other companies). But if the leads vendors get have been contacted before, their willingness to have a conversation drops substantially. Even the best lead in the world with all contact information, the correct persona, and with budget and need will burn out after the third company contacts them soliciting products and services in the vendor’s space. It’s simply impossible for lead gen companies not to have exhausted leads because with account-based lead gen and enterprise sales (where most lead gen is done), there is a limited number of people. The chances are high that a contact’s name has been sold more than once as a lead in the same industry. Vendors are told otherwise, but the problem is that the companies that deliver the leads are clearinghouses and middlemen. They are often at least one company removed from the actual source of the lead, so they do not really know if it has already been sold or not. And there is a good chance that a contact is blocking all outbound solicitations out of pure frustration, even if they are a perfect fit.

Downfall #3: Not Knowing How to Assess Need

An immediate need for a product or service is important to prospects making a buying decision, especially in technical fields. The only way they can effectively manage their time when acquiring new technology is to look at what is relevant to them right then.

In spite of this, prospects are bombarded by vendors trying to sell them something. The way leads are captured makes it VERY difficult to identify need. You can try to assume need based on types of content, but this is very misleading because techies like to educate themselves on a regular basis. So even the perfect lead may have no interest in what you have to offer, because the product is not addressing an immediate need.

In the modern ecosystem, most technical buyers will have made a buy/no buy decision without talking to anyone, or the vendor even knowing they are there.

Blame Comp Plans

There are a lot of reasons organizations turn to lead gen. But all of them have to do with organizational structure and/or pending financial pressure. You will often see companies in times of desperation turn to lead gen programs, and drop everything else. This is especially true for VC-funded tech startups that are 2-3 years old and not yet profitable, and hoping for a quick hit. After all, their only problem must be sales, right?

But the other common reason is how the organization is set up. Organizations where lead gen is a favored practice are often structured in a way where the incentives of lead gen compete with the rest of the organization. Their bonus is usually based on a number, not the quality of that number. And if you have the budget, why wouldn’t you just allocate it based on hitting that number?

Inevitably, the quality of leads becomes an open conversation where sales will complain about poor quality of leads. Why? Because the rest of the organization is looking at them saying, “You got your names—Why can’t you close them?” The passive-aggressive battle will continue, where both sides use every justification and plausible deniability skill that they have. Eventually, the sales team gives up—because it’s not their budget, and their job is to sell. So they take what they get, and they either find new ways to talk to the right people, or just accept the inevitable.

The net result is that everyone is guilty and the whole sales and marketing organization is complacent about spending money on fruitless activities. Then, the entire organization suffers—and not just financially. The entire brand slides downhill. Organizations can quickly go from being a tech company to just being a sales floor with a complete misunderstanding of the market and a bad reputation.

The Takeaway

Lead gen seems like an easy way to get numbers—and for some enterprises, just a standard part of marketing. But in my 12 years of marketing technology, I’ve never seen it work successfully as a campaign. I have seen lead gen eat organizations from within. And due to the way the market is changing, it’s going to be even more challenging to capture and realize the value from lead generation programs. The problem is not the lead gen team—It is the organization’s marketing strategy, and penny wise and pound foolish hierarchy.

 


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Chris Riley (@HoardingInfo) is a technologist who has spent 12 years helping organizations transition from traditional development practices to a modern set of culture, processes and tooling. In addition to being a research analyst, he is an O’Reilly author, regular speaker, and subject matter expert in the areas of DevOps strategy and culture. Chris believes the biggest challenges faced in the tech market are not tools, but rather people and planning.

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