6 Considerations that Affect Lead Generation

The following is an excerpt from the “Secrets of Direct Marketing Arithmetic” report, published by DirectMarketingIQ. It’s an updated guide to the science of direct marketing, including using arithmetic for direct mail, lifetime value, getting leads, email acquisition, online P&L, measuring social media and more.

Marketing a high-end product or keeping a sales force busy requires you to generate leads. Fortunately, there’s a scientific way to do it profitably. Remember, every dollar invested in marketing must have a payback. Think of yourself as a marketing portfolio investment manager. For every dollar you spend, there must be a high return on investment.

Controlling marketing costs and generating the highest possible return on your marketing investment should be your driving motivation when you decide to create and manage a lead generation program.

Even though there are other good reasons why you go through the added hassle of two or more steps to generate, qualify and convert leads to sales, the driving reason should be to generate the greatest return on marketing investment when you use a lead generation program.

You’ll likely use lead generation programs for one of two reasons:

I. You’re selling an expensive product and before you mail the expensive brochure, videotape, or other marketing materials, you need to make sure your prospect is truly a lead.

II. You have salespeople making sales calls and you help them utilize their time better, have a higher close rate and make more money by generating qualified leads for them.

Oversimplified lead generation measurement involves counting your leads and dividing them by the cost of the program to give you a cost per inquiry (CPI). But that doesn’t tell you the whole story. There are a host of other considerations, all which impact the arithmetic, such as:

  1. Cost to fulfill each inquiry. You must have a complete plan of action and materials to send to every inquiry. Remember, too, that when you produce volumes of leads you have to fulfill them. It won’t do you a nickel’s worth of good to generate “tire kickers,” so factor in your added cost of generating worthless leads.
  2. Conversion rate. Whether the conversion comes from the expensive fulfillment package you have mailed or from a sales person, the percentage of conversions has a dramatic impact on your bottom line profits.
  3. Average purchase amount. If you use a sales force to sell products or services which can result in frequent purchases, the average sale per customer has a dramatic impact on what you can spend on marketing. Future purchases measured over a long-time basis add significantly to your profitability.
  4. Freebies or discounts. Are you including a free premium item? Discounted price? Other costs to acquire the sale?
  5. Sales call costs. Sales calls are expensive and can be $400 or more each. Reducing the number of calls to close the sale is a powerful reason to use lead generation programs.
  6. The second and all subsequent contacts. What happens when someone inquires about your product and you mail a fulfillment package but generate no response? Does that inquiry fall into a black hole never to be found again? Or do you contact them over and over until it doesn’t make financial sense to pursue that lead?

Click here to find out more about the “Secrets of Direct Marketing Arithmetic” recent report. Gary Hennerberg, president of Hennerberg Group Inc., is a creative strategist, copywriter and analytic consultant for direct mail, websites, email and other direct marketing media. Contact him at (817) 318-8100 or www.hennerberg.com.

Reinventing Direct is for the direct marketer seeking guidance in the evolving world of online marketing. Long-time traditional direct marketer, Gary Hennerberg, has reinvented his skills multiple times in his career. As a former marketing and product manager, agency executive, and now a sought-after consultant and creative director, Hennerberg has successfully transferred traditional direct marketing principles to online media. An author, speaker, strategist, copywriter, and analytics pro, he founded Hennerberg Group, Inc., in 1992. Email him using the link below or follow Gary on LinkedIn.Co-authoring this blog is Perry Alexander of ACM Initiatives. Alexander’s passion is conveying information clearly and compellingly. He is a veteran marketing strategist, copy editor, design pro and video producer. Hennerberg and Alexander have worked together since 1996. They integrate direct marketing methodology in cross-channel marketing applications for end-to-end, strategy-to-roll-out initiatives that drive people to action. Follow Perry on LinkedIn.
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