Outbound Lead Generation: Do You Know (and Understand) Your Lead Generation Economics?

December 10, 2012 by

Presenting several lead generation techniques, this is the second post in a two-part series on the two most important factors to consider when deciding whether or not to launch an outbound lead generation team. To read the first post on why you should consider the complexity of the sale first, click here.

In my last post, I wrote about how you can determine if the complexity of your sale justifies developing an outbound lead generation team. But complexity of the sale is just one factor that companies must consider when they make the decision to fire up an outbound lead gen initiative. The other, which I’ll cover in this post, is lead generation economics.

lead generation techniquesEven if your products and services require a complex sales process, an outbound lead generation team still might not be the most appropriate strategy to take. Before you decide to move forward with launching a team, your company’s lead generation economics should also be taken into consideration. In other words, how much does it cost you today to generate a qualified opportunity?

To answer that question, you should consider the following example.

If your marketing team has an annual budget of $1M and it generates 500 opportunities, your cost per marketing generated opportunity is about $2,000. Outbound lead generation reps typically cost $80,000 to $100,000 per year fully loaded. Even if a lead generation rep only finds two opportunities per week, it will cost roughly half as much money to generate almost the same number of opportunities.

Here’s the math to back that up:

[2opps per week] x [48 working weeks/year] x [5 outbound lead gen reps] = 480 opportunities

[5 outbound lead gen reps] x [$90,000 per fully loaded rep] = $450,000

Cost per outbound rep generated opportunity = $937.50

Outbound lead generation vs marketing economics

Outbound lead generation vs marketing economics

In this example, if your ASP is $25,000, then your outbound lead generation team should generate $12 million in pipeline. This makes it easy to justify the $450,000 cost of the team with a pipeline multiple of roughly 26X the investment. You can also take it a step further and estimate the team’s ROI if you know your average win rate.

In addition to the two primary factors that I mentioned in this series — sales complexity and lead generation economics — you must also consider the derivative benefits that come from having an outbound lead generation team.

Outbound lead generation isn’t just about opportunity creation. It also allows you to capture value points and objections from potential buyers, and to test new messaging and pitches with immediate, actionable feedback. Ultimately, that intelligence can help you fine tune your sales, marketing, and product development efforts with a much better understanding of the prospects in your target segment.

This inevitably makes every component of your organization more focused. Having a high volume of direct touches and conversations with prospects also helps companies increase brand awareness in their target market and build stronger relationships than an e-mail or advertisement could otherwise create. These intangible benefits can be incredibly valuable for expansion stage companies looking to increase awareness, market share, and their own understanding of their prospects and target markets.

Though deciding whether to build an outbound lead generation team is not an entirely black and white issue, your final decision should be based on a cost benefit analysis that takes into consideration the three things I’ve discussed in my my last few posts — sales complexity, lead generation economics, and the additional benefits that come as a result.

If your product requires a complex sale and the economics make sense, then building an outbound lead generation team should be a no-brainer.]

Learn more lead generation techniques here.

  • http://www.facebook.com/Busintellsol Jon Nugent

    Great article. This is exactly the scenario that we’re working through now. We’ve moved from 3 outside reps to 1 lead generation rep and 2 outside sales reps.

    The quesiton I have is why did you choose the pipeline multiple of 26X. Were you factoring in other operational costs / SGA costs. If so, in your scenario, what are those costs or other factors.

  • http://twitter.com/chris8649 Chris Beall

    Going back one more step, to generate 2 opportunities per week, how many conversations would you expect each lead gen team member to have?