Prioritizing Metrics: Weighing Lead Generation Options

1. Scientific Approach to Lead Generation:

• Focus: Identify areas for improvement and track lead sources. Example: Identifying low lead numbers from print ads.
• Modeling: Study successful strategies used by others in similar markets. Example: Researching best practices in digital real estate advertising.
• Systems: Create a plan including budget, message, target audience, integration into the overall lead generation strategy, and define success metrics. Example: Setting a monthly social media advertising budget and creating engaging ad content targeting potential buyers in a specific area.
• Accountability: Implement the plan consistently for 3-6 months, tracking and analyzing lead sources using a dedicated Lead Source Spreadsheet. Example: Recording each lead, contact method (phone, email, etc.), source (website, ad, referral), and acquisition cost.
• Conclusion: Compare program costs to net results to determine Cost Per Lead. Example: Spending $1000 on an ad campaign and acquiring 50❓ leads results in a $20 Cost Per Lead.

2. Success Equation: Quantity Before Quality?

• Quantity Matters: The total number of leads generated is more important, allowing for compensation of low conversion rates.
• Law of Large Numbers: As the number of trials increases, actual results approach expected results. More leads increase the chance of closing deals.
• Conversion Formula:
  • Deals Closed = Leads x Conversion Rate
• Practical Example: To close 10 deals with a 10% conversion rate, 100 leads are needed. If the conversion rate drops to 5%, 200 leads are needed to close the same number of deals.

3. Economic Model and Impact on Lead Generation:

• Economic Engine: The lead generation plan should be based❓ on an economic model defining the number of appointments needed to achieve goals.
• Leads-Appointments-Sales Relationship:
  • Leads fuel the economic engine.
  • Leads lead to appointments.
  • Appointments lead to sales.
• Formulas to Determine Required Leads:
  • Appointments Needed = Target Deals / Appointment Closing Rate
  • Leads Needed = Appointments Needed / Lead-to-Appointment Conversion Rate
• Example: To close 12 deals per year with a 50% appointment closing rate, 24 appointments are needed (12 / 0.5 = 24). If the lead-to-appointment conversion rate is 20%, 120 leads are needed (24 / 0.2 = 120).

4. Ratio Analysis:

• Advertising-to-Sales Ratio: Compares advertising costs to revenue from sales.
  • Advertising-to-Sales Ratio = (Advertising Cost / Total Revenue) x 100%
• Cost Per Lead to Customer Value Ratio: Compares the cost of acquiring a lead to the total value the customer brings to the business.
  • Cost Per Lead to Customer Value Ratio = Cost Per Lead / Customer Value
• Example: If the Cost Per Lead is $50 and the expected customer value (net profit from the deal) is $5000, the ratio is 1:100, meaning $100 is earned for every dollar spent on lead generation.

5. Factors Influencing the Local Market and Team:

• Local Market Dynamics: Local economic conditions, competition, and demographics affect the effectiveness of lead generation strategies.
• Team Capabilities: Team skills and experience affect conversion rates and the ability to manage a large number of leads.
• Adaptation to Changes: Strategies should be adjusted based on market changes and team performance.

6. Calculating the Cost of a Lead Generation Program:

• Direct Costs: Include advertising costs, marketing materials, software, and tools.
• Indirect Costs: Include employee salaries and time spent on lead generation.
• Return on Investment (ROI): Measures the profit generated from a lead generation program compared to its cost.
  • ROI = ((Net Profit - Cost) / Cost) x 100%
• Example: Spending $10,000 on a lead generation program and achieving a net profit of $30,000 results in a 200% ROI.