… And the next chapter in my book on lead generation….
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At this point I hope I’ve made it clear.
Building an automatic lead generation system can radically transform your selling process. From difficult to easy. From arduous to enjoyable. From costly to profitable.
Bringing in a steady stream of qualified, well-educated leads represents a huge leap forward in any business.
Selling becomes easier, more fun, and more profitable.
And because your customers and clients actually get to feel like they’re making an educated, informed decision (rather than being sold hard on something they may not need), they’re happier, too.
Before we go into the details of what your automatic lead generation system may look like, I want to answer a few final questions. In doing so, I hope to expand on and add dimension to the value you can get out of investing the time, money, and resources into building such a system for your business.
So, without any further ado…
What kind of business is a lead generation system a good fit for?
Perhaps the better question would be what kind of business it is NOT a good fit for.
I would not necessarily build an automatic lead generation system for Walmart. Nor for Amazon. Nor for many retailers with a very wide product base.
If your business’s primary role is to sell a large inventory of others’ products to a large swath of different buyers, it may not be a fit.
For a lead generation system to work, it’s best if you’re able to target a specific type of buyer, with a specific problem your products or services will help them solve.
On the other hand, if I were working in a different sector of the Amazon business empire, I might.
For example, for their web services platforms. Let’s say I was able to identify one particular ideal target customer — say, a business with very high volume video streaming.
I know that anyone dealing with a lot of multimedia content online is going to care about a few things. Storage costs. Bandwidth. Scalability. Service availability. Customer experience. Ease of use.
A lot of those questions wouldn’t necessarily need a human salesperson to answer them. Maybe in a high-end corporate sale, there would eventually need to be sales team involvement. But 90% of the lead generation and customer education could be done prior to that first contact.
In general, if you have a sales staff, it will be a smart idea to do more automated lead generation.
Not only is there a high emotional cost to cold call prospecting and lead generation, there’s a high financial cost to your business as well. It’s typically the least efficient part of the selling cycle. The time (and resulting payroll) invested has a very low payoff relative to other parts of the sales cycle.
The more of the earliest phases of the sales cycle that you can automate through marketing, the more profitable your entire sales department will become.
One more factor that significantly contributes to whether or not this is a good idea for your business is cost and customer value.
If you’re selling a $5 hairbrush through retail, where the margins per customer are paper-thin, you mostly have to let your retail presence do the selling for you.
However, if you’re selling information, services, software, or products with prices in the hundreds, thousands, or even hundreds of thousands of dollars, your economics change significantly.
Also, if customers come back to buy from you again and again (and you should structure your business so this happens), it may be worth investing more in a system to generate leads.
On a very basic level, it comes down to math. If it’s cost-effective for you to invest in automated lead generation (that is, if it gets you leads or customers at or below your target cost), you should do it.
Which leads us to our next question…
What kind of math makes a lead generation system make sense?
My answer to this question is a very abbreviated version of my Magic Number essay, which I’m including as an appendix to this book.
Most business owners’ thinking on the cost of acquiring a customer is exactly the opposite of what it should be to maximize growth.
Most businesses would prefer to spend as little as possible to get a new customer.
The very best marketers do the opposite, they figure out a high maximum allowable cost to bring in a new customer, and try to get as many new customers as they can for that cost or less.
I’ll explain.
In order to figure out how much you can afford to spend to acquire a new customer, you have to determine the lifetime value of each new customer. In its most simple form, that’s the amount of profit the customer will bring to your business over an expected lifetime of their relationship with you.
So a new customer may only have $50 profit in their first transaction. But on average, each new customer may be worth $1,000 to you within two years.
Most business owners will try to keep their cost of customer acquisition to well under $50, so they can profit on the first transaction.
The problem with this is that it inevitably limits you. What media you can use. What impression you can make on customers. How many times you can show up in front of them to convert them. And so on.
The really good marketer will look at that lifetime value of $1,000, and recognize that as the more important number. Every new customer that leads to $50 profit today is actually worth $1,000 within two years.
And so it makes sense to spend at least that $50 profit from the initial transaction to get an additional $950 within the next 24 months. For many though, that’s not enough. In my copywriting work with some of the biggest consumer direct marketers in the world, I’ve found they’re willing to go negative for as long as a year before breaking even on a customer.
So let’s say that out of that $1,000, $700 of the profits are made in the first year. These marketers will spend as much as $700 to get that first $50 in profit from the customer, knowing that within 12 months they’ll have their $700 back, and in 24 months they’ll be $300 ahead.
This allows them to reach the customer through more media. To make a bigger impact. To reach farther and wider to bring more customers in through the door.
And inevitably it’s the marketer or business owner who thinks this way who will — in 1 year, 5 years, 10 years — own their market. Because they were willing to spend what others weren’t to get the customer, they get the customer while others don’t.
It takes some serious thought and calculation to define the Magic Number for your business. And perhaps, financing or somehow managing the float.
But once you define the high amount that you’re willing to spend to acquire a customer, you can achieve some pretty impressive results.
In terms of lead generation, this is the math you need to be considering. Not “how little can I spend to get a lead?” Rather, “how much can I spend to get a lead and acquire a customer, and still come out ahead in the long run?”
This will drastically change what you’re able to accomplish with lead generation, in a very positive way.
What other advantages do I get out of building an automated lead generation system?
I’ve teased the answer to this question a few times already, but I do want to take a moment to address it directly.
If you build a sophisticated system for…
— Reaching out into your market…
— Getting the attention of leads and prospective customers for your solution…
— Getting them to raise their hand and express interest in what you have to say…
— Educating them on the solution to their problem and establishing buying criteria that favor you…
— And finally showing them the next steps to moving forward to get your solution…
You will find huge advantages come to your sales operation and your business.
First off, it will make every customer you bring into the fold feel more comfortable with buying from you. By systematizing the earliest parts of your relationship with them, they will feel a natural confidence in your ability to deliver once they’ve purchased.
Because of this, your sales team will find it easier to close a higher percentage of leads into sales. They will be pre-qualified, pre-educated, and pre-sold on doing business with you. This simplifies the selling job down to basic Q&A and order taking. This means less sales staff will be required to handle the same order volume, and the sales staff that you do have will be able to achieve better results (without actually having to be better sales people).
And if you set up the math so that you’re willing to spend more than your competitors to bring new customers in through the door, you’ll find even more advantage. You’ll reach a broader segment of the market than your competitors, and make more sales. This will be a positive feedback loop that only increases your dominance in the market.
While there’s a lot of short-term value in automating lead generation and the first steps of the sales process, the long-term result of solid growth and market domination will pay even greater dividends.
So, what are we waiting for? Are you ready to get started?
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For the full Magic Number essay, click here.
Yours for bigger breakthroughs,
Roy Furr
