The Basics of Lead Generation Through Ads

As an online ad specialist, lead generation is a big part of my business. From lawyers to dentists, roofers to insurance agents, and chiropractors to skincare clinics, I’ve managed thousands of lead generation campaigns. Have they all worked great? No. Although I am highly trained and experienced, I can’t control every aspect of success. For example, I can’t control consumer demand and behavior. In many cases, I can’t predict it either. Of course, I can draw on my experience. When I’ve managed successful campaigns in the past – say, for an orthodontist in Lodi, CA – I can feel confident about taking a similar approach for an orthodontist in Decatur, IL. Does that mean the same results should be expected? No, because there might be differences in the marketplace for each area. But it’s a reasonable approach.

There are several important factors to measure when it comes to lead generation, but the most important one by far is profitability. It must be considered whether the whole endeavor leads to a net gain or a net loss for the business. There are situations when lead generation expenses are a net financial loss in the short term but are an investment for the long term. For many business types, growing and scaling is costly but has the potential to increase profitability later.

Although overall profitability is the main factor, there are several important sub-factors that play a part in determining profitability. Here is a list of five.

Volume of leads – Lead generation has always been (and will always be) a numbers game. Enough leads must be generated to support business growth or at least to maintain the status quo. Otherwise, the business will shrink and disappear at some point. The volume of leads is considered a “top of the funnel” matter, whereas nurturing and closing leads are “middle” and “bottom” of the funnel ones. It’s important to have a steady stream of new leads, and that genuine interest in the product or service be the litmus test.

Cost per lead – The cost of the leads is obviously very important. It needs to make sense related to the marketing goals of the business. What’s a good cost per lead? It depends. For some times of businesses, $5 is a reasonable and attainable cost per lead. For other types, hundreds or even thousands of dollars might be the cost. There are companies that would be thrilled to get viable leads for $5,000 each. Obviously, those companies stand to make big revenue for a sale.

Quality of lead – Like volume of leads, quality of lead relates to interest, including the level of interest and type of interest. Normally, you want the type of interest to be related to doing business. Make no mistake; there can be those who are keenly interested in getting free information but not at all interested in paying for anything. And perhaps they can’t afford to pay for anything. As a lead generation expert, I can tell you that the quality range from a single campaign can vary greatly. When it comes to qualifying the lead, there is no official right or wrong way or time to do it. For different businesses, it can work differently. Some prefer to have qualifiers at the very top of the funnel to avoid any time or energy wasted on them. Others prefer to let a broader range into the top of the funnel and let follow-up mechanisms do the qualifying.

Closing rate – Although closing rate isn’t a direct part of lead generation, it is a crucial factor in determining the success of a lead generation campaign. It refers to the percentage of leads that a business successfully converts into actual sales. A high closing rate indicates strong sales skills, while a low closing rate may highlight potential challenges in sales techniques or lead quality. What should a closing rate be to be considered healthy? There’s no right or wrong answer, as it depends on the goals and finances of a business. For example, suppose a business’s closing rate is only .001%. That sounds bad. But if they make ten million dollars in revenue for every sale, it might be fine.

Lifetime customer value – When a new client/ customer is attained through lead generation, the value of that customer must be measured in relation to the lead generation cost of time and money. The most useful number to factor in is called lifetime customer value. This refers to the total amount of revenue a business can expect to generate from a single customer over the entire duration of the relationship. It’s important to consider as many factors as possible – direct and indirect. For example, you might consider the possibility that referrals might result from the relationship. It takes organized data over time to determine the lifetime customer value of a customer. It usually involves averaging. But if you know that your average customer has a lifetime value of $900 and that it costs you $600 to attract and serve a customer, you’re positioned to make a profit of $300 for every new customer you get.

In closing

When money is being spent on ad campaigns for lead generation, it’s a wonderful thing to see successful results — especially results that remain consistent over time. But when the results aren’t successful, it can be confusing and disturbing. The problem normally lies with one of the factors I outlined above. But keep in mind some advertising basics. The main jobs of ads are to (1) be seen, and (2) generate interest. It’s quite easy to get them seen. But what if they aren’t generating sufficient interest? When this happens, it’s the result of one of these two reasons (if not both):

1. Bad execution of ad campaigns – Ad management is a deep, deep specialty. It may seem to some like an easy, just follow-the-instructions thing. But there are a lot of moving parts that affect how money is spent or misspent. It’s very common for people who aren’t high-caliber specialists to badly execute their campaigns. This leads to bad targeting, bad ad placement, and wasted money.
2. People simply aren’t interested enough in the product or service – which is a considerable marketing problem. You might have a useful, unique, and affordable product or service to offer. But if you can’t draw interest enough to make sales, you don’t have a business. Unfortunately, a very common scenario in modern entrepreneurship is: great product, bad business.

Consumer behavior is mysterious. There are things that we buy but don’t love and things that we love but don’t buy. Sometimes (for sure), a change in packaging or messaging can make all the difference. However, not every situation has a marketing solution.

If you are determined to find a successful lead generation process, my best advice is to keep excellent records of everything that is done so you can look for patterns over time. (My routine is to put numbers in a spreadsheet every Friday at 5 pm, such as how many leads came from my ads, how many appointments were booked, how much was spent on ads, etc.) And always try to improve results in the five categories mentioned above.