Understanding Lead Generation & Your Role In Its Success

Updated on March 13, 2023

For any service company to survive and thrive, there must be a consistent flow of new customer opportunities coming in that puts appointments on the call board and keeps employees busy. Whether you are a one-man shop or a large company with hundreds of employees, demand generation isn’t a luxury, it’s a necessity.

For most companies that are providing great service to their clients, repeat business and referrals should make up the majority of their work. But the reality is that no matter how good you are at servicing your customers and keeping them happy, you are going to need lead generation in order to attract new customers, keep your call board full, and grow your business.

Lead generation comes in many shapes and sizes, and some lead generation methods will work better than others for your business. So how do you measure the success of these lead generation programs?

We’ve been generating exclusive leads for our clients for over 15 years, and in doing so have also worked with lots of other lead generation companies in our space. So here’s some things we think you should be considering.

Understand What You Are Buying

Before we get into the metrics you should be analyzing to determine success, it’s important that we create some context around what lead generation is and what it isn’t, and the implications that has for your business when it comes to a successful lead generation program.

What is a lead?

Generally speaking, a lead is an opportunity. What does that mean? It means that whatever you are purchasing, whether it’s a form lead (that comes to you via email) or an inbound phone call, there is an opportunity to win their business because the lead has an intent to use your service.  

What isn't a lead?

A lead is not a completed job or booked appointment. There is no guarantee that a lead will become a paying customer.

 Again, a lead is a great opportunity for you to convince someone that needs your service that you are the right choice for their needs. It’s a chance for you to gain their trust and build value in what you do, such that you have a chance to service them and turn them into a life-long customer. But that is something only you can do (or not do, depending on your ability to sell your company/services), not the lead generation company you have hired to provide you with opportunities. 

Understand The Role You Play In Lead Generation Success

Because lead generation programs are designed to give you opportunities, it’s important to recognize your role in turning those opportunities into customers. 

To put it bluntly, you have to put in the work to make any lead generation program successful. And if you aren’t willing to put in the work, you won’t succeed and ultimately your business won’t grow. In fact, statistically speaking, it’s more likely it will shutter.

If you aren’t willing to do the things necessary to take leads (opportunities) and turn them into actual customers, then no lead generation company can help you.

At Service Direct, our focus is on driving inbound phone calls to our clients. How likely are you to succeed with our program if you don’t answer your phone? The answer is easy: there is a 0% chance you’ll have success with us. In fact, good phone etiquette is one of the biggest keys to success for any small service business.

We deliver exclusive leads, but other lead generation companies offer shared leads, which means you could be competing with other businesses in your area for any given lead. If it takes you 3 days to respond to those leads, how likely are you to win their business?

At the end of the day, the bulk of success is dictated by the company, not the lead provider. We see that reality play out day after day within our platform. We have clients that consistently generate 20X returns with our service, while others see no value. For each, we are doing the same thing: making their phone ring with potential customers. But some obsessively focus on how to maximize those opportunities and turn them into lifelong customers, and others don’t.

Understand the Key Metrics That Determine Success

Appointment Rate

Regardless of what type of service you provide, your ultimate goal is to turn a lead into a paying customer. That starts by booking an appointment. So one metric you should be focused on is the percentage likelihood that a lead becomes an appointment.

It’s important to understand that you are never going to achieve a 100% rate with any lead generation program, or any marketing service for that matter. When you send out direct mailers or hang door flyers, do you expect each and every one would produce a customer? If you’ve ever bought clicks to your website, was the expectation that every click would result in a customer? Of course not.

That said, lead generation services should deliver a relatively high appointment rate, depending on the type of leads offered and your company’s overall ability to convert. For some, that rate may be as low as 10%, while you may experience a much higher booked appointment rate with other services. 

On its own, appointment rate isn’t enough to determine success (more on that in a second), but it is a metric you should be trying to optimize. How can you go from 20% to 40% appointment rate? Because guess what, you have competitors that are probably at 60%. What are they doing that you aren’t? Put in the work to understand how you can improve, and you will!

Cost Per Appointment

Lead generation companies can offer a wide variety of lead types. The type of lead you are buying will help determine 2 things: the lead cost and the appointment rate, which taken together will determine your cost per appointment.

Let’s take 2 examples. Shared form leads and inbound phone calls that go exclusively to you. With shared form leads, it stands to reason that you are less likely to win their business simply by virtue of having more competition. Because of this, they are typically much less expensive than exclusive inbound phone calls provided by pay per call lead generation services.

Here is some simple math:

In the above example, which lead was really more expensive? Sure, the phone lead is 3x the cost of the shared form lead, but when you factor in the likelihood of actually turning that phone lead into an appointment versus the shared form leads, it’s actually considerably more cost-effective. 

So don’t just look at the actual cost of the lead. Instead, focus on the cost of the thing you need the lead to produce: the appointment.

But you can’t stop there – there is still more to analyze.

Average Ticket Price

Not all leads are the same, and therefore not all customers produced by those leads are going to be the same. When comparing shared form leads to exclusive phone leads, it’s also important to track the average ticket price you generate when you do win someone’s business.

What will you typically find? 

In most cases, the average ticket price for a shared form lead is going to be less than an exclusive phone lead. Why? When you think about it, when someone submits their information into a form knowing they are going to get multiple quotes from providers is most likely price shopping. You may need to approach the sale differently, and even if you win their business, chances are it’s because you outbid your competitors. This drives down your average ticket price.

With exclusive phone leads, customers aren’t typically as price sensitive. That’s not to say they won’t inquire about price or that they aren’t value conscious, but because of the exclusive nature of the lead, you have a better chance of not only winning it but also generating more revenue from it.

In fact, here are some examples of our client-reported revenue from our exclusive phone leads compared with the industry’s leading shared form lead provider. As you can see, for plumbing leads for example, our clients report their average ticket price to be 40% higher than jobs won from shared leads:

But like every other metric, and regardless of which lead service you are using, you need to look for ways to continually improve average ticket price. Within our platform, we constantly see clients that generate 3X more revenue from the same types of leads as other clients. Why? Because they train their employees to build more value in their services and are able to generate more revenue because of it.  

Actual Customer Value (Lifetime Value)

When judging an online lead generation service, it’s important to remember that the goal of those programs is to increase net new customers to your business. However, by only considering the first job you do for a given lead, you may be undercounting the actual value the lead will ultimately provide your business. Why? Because if you’ve done that job well, 2 things will happen:

• They will use your service again
• They will tell their friends and family members to use you

When those things happen, the lead generation program responsible for the initial customer contact doesn’t typically get credit for the additional revenue. But rest assured, had you not purchased that lead, you wouldn’t be reaping the benefit of the ‘free’ business that was produced by it weeks, months, or even years later.

So it’s important to ask yourself: what are you doing to maximize the value of a customer you paid for? Some companies do zero remarketing, nor do they ever ask for reviews and referrals. Others are constantly performing outreach to their customer base to offer their services or ask for referrals. Which do you think sees the higher lifetime value of a customer?

Return on investment

At the end of the day, a marketing program’s success is ultimately determined by the Return On Investment (ROI) it produces. As we’ve discussed above, that number can vary widely between programs, industries, and companies, but the formula is simple:

Every company has different ROI goals they are trying to achieve. Some companies are so good at maximizing the long-term value of customers they are willing to break even on their marketing spend to acquire that customer. In other words, they’re willing to accept 0X ROI. Others may need to see 10X+ ROI in order to run a profitable business – although, if this is the case for your business, it may indicate that customers aren’t happy with your service and you aren’t generating enough repeat business or word of mouth interest.

Generally speaking, a 3-4X ROI is considered the minimum ROI that is warranted to continue using a marketing service. With Service Direct, our lead generation platform allows our clients to track their revenue with our service, so we are fortunate to have a lot of insight into our clients’ ROI. On average, our clients see an 8X ROI with our service. 

Conclusion

If there’s one thing you’ve come away with in this article, it should be recognizing that you play a massive role in determining your ROI, and ultimately your success, with any lead generation company. By optimizing your business around the key metrics for success we’ve discussed, partnering with lead generation companies can be a great way for you to win more customers, maximize their value to your company, achieve a higher ROI, and ultimately grow your business.

Learn more about Service Direct’s proven lead generation programs.

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