Enterprise Lead Generation, Lead Nurturing, Lead Management, Marketing Automation

Home > Resources > Articles

Pay For Performance – Inciting Bad and Costly Behavior
By Tim Adams

When outsourcing lead generation, it is tempting to choose a pay for performance arrangement. While this may seem the best way to insure the most for your money, let’s examine a few ways clients have experienced disappointment in these programs.

Telemarketing’s Flawed Mentality

To understand the fundamental flaw in pay for performance, we must first identify an important fact of lead generation, and often how a telemarketing mentality tends to overlook this key idea. It is well known that the vast majority of prospects you call on will not yet be ready to purchase your products or services. Farming through a list of contacts with the intent to only identify immediate deals may have you in a strategy that hurts you on even more potential opportunities for future quarters. This telemarketing mentality is detrimental to a complex sale pipeline where sales executives are used to managing many deals at various stages. So also, should marketing approach any campaigns to targeted prospects.

Prospects whose buying cycles do not yet allow them to enter further conversations with you should be considered for incubation. Incubating a prospect is the process of making regular contacts every 30-60 days in order to build a relationship and foster credibility. A good incubation strategy usually involves a combination of newsletters, pertinent white papers, and occasional phone calls. There is little you can do to alter the buying cycles of a prospect. You can however make the best of this opportunity to earn their trust in the mean time so that when they are ready to buy, you are the vendor who writes the specs, verses the vendor who’s only purpose is to provide pricing pressure for an incumbent.

In a pay for performance campaign, the lead generation vendor is only concerned with immediate and near term opportunities. This affects every area of their work from capturing CRM data, to reporting, and ultimately to the conversations had with key contacts in your targeted accounts.

CRM Data

PFP (Pay for Performance) vendors will rarely allow you direct access to their working data. In contrast per-hour vendors will grant you direct access or work directly in your CRM system if desired. This will allow maximum insight into all activity and help promote optimal tweaking of both message and time usage.

Reporting

PFP vendors typically report only on the amount of calls made, number of leads qualified, and why other leads were disqualified. A per-hour vendor can show you more such as what buying cycle stage prospects are in, when they should be followed up with, and other incubation statistics.

Conversations

I have had clients that were concerned their previous vendors had damaged potential opportunities by trying to force them into meeting too soon. On the opposite side of this, I have also had clients that felt their previous vendors passed on leads that they knew were not a fit. This is all because PFP vendors have little incentive to manage an incubation process they may or may not benefit from in the future. In contrast, it is far better to approach your prospects with the goal of putting your best foot forward and to make a valuable first impression regardless of where they are in their buying cycle.

Lead generation outsourcers who charge per hour rates will capture the same qualifying information as the pay for performance vendors and hand over the same hot leads, all while marking prospects for incubation as needed. Some will go a step further and mange the incubation process building trust with your clients versus leaving a bad taste in their mouth. It is important to remember that each and every conversation had with a decision maker or key influencer should be used in directing your incubation strategy with that prospect.

Managing your Cost per Lead

Of course managing your cost per lead is an important function of marketing. Every per-hour lead generation outsourcer I know, including my firm, helps their clients manage this stat to a desired targeted level. Many clients in fact can shave 10-20% off of their previous cost per lead due to optimization based on better data visibility inherent with per-hour outsourcers.

Bottom Line

Back in my days of selling call center outsourcing, many of our most profitable deals were pay for performance or pay per call versus per-hour. In taking on part of the risk, we would usually add a few points in the margin. We wouldn’t take a deal we didn’t think we would come out on top of. So you can see, regardless of how you are invoiced, vendors always try to make their margins one way or another.

If the costs are going to be the same, why not choose the method that gives you more information and more of a chance with long term opportunities. Don’t forget that per-hour deals allow you to better manage your budget. If you are unsure of a vendor’s potential success selling your services, check references and ask about any guarantees that make getting out of a contract easy should you be unsatisfied. In my experience, chasing a PFP contract is likely to cost you both more time and money in the long run.