The Pros and Cons of Lead Generation Companies

The Pros and Cons of Lead Generation Companies
(Reading time: 3 - 6 minutes)

Imagine for a moment you just started your own party planning business, and you are trying to find customers who would potentially use your services. Still, you don't know anything about marketing, directories, flywheels, and/or funnels. You do a quick Google search and find a company that you can pay to find some leads for you (a lead generating company). They have a plethora of established leads or potential clients, so they say. 

This company may have a website that offers free birthday cake recipes and craft wrapping bows ideas as a downloadable pdf. A prospect may enter their email address to access it and have it emailed to them. By entering their email, they agree (usually in the fine print) to have the email address shared with businesses in their area that offer these services. You are then handed (after paying a price) a lead for someone throwing a birthday party. The email and contact information may also be shared with other like-minded businesses who may be potential partners (craft businesses, entertainment, or bakeshops) or even your biggest competitors.

What Is A Lead Generation Company?

A lead generation company is a company that gets paid to give business owners data about people who may be interested in a business, product, or services. Or "Leads," as they are called. Lead generation companies sometimes set up websites or advertisements that offer free things to people to get prospective buyers to give away their info in exchange for something related to what product or service they are trying to generate leads for.

What Kind Of Leads Get Generated By Lead Generation Companies?

There are three kinds of leads that lead generating companies use to advertise and sell. 

1. Phone Leads

This type of lead is the least used. These leads can be highly scripted to fit any situation, but even though it has a high potential for conversions, the results are not good and often are rejected before the call is even answered.

2. Inbound

Using social media outlets like Facebook and Instagram, content marketing, search engine optimization (SEO), social media ads, and pay-per-click (PPC). These types of lead generating methods are the least intrusive out of the three forms and an excellent method. This method lets buyers continue through the buying process at their own pace like they would in a store, perusing and wandering, picking and choosing what to look at, and adding to their grocery cart.

3. E-Mail

This method utilizes the most popular method for converting potential buyers, and with good reason too. It has better than average conversion rates. This method can be personalized and tailored to say and show exactly what you want it to. Letting the business put its best foot forward.

The Pros And Cons Of Using Lead Generating companies

Pros

  • If you get lucky and manage to go with a genuine lead generating company, they are experienced so that you could benefit.
  • You could save time and effort. 
  • You could avoid human dependency and error altogether. 
  • They perform analytics at some of the best lead generating companies. 
  • Build your company faster with genuine leads that actually convert after you bring the sale in.
  • Choosing the right program with great strategy and execution does work well for lead contractors.

Cons

  • Genuine lead generating companies are going to really cost you huge expenses, so if your a smaller business with a limited budget, you have to really watch the leads that you're getting are worth the expense. 
  • There is absolutely no guarantee that it will work. Lead generating companies only have to hand you leads, not reel the customer in for you. That is still your job, and if you're not ready to handle the volume, if it does succeed, be careful that you don't find yourself in a bind.
  • The cost of a lead is determined by the effort the agency spends on its detection. So if you go cheap, the chances the lead won't pay off are greater.
  • So the risk is a massive gamble for businesses just starting out and building a client base.
  • Lead generation companies have extensive knowledge of what they are doing but will initially not know as much about your products or services. 
  • You have to pay for leads, whether they are qualified as genuine or not, and all money is paid upfront. 
  • Sometimes and sometimes often, you're not going to be able to reach a customer to verify a lead, and when this happens, you still have to pay for the lead. 
  • If you're a new business and not exactly business savvy yet and well versed in the ways of hooking and reeling your customers in, then you might not know how to properly respond to genuine leads or fail to reach your lead in a timely manner. Remember, those lead generation companies only give you the leads, but it's still up to you to bring the customer through to the finish line. 
  • The average person receives around 88 emails a day, leaving your messages lost in the clutter and largely ignored if not deleted from so many other lead generating companies targeting your lead.
  • If you do manage to land a real lead through email, the average time it takes to woo a person into buying from you? 4-6 months on average. That's a lot of time and energy to invest in a maybe when there are so many other constructive uses for your time.

The Bottom Line

If your business is in the construction field, a service-based business, or something similar, then I would not suggest using a lead generating company to start with. Getting a bad lead with or getting handed oversold leads could break a business before it gets the chance to grow. It has the potential to suck up capital quickly with no guarantee of success. 

If you're just starting to grow your company in any specific niche-related field of the market, then learning the right way to organically grow your business might work better until you've grown in capitol to at least a medium-sized business that can better handle low conversion rates that can sometimes dip down on average to below 7%. There are many other ways to build your customer base, often it is much more prudent to invest in SEO practices and tried and true marketing methods or even your own emailing marketing. If you need help gathering leads through your website or help to establish your expertise online then feel free to reach out.

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Chad Treadway

Written by:  |  January 13, 2021

Chad is our business development manager. He will help you survey your business needs, ensuring you are educated on your options before suggesting any solution. Chad also has several certifications through HubSpot to better assist you with your internet and inbound marketing.

https://cubecreative.design/about/chad-treadway