The Economics of Business Leads

Economics is all about supply and demand. (Technically, it’s all about the production, distribution, and consumption of goods and services.) But hey — I’m a marketer, not an economist.

In enterprise software companies, sales leads are a valuable commodity. To extend the metaphor, leads are a commodity traded on an electronic exchange. The exchange typically involves multiple systems, including marketing automation, sales force automation, and other software platforms.

Marketing produces most leads and distributes some of them to sales based on various rules and regulations. The leads not distributed to sales remain in inventory until they ripen (or rot). Sales consumes some of the leads distributed to them, but leaves others in inventory because they don’t smell right to them. Once the best-smelling leads are consumed, sales usually goes back to the market in search of fresher, better leads rather than consuming the other leads they have already been distributed (which have probably rotted by now anyway).

There are all these leads rotting in dark cellars. Yet most companies will tell you they don’t have enough.

This is going to sound crazy to most people out there, but I think most enterprise software companies are oversupplied with leads. In fact, most companies that I meet with have warehouses with lead stores so large they couldn’t consume them all in a single year even if they stopped producing new leads and throwing them on top of the pile. Yet they continue to pour money into lead generation in search of a higher yield of better-quality leads.

And here’s another crazy point (that will border on the esoteric). To paraphrase Shakespeare (from “Hamlet”): “No lead is either good or bad, but thinking makes it so.” What I’m trying to say is that lead quality is most often defined by our actions rather than the inherent characteristics of the lead. Any lead that is produced, distributed, and consumed within five minutes is better than any lead that is produced, distributed, and consumed within five months.

If a marketing or sales professional thinks a lead might be bad, it won’t be consumed rapidly (if at all), which will actually make the lead bad regardless. That’s why I have such a huge problem with most forms of lead nurturing and scoring (but that’s another story; don’t get me started).

Companies need only ask themselves one simple question to start a conversation about lead economics. But be careful; even asking this question could shake the very foundations of what you believe to be best practice for B2B sales and marketing.

The question? Is every lead produced by marketing distributed to and consumed by sales within five minutes of production?

If the answer is no — and I know the answer is no — you may be oversupplied in leads.

What would happen if marketing immediately distributed every lead they produced? And what would happen if sales immediately consumed every lead they were distributed? In all likelihood, neither department could handle the volume in a reasonable time frame. Bam! Oversupply! And how do we hide the oversupply? We store the leads in inventory so they can rot in the dark. (There are secret warehouses in both sales and marketing systems.) 

Supply is clearly greater than demand in most companies. So we do as the Romans did; we complain about the shortage of fine wine while barrels of really good wine turn to vinegar in damp cellars.

Marketers need to stop acting like Monsanto and start acting like homestead farmers. And salespeople need to stop acting like foodies and start acting like, well, homestead farmers. Those folks don’t waste anything; they’ll eat the mold off a heel of bread or the moss off a rock (I have personally witnessed both of these acts).

Across my entire career, I’ve seen very few companies of significant scale truly undersupplied with leads. In most cases they are oversupplied and they simply don’t have the right processes in place to run a lean and efficient lead market. What’s needed are efficient marketplaces that produce high-quality leads that are in turn distributed and consumed immediately. A fresh tomato tastes great even when it’s not the best tomato from the field. There is simply too much waste out there not to comment on it.