Lead Generation and Online Customer Acquisition
In our post, “What Is Lead Generation,” the goal was to help add some structure to a term used very broadly, i.e to provide a framework for categorizing different businesses. And, as mentioned previously, those operating in online lead generation, as we use the term, have following in common:
- They play some part in connecting users with companies – those interested in a good or service with a provider of that service
- They work on a real-time basis
- They more often than not try to solve an online to offline divide, i.e., users search online for a good or service but a key element of the transaction for that good or service generally occurs offline (be it phone calls or in person visits).
Were we trying to solve the question of what makes for a good vertical, we would also want to add the following:
- The industries tend to have rather complex products
- The life time value of a customer is high
The complex product piece isn’t always necessary. If we think about finding a cleaning service or a plumber; those don’t require an explanation (like a complex insurance product would), but they do require offline fulfillment. In the past, and still today, those trying create new marketplaces for online lead generation will focus on complex products first, because it generally means a greater likelihood of getting a customer on the phone.
The online / offline divide, generally means that much of the follow-up must take place on the phone. It is one of the elements that makes online lead generation special. There is a dual-risk. A lead seller generally must spend money to generate a lead for the buyer, but the lead buyer makes no money off the data received. It’s one thing I like about the model. There is some cost (time), but there isn’t a physical cost. That is not the case with all types of customer acquisition, and it is why Lead Generation cannot be synonymous with customer acquisition.
Here is the way I view the world:
The “What Is Lead Generation,” post focuses on the left hand portion of the umbrella. The right hand side of the umbrella operates on a different model. All companies under the umbrella want new consumers, but for certain companies, it doesn’t make sense to purchase leads. They could try to purchase leads, but that would fall under Database Marketing as opposed the Transaction Oriented which encompasses upwards of 85% of the dollars spent in the online lead generation ecosystem.
Companies on the right half of the umbrella all share something in common, especially online, they collect billing information. Unlike a conversion on a lead form, a conversion that takes place with a transaction oriented company doesn’t happen without the user entering their payment details. Transaction companies might have email sign-ups and other no-cost ways to extend a dialog, but from a conversion standpoint, it means the ability to charge.
Where things get tricky, at least from the marketing standpoint, is when looking at continuity programs. The ability to charge a user is a very powerful tool, and for services that we like, we don’t mind. While we may pay more than we like for certain recurring charges, that they occur every month doesn’t both us. Currently, the trouble comes from the perfect storm of cheap media and borderline illegal marketing techniques used by marketers promoting unbranded continuity programs where users sign-up for a free trial without being made aware of the full extent of the charges and their being easy mechanisms for cancelling.
