Myth: buying more leads fixes sales

Topic: Revenue and sales

"Commercial Breaks" is a series of posts about things going wrong in sales, operations and marketing - everything that makes your revenue break.

If your pipeline’s feeling down
And you need to close the quarter,
Buy more leads and look no further.
Deals not closing? Not your problem.

Sound familiar? Every time the sales forecast is in trouble, marketing and sales are pressed into “doing something, now”. Sales: “To close more deals, we need more leads. Hey, marketing, can you find more leads by tomorrow?” Marketing: “That fast? Paid ads are all I can do.”

Next thing you know, your marketing budget is off to Zuckerberg and co. Or it goes to Clay/GTM budgets if you do B2B. I call them all “paid leads” here.

Leads come in and it feels like the problem is solved. But is it, really?

Buying leads feels right…

The addictive thing about paid leads is that you can see “xx% growth in leads” the next morning. SEO takes months; socials don’t go viral with every post. But paid leads - they work like a charm in almost any industry.

Plus, the logic is bulletproof: “Spend $100 on a lead that brings a $1000 opportunity into the pipeline.” Pay $100 to get 10x potential revenue - who can argue with that?

…but it usually doesn’t work (enter the “Leaky Bucket”)

The problem is, when buying leads/ads, many companies forget about pipeline leakage. How many leads does it take to close a deal? If acquisition is $100 per lead and it takes 10 leads to win a $1000 deal, then congrats - you’re treading water, faster. That’s before sales salaries, tools and delivery costs, after which you’re probably sinking.

A good marketer or GTM team can push acquisition costs down and improve the lead quality. The problem is that if your downstream pipeline is leaking, you keep throwing money out the window. Plus, pouring more leads into the same team means reps take longer to respond, quotes queue up, follow-ups slip. Now you’re making the holes bigger.

Why does nobody spot the leak?

Identifying the leaky bucket is not easy, and it’s spread across teams.

  1. Pipeline leakage is often neglected: it’s hard to measure and it’s full of excuses. It means asking the right questions, building dashboards, tracking metrics and setting up systems that capture them - the dopamine high is gone before you even start. Yet, that’s where the real growth is unlocked most of the time: understanding what parts of the sales/marketing/ops are dropping the ball.
  2. To understand your pipeline, you need to look at deals from start to end. In reality, it breaks between 2-3 departments: marketing, sales and operations. Each of them reports their individual performance, but what matters more is a report built around deals, not around departments. Marketing may be excelling at leadgen, sales might be hitting quota, but customers are still walking away. And when they walk away, they usually walk towards your competitors.

Is this hard? Maybe. Is it worth it? Yes: a fixed revenue leak today is a cumulative increase in revenue moving forward. Recovering $100K/mo today is $1.2M of recovered revenue in a year.

Hit-list of leaky buckets

Every organisation is unique, and so are the leaks. Here are the most common.

  1. Initial enquiry response, aka “speed-to-lead”. That’s your first impression on a customer who’s probably enquired with a couple of competitors. How fast and meaningful is your company’s response? B2C buyers expect a reply within minutes; B2B buyers, within one business day. If your response is slow - you have a problem. If you don’t know the speed of your response - you most certainly have a problem. Measure “median time to first response”.
  2. Handoffs between teams: OK, the initial response was fast, great. How about the rest? When the quote was requested, how long did that take? Once a deal was assigned, how long did the sales rep take to make contact? Measure things like “time from quote request to quote sent”.
  3. Deal fallout. Once a customer commits, do the deals go through? If your actual revenue is half of what’s projected - sorry, marketing can’t help. Diagnose and resolve before going further. Measure “committed vs. invoiced revenue” and the like.

Bottom line

Buying leads looks like an easy way to fix sales, but it only works if you’ve fixed your leaky bucket. To fix it, look holistically at the funnel from first lead to closed deal and fix the main leakages.

Once that’s done, a good marketing or GTM team will work miracles for your business.