The cost per lead model (CPL) is one of the most widely-known pricing models for telemarketing campaigns. While this model can help to keep campaign costs down, people often don’t realise its downfalls.
In this article, we’re covering the pros and cons of the cost per lead model, and why modern telemarketing companies, including us here at Inspired, use other models such as daily rates for lead generation and appointment setting campaigns.
What is 'Cost Per Lead'?
The cost per lead pricing model, also called pay-per-lead, is used to structure lead generation and other marketing campaign costs across digital and telemarketing campaigns.
It works exactly how it sounds; companies are charged for each lead an agency delivers to them, rather than for the campaign as a whole.
What are the benefits of the cost per lead model?
The cost per lead model has some benefits when used for telemarketing lead generation campaigns. Such as:
Campaign costs based solely on results – If the campaign results are underwhelming, the client hasn’t forked out a huge amount for nothing.
Helping you maximise your budget – Your budget is only being spent on leads rather than the process to get leads
Low risk – There is minimal risk for businesses as they are not dedicating a large budget to a campaign, but rather paying for individual leads. No leads, no money spent.
What are downsides to the cost per lead mode?
While the model has its pros, it has some cons too, and they are some pretty big ones! The downsides include:
Quantity over quality – Cost per lead agencies tend to focus on generating as many opportunities as they can for their clients, irrespective of their quality. The more leads they produce, the more money they get. This can leave you paying for lots of leads, that aren’t qualified and won’t be likely to convert.
Cost over ROI – Agencies that use cost-per-lead models often focus on the key benefit of cost and budget maximising, but they often neglect to mention ROI. Why? Because cost-per-lead ROI can often be disappointing or non-existent due to poor lead quality.
Additional costs – Depending on the agency, some cost-per-lead campaigns don’t include data, which means you may have to pay for the campaign data yourself and additional hidden costs may appear.
Wasting your sales team's time – while the lead acquisition process is taken out of your hands, it’s not as time-efficient as you might think. If your sales teams are constantly chasing unqualified, poor quality leads, it wastes their time and reduces sales productivity.
Leads doing the rounds - Leads are often presented and sold to multiple companies, meaning you could be getting the ‘bottom of the barrel’ leads that no one else wants, or you’re having to compete with a dozen other businesses that are all going for the same lead.
Higher costs than expected – Depending on the price per lead that has been agreed, you could end up being charged a lot more than initially thought. Say for example the agency’s price per lead is £50, if they generate an average of 6 – 7 leads a day, you could be paying up to £350 per day – and due to the quantity-focused approach, these leads might not be correctly qualified!
Lead qualification – Another big issue with cost-per-lead telemarketing, is what the agencies class as a ‘lead’. Often they will send across ‘leads’ that haven’t expressed real interest, aren’t in line with their customer’s goals, and are nothing more than contacts who have said yes to an email or a free quote being sent over. This leads to a poor conversion rate, disappointing return on investment, and could harm your reputation.
Why daily or hourly rates work best
There is a common misconception that campaigns run at a daily or hourly rate are no different from cost-per-lead campaigns and that they are simply charged this way so that telemarketing agencies can make more money from each campaign.
The above statement certainly isn’t true, and the reason for the difference in the pricing model is that you’re getting a much more involved, targeted, and quality-focused service than you get with a cost per lead campaign.
To give an example, here at Inspired, because of our high standards of opportunity quality, all of our lead generation, appointment setting, and telesales campaigns are run at a daily rate. With our campaigns, we work exclusively for individual clients, which means leads generated on their campaigns don’t get passed around or resold, unlike many CPL campaigns.
Also, our daily rate doesn’t just cover our agent’s dialling time, it covers everything needed for the campaign, including, data acquisition, software costs, and email marketing campaigns to warm data.
Another huge difference with daily/hourly rate telemarketing is that you get to pick your lead qualification criteria, and you’re not held to the standards of lead classification that CPL agencies use to rake in more money. You specify exactly what a lead is to your business, whether it’s based on location, business size, business type, the level of interest shown from the right decision-maker or other factors. All of this means your campaign will yield nothing but the best in terms of lead quality.
You’re much more likely to see better results because the agency has nothing to gain from sending you poor quality leads, and everything to gain from handing you fully-qualified, actionable leads! Unfortunately, the same can’t be said for cost per lead agencies, and when we hear a client telling us they have been stung by telemarketing companies in the past, nine times out of ten they were using a cost per lead agency.