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What is Lead Generation?

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Businessmen at Networking Event Exchanging Business Cards
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Definition:

Lead generation is the practice of soliciting inquiries from potential customers. Traditionally lead generation occurred at places like trade shows – visitors to a company's booth would fill out a card with their contact information and turn it in to receive a call back from that company's sales team. Since the rise of the Internet, many businesses use their websites as a lead generation option. Most marketing experts recommend that companies use at least 10 different lead generation methods to ensure that their pipelines remain full.

Because lead generation is the first step of the sales process, both quality and quantity are important factors. Quality leads are leads that a salesperson has a good chance of closing. Every lead list will have a number of junk leads – people who are not qualified to buy the product for some reason – but the smaller the percentage of bad leads, the less time salespeople will waste while processing that list. Quantity is also important because even a salesperson with a list of 100% good leads won't be able to close every one of them. A salesperson with 100 good leads might be able to make 10 appointments, out of which 4 will close the sale. Therefore, if a salesperson has a quota of 40 sales per month, she will need 1000 good leads per month just to make the minimum required number of sales.

Lead generation techniques are usually a tradeoff between quality and quantity. For example, a form on the company website that visitors can fill in to request a call back will generate high-quality leads – these visitors are very likely to buy, since they're interested enough to want to hear more – but probably won't generate a large quantity of leads. On the other hand, a lead list that's based on a newsletter subscription list from another company may generate a large quantity of leads, but they won't be nearly as interested or qualified. This tradeoff is another reason why companies are wise to use many lead generation methods.

Many marketing agencies offer lead generation services for business that don't wish to develop their own systems. These agencies will often have a network of companies and websites that it uses to promote its client businesses. When a visitor expresses interest in one of the agency's clients, the agency passes that lead back to the client. Often agencies will promote their clients through a directory or list of providers, and when a visitor requests a quote for a specific service, the agency alerts the appropriate client. Most agencies will allow clients to specify the type of leads they would like to receive. For example, a company might choose to limit leads to a certain geographic region.

Search engines also provide lead generation options. Any business with a website can appear on a search engine listing for related searches, and visitors can then click a link and be taken to that company's website. However, some search engines also offer a pay-per-click lead generation option. The search engine posts a link to the company's website at the top of the search results form, making it much more likely that prospective customers will choose to visit that website. However, when a visitor does click the link the search engine charges that company a small fee, as opposed to the free 'general' listings. Companies that use pay-per-click advertising are advised to move cautiously at first, as an overly successful campaign can end up costing far more than expected!

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