Your intuition is wrong

One of our lead generation strategies feels like a complete waste of time and money.

We offer free value that we have to deliver manually.

Then we follow up. Follow up again. Talk to them. Address objections. Follow up again. And again. And again.

It’s a lot of work and these conversations never seem to go anywhere.

Especially in comparision to our other lead generation strategies.

With Category A leads, we schedule a call, follow up maybe once, and then close 50% of them.

It feels like all of our clients come from Category A leads.

So we stopped our free value lead generation strategy.

But then I looked at the actual numbers.

The free value we offer really only costs us $5 to deliver. And while our close rate indeed is kind of abysmal for these leads, we still close 1 out of 25. That’s a 4% close rate.

So we’re really spending $125 to close a deal. A bit more if we include the cost involved in the follow ups. But these are largely automated. So it’s not significantly more.

Our LTV is a lot higher than $125.

So the strategy actually has an insanely high ROI.

We were misled by our intuition.

Other types of leads are just so much easier to close. Almost every conversation is pure signal while with free value leads, there is a lot of noise.

But the ROI is still there.

And we’re not even taking into account second order effects.

People might not buy. But if we impress them with the free value we deliver, they might tell a friend or two when they’re talking about lead generation.

We’re building a lot of goodwill by delivering free value.

These kind of things happen all the time.

We have one client complaining very loudly and persistently about a certain aspect of our service.

So we assume it’s a big problem.

But then we look at the numbers and actually check with all other clients, it turns out it’s a non-issue.

It’s just this one client and the problem is actually on their end.

But they’re screaming loudly so we pay attention.

We’re constantly misled by our intuition.

So always take a step back and check the actual numbers before making a decision.

Written on August 21, 2023

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