What is B2B Lead Generation?

The definition of lead generation

“Lead Generation is the creation of potential customer interest into the products or services of a business.”

For example, if you were a supplier of plumbing pipe and you called all the plumbers in your area to ask them if they wanted to buy from you, then that would be lead generation.

However, this definition is rather simplistic. In reality, to understand what someone means when they say “Lead Generation” you must first ask what they are trying to achieve. Ultimately the aim of Lead Generation is to generate more business, i.e. greater revenue; but where is that business coming from? It might be from consumers (B2C) or businesses (B2B) or both.

In this article we will focus on business to business (B2B) lead generation.

B2B lead generation

Depending on the product or service you sell, B2B lead generation will differ greatly. If you are a software vendor (Microhard) selling multi-million dollar enterprise software whose average sales cycle is one year, the value you place on leads and even your definition of a lead may differ to a two-person accounting firm (AccountantsRUs), whose average sales cycle is one meeting.

For example, both Microhard and AccountantsRUs might consider a reply to a Contact Us form on their website a lead. Let’s assume this lead contains the contact details of the prospect and their reason for contacting the business.

An accountant firm would consider such a lead very valuable as they are potentially one meeting away from a new customer. On the other hand, Microhard would place very little value on this information and would not even define it as a lead but rather a touch.

In summary, never take another person’s definition of a lead for granted. You may be speaking about vastly different things.

Types of leads

Some common types of leads are:

  • Email – a prospect sends an email to the business
  • Web Form – a prospect fills in a Contact Us form on the business’ website
  • Downloads – a prospect downloads a white paper or brochure from the business’s website
  • Subscribe – a prospect subscribes to a newsletter on the business’s website
  • Phone Call – a prospect rings the business

Grow your business – effectively

To use B2B lead generation effectively to grow your business, you must understand what a lead is worth, the cost of lead generation and most importantly how to compare the ROI of different lead generation activities.

How much is a lead worth?

As previously discussed, different businesses will place different values on each type of lead. A very simple way to value a leads is:

Value ($) = probability of conversion (%) X average deal size ($)

For example, if AccountantsRUs usually gets 1 customer from 10 prospects filling in their Contact Us form on the website, their probability of conversion is 10% (1/10). If each customer is worth $2000, then the value of the lead is:

$200 = 10% X $2000

Cost of lead generation

All leads cost something to generate, whether you actively pay for B2B lead generation activities or just the time-cost of updating your website.

The cost per lead of lead generation is usually easy to calculate. It’s just the:

cost per lead ($) = total cost ($) / number of leads generated

For example, if you paid $6000 for telemarketing which generated 60 leads, then the cost per lead would be:

$100 = $6000 / 60

Comparing ROI of B2B lead generation activities

The return on investment (ROI) is the key to determining the value of B2B lead generation. Ultimately lead generation is not a fixed cost (such as utilities) but an investment, and it should produce more revenue than it costs. ROI is calculated like this:

ROI (%) = your average deal size ($) / cost per lead ($)

Continuing the last example, if your average deal size is $20K, then your ROI would be:

200% = $20,000 / $100

ROI is the only way to objectively compare different lead generation activities or providers.

For example, if you approached two different telemarketing agencies and one quotes you $7000 and the other quotes you $5000, how would you compare them? The only objective way would be to compare ROI. This is why you should always get a guarantee on the number of leads generated.

Lead sources

There are many ways to generate leads. Some of the common B2B lead generation techniques are:

  • Direct postal mail to prospects
  • Emails to prospects
  • Emails to existing customers
  • Inbound leads through your website
  • Pay-per-click advertising on Google
  • Outbound Telemarketing
  • Service bundles

Outbound Telemarketing can deliver very good ROI when done professionally but always be sure to get a guarantee on the number of leads so you can calculate your ROI and thus determine whether it is worth doing.

For more information, read our article about why telemarketing lead generation works.