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Online lead generation

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Online Lead Generation is a marketing term that refers to the creation or generation of prospective consumer interest or inquiry into a business' products or services online. Leads can be generated for a variety of purposes - list building, e-newsletter list acquisition, building out reward programs, loyalty programs or for other member acquisition programs.

A lead is a sign-up for an advertiser offer that includes contact information and in some cases, demographic information. There are two types of leads in the lead generation market: sales leads and marketing leads.

Sales leads are generated on the basis of demographic criteria such as FICO score, income, age, HHI, etc. These leads are resold to multiple advertisers. Sales leads are typically followed up through phone calls by the sales force. Sales leads are commonly found in the mortgage, insurance and finance leads.

Marketing leads are brand-specific leads generated for a unique advertiser offer. In direct contrast to sales leads, marketing leads are sold only once. Because transparency is a necessary requisite for generating marketing leads, marketing lead campaigns can be optimized by mapping leads to their sources.

Online pricing models

There are three pricing models in the online advertising market that marketers can use to buy advertising and generate leads.

CPM (Cost-per-Thousand) Pricing Models charge advertisers for impressions — i.e. the number of times people view an advertisement. Display advertising is commonly sold on a CPM pricing model. The problem with CPM advertising is that advertisers are charged even if the target audience does not click on (or even view) the advertisement.

CPC (Cost-per-Click) advertising overcomes this problem by charging advertisers only when the consumer clicks on the advertisement. However, due to increased competition, search keywords have become very expensive. A 2007 Doubleclick Performics Search trends Report shows that there were nearly six times as many keywords with a cost per click (CPC) of more than $1 in January of 2007 than the prior year. The cost per keyword increased by 33% and the cost per click rose by as much as 55%.

CPL (Cost-per-Lead) advertising solves risk of CPM and CPC by charging only by the lead. Like CPC the price per lead can be bid up by demand. Also like CPC there are ways that providors can commit fraud by manufacturing leads or blending one source of lead with another (example - search driven leads with co-registration leads)to generate higher profits.

In recent times, there has been a rapid increase in online lead generation — banner and direct response advertising that works off a CPL pricing model. In a Cost-per-Lead pricing model, advertisers pay only for qualified leads — irrespective of the clicks or impressions that went into generating the lead. CPL advertising is also commonly referred to as online lead generation.

CPL pricing models are the most advertiser friendly. A recent IBM research study found that two-thirds of senior marketers expect 20 percent of ad revenue to move away from impression-based sales, in favor of action-based models within three years.

It also helps explain why 2007 saw a paradigm shift for the industry, with spending on performance based pricing models exceed that on display (IAB PWC 2007 Internet Spending Report)for the first time.

A GP Bullhound Research report states that the online lead generation is growing at 71% YTY — more than twice as fast as the online advertising market. The rapid growth is primarily driven by the advertiser demand for ROI focused marketing, a trend that is expected to accelerate during a recession.

Common types of opt-in ad units are:

  • AdUnitX Banners: AdUnit X banners allow advertisers to run display advertising on a CPL pricing model. These banners eliminate the need for users to click-through a landing page. The user enters her/his information within the banner. Contact details are transmitted automatically from the publisher to the advertiser via the backend.
  • Co-registration advertising (aka Co-Reg): The advertiser receives some or all of the standard fields collected by a site during the site's registration process.
  • Full Page Lead Generation: The advertiser's offer appears as a full page ad in an HTML format with relevant text and graphics. The advertiser receives the standard fields and answers to as many as twenty custom questions that s/he defines.
  • On-Line Survey: Consumers are asked to complete a survey, including their demographic information and product and lifestyle interests. This information is used as a sales lead for advertisers, who purchase the consumer's information. The consumer has 'opted-in' to receive correspondence from the advertiser and is therefore considered a qualified lead.

CPL advertising and CPA advertising

For marketers that are looking to pay only for specific actions, there are two options: CPL advertising (or online lead generation) and CPA advertising (also referred to as affiliate marketing)

In CPL campaigns, advertisers pay for an interested lead — i.e. the contact information of a person interested in the advertiser's product or service. CPL campaigns are suitable for brand marketers and direct response marketers looking to engage consumers at multiple touchpoints — by building a newsletter list, community site, reward program or member acquisition program.

In CPA campaigns, the advertiser typically pays for a completed sale involving a credit card transaction. CPA is all about 'now' — it focuses on driving consumers to buy at that exact moment. If a visitor to the website doesn't buy anything, there's no easy way to remarket to them.

References

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