What Is Lead Generation Marketing and How Does It Work?

As a modern marketer, you should know how lead generation has changed and how this critical multichannel strategy fits in your marketing toolbox to generate demand and convert new business.

Lead generation has changed a lot in recent years, but it remains a critical part of helping businesses build relationships, generate qualified leads, and ultimately close deals.

Lead generation is useful for all types of businesses in the B2B sector regardless of their business size.

Lead generation can also be appropriate for certain B2C industries for high involvement purchases, where consumers are less likely to purchase immediately on a website and might need some nurturing.

In this guide, we’re going to run through lead generation in more detail and close with an overview of how to launch your own lead generation campaign and how to solve common challenges.

In this lead generation guide, you’ll discover:

 

What is lead generation?

Lead generation is the process of getting people interested in your business and gradually moving them through a pipeline to become paying customers. Some people still have a perception of lead generation as big email blasts and pushy salespeople.

But today, these techniques are no longer successful.

In the modern online marketplace, both B2B and B2C consumers are overwhelmed by people vying for their attention. There is a lot of noise for businesses to cut through.

Customers have become very good at blocking out approaches and messages that don’t resonate with them or aren’t well-tailored to their needs, challenges, or opportunities.

So in the world of lead generation, a reliance on one or two channels to blast a prospect list and follow up with a phone call is the approach of yesterday.

Modern lead generation is more likely to consist of:

  • 1:1 targeting
  • Consistent messaging across multiple channels
  • A focus on educating the customer
  • Cultivating meaningful relationships

Modern lead generation is also likely to traverse multiple departments within a business. The process will typically start with marketing before moving on to the sales or business development team, and for SaaS businesses, the modern lead generation program is also likely to involve either product or service teams if free trials are offered.

 

Why is lead generation marketing important?

Embracing lead generation is critical for all B2B businesses or any B2C business that offers a considered high-involvement purchase.

Marketo Engage has seen that businesses that employ a mature, well-developed lead generation process can achieve 133% greater revenue versus their plan than average companies. So there is a clear revenue generation benefit.

But a solid lead generation process that builds warm, well-qualified leads can also help business morale and efficiency. A good lead generation process can help your sales teams spend more time selling and less time on prospecting and administrative work.

Additionally, although the lead generation process is likely to involve multiple departments, it often starts with marketing. 

If the marketing team can be seen to be working collaboratively with sales to win more customers, then it is visible that marketing is really helping the company grow. This can help with the perception of marketing no longer being seen as a cost center but as a valuable part of the company that helps make money.

 

How important are the quality of leads?

One of the biggest challenges when implementing a lead generation process is often the different objectives and KPIs of marketing and sales teams.

It’s not uncommon for marketing teams to be set a ‘cost per lead’ (CPL) target for their marketing efforts, which incentivizes them to generate as many leads as possible within the marketing budget.

On the other side of things, the sales team are often set targets based on the conversion rate of the leads they are passed. If marketing is passing through a high volume of low-quality leads, this isn’t going to help the sales team achieve their targets. They would actually most likely prefer to be passed a smaller number of high-quality leads.

So it’s important from the very outset to work together across departments to define what you want to achieve from lead generation strategies, and also look at what are going to be acceptable ratios of marketing qualified lead and sales qualified lead.

 

The lead generation pipeline explained.

Any effective lead generation program should have a clear pipeline through the sales funnel.

Anyone that isn’t yet in your pipeline is likely to benefit from top of funnel marketing (TOFU) and is likely to fit within one of the below ‘cold’ categories:

  • Unaware. These are potential customers that are currently unaware of your brand.
  • Aware. These are potential customers that are aware of your brand and may have been on your social media pages to find out more or visit your website.
  • Friendly. These are potential customers that are aware of your brand and have potentially made multiple visits to your social media channels or website. They are likely your target audience and are interested in your product or service, but they have yet to make contact.

Once a customer moves past the ‘friendly’ stage and provides their contact information or gives permission to be contacted, they move from the top of the funnel (TOFU) to the middle of the funnel (MOFU), and we need to start considering the qualification of leads.

What are marketing qualified leads (MQLs)?

Marketing qualified leads are leads that have been identified as being interested in your products and services by the marketing team.

These leads have met certain criteria, such as registering their interest in your product on social media platforms or providing their contact information on an email capture landing page on-site.

But not every customer that provides their email address is going to be a valuable lead. For a lead to be ‘marketing qualified,’ it might have to pass through some scoring criteria, potentially based on answers to certain questions on the lead capture form or from historic browsing or engagement details.

What are sales qualified leads (SQLs)?

Sales qualified leads are leads that have been passed over from the marketing team and have had interactions with the sales team, after which the sales team has marked them as being ‘sales-ready.’

Businesses often consider SQLs to be more serious leads than MQLs and are likely them a higher priority.

Measuring the ratio of MQLs to SQLs is often important to help determine the quality of leads that are coming through via marketing activity.

What are product qualified leads (PQLs)?

Product qualified leads are leads that are often viewed as going beyond the sales qualified stage and have actually managed to gain experience of using a product firsthand through either feature limited access or a fixed term free trial.

In the world of SaaS (Software as a Service), it is technically possible for users to become PQLs without being SQLs, as it may be possible to sign up for a free trial before speaking to a salesperson.

Every business is different and needs to make the decisions on the most effective pipeline setup and metrics of measurement.

What are service qualified leads?

Service qualified leads are slightly different in that they are actually existing customers who have given feedback to customer services that they are interested in a conversation with someone in sales about a new product or service.

Making sure Customer Services and Sales are working in alignment here is really important, as picking up on signals that a customer is ready for an upgrade or a cross-sell can not only improve their lifetime value (LTV) but also prevent them from considering other services elsewhere.

 

What you need to implement lead generation.

Lead generation programs don’t end at simply generating your leads, there are various other components that are just as important to the lead generation strategy. 

  • A lead generation database.  As leads come in, you’ll need to be able to track, attribute them to the appropriate source, score, and segment them to begin nurturing. While you can do some of this manually, you’ll need an automated system in place if you want to scale your efforts. 
  • Supporting content and lead-ready channels.  Content is the foundation of your lead generation efforts. Think of content as the fuel for all of your marketing campaigns — from email, to social, to event collateral. You’ll also want to see how your website, landing pages, social media, email marketing, paid programs, and sales tactics fit in to the lead generation execution plan. 
  • An analytics engine. Now that you know how much you’re investing you can accurately track returns on your lead generation programs. But looking at only the first or last touch to determine how your overall strategy is working won’t give you a full picture—common wisdom is that it takes seven touches to convert a cold lead to a sale. 
  • A martech stack.  The right lead generation technologies will save you money, help you do more with less, measure and optimize your programs, and ultimately allow you to grow your lead generation programs — and company — faster.

 

Advantages and disadvantages of lead generation.

There are a number of key advantages to lead generation. In particular, lead generation can improve:

✓ Content marketing. 85% of B2B marketers say lead generation is their most important content marketing goal (Ring Lead, 2017). 

✓ Content relevancy. Targeting users with content relevant to their position along the buying process yields 72% higher conversion rates.

✓ Revenue. By building a lead generation strategy, we’ve seen mature companies achieve 133% greater revenue versus their plan than average companies, and 174% more than the least mature companies.

However, there are a few pitfalls too. Lead generation can cause problems with:

x Buy-in. A strong lead generation game relies on close collaboration between departments. If people aren’t invested, then the project may fail.

x Definitions. Nailing down your key metrics like ROI can prove tricky. For example, does the ROI of lead generation only include the revenue from new customers? Or if you’re looking at lead generation holistically and including customer service, does ROI include revenues from upgrades and cross-sells for existing customers also? 

x Conversions. You may generate a large amount of high-quality leads, but if your products, services or marketing isn’t up to scratch, they won’t convert. 

Common problems lead generation can solve.

 

Problem

Solution

I’m not getting enough leads.

If you’re not getting enough leads from your ‘top of funnel’ marketing activity, you potentially want to look at a few things:

  • Audience targeting. Are you reaching the right people with your message?
  • Messaging. If you are reaching the right people, does your message speak to show you understand them and that you have a solution that can solve their problem or realize their opportunity?
  • Call to action. Is there a clear call to action that drives them to your lead capture form?
  • Channel mix. Are you over-reliant on one or two channels? Would your message be worth trialing on other marketing channels?

My sales team says that I’m not delivering high-quality leads.

If your sales team is saying that the leads you are sending are not high quality, it is worth double-checking that they are meeting the pre-agreed marketing qualified criteria.

If the leads you are sending through to sales are meeting all the “marketing qualified” criteria and they are still seen as low quality, it is important to understand why. What are the characteristics or objections from customers that make them low-quality leads? Do the leads tend to come from one particular marketing source, or is it from all sources?

Once you understand what is causing the leads to be ‘low quality,’ you can potentially adjust your marketing mix to avoid low-quality channels or update your lead capture form to ask additional qualifying questions.

I’m bringing in leads but don’t have a strategy around what to do next.

Generating leads is just one part of lead generation.

Once you bring these leads in, you must utilize lead scoring and nurturing to qualify said leads before sales can do their job.

According to Forrester, buyers might be anywhere from 75 to 90% of the way through their buying journey before they contact the vendor after they’ve completed their own research. Keep this in mind when determining what point in the funnel sales should step in.

I need to be able to demonstrate the return on investment (ROI) of my marketing team.

To show the impact of your marketing team, you’ll need to plan out a strategy and determine what to measure, when to measure, and how to measure.

Choose metrics that show how marketing is increasing effectiveness across the board, generating quality leads, amplifying sales pipeline velocity, and improving sales and marketing alignment through leveraging lead generation software.

 

Lead generation process: how to launch a campaign.

Step 1: Determine your objectives.

Before developing any lead generation strategies, the most important thing is to determine what you want your lead generation strategy to achieve. What are the overall company goals, and how can your lead generation activity help support that?

Are you looking to onboard new customers as a business focus? If so, you will probably want to make sure that your top-of-funnel activity is quite heavy and you have great communication between marketing and sales.

Do you already have a strong market position but want to increase your annual recurring revenue from existing customers via a new product you’ve launched? Then customer service and sales need to connect more closely.

The reality is that you often see the most effective lead generation strategies when all departments within a business work together.

It’s also really important to clearly outline how you’re going to measure success and ROI and how performance is going to be rewarded across departments.

Step 2: Consider proposition and audience.

With a clear understanding of your objectives, it’s important that the business has a clear, unified vision of the proposition and unique selling points of your products or services.

It’s also important to have a clear understanding of your target audience and, where possible, develop some clear audience personas that might include:

  • Location
  • Seniority
  • Challenges
  • Goals
  • Values
  • Typical media they consume

Trying to get a clear understanding of what your typical ideal customer looks like is important before deciding which marketing channels and messaging you’re going to use.

Step 3: Plan your marketing channels and messaging (TOFU, MOFU, BOFU).

Almost all marketing channels can be effective in one way or another for the lead generation process.

Whether they are right for you and how they operate as a top of the funnel, middle of the funnel, or bottom of the funnel is really down to your specific lead gen objectives.

Some of the most common channels used for lead generation include:

  • Email. Email is a cornerstone of many lead generation strategies. Email can deliver relationship-building communication at every stage of the funnel. It can be equally as effective for converting fresh leads into new customers as it can be for making existing customers aware of new products or upgrades that can increase their lifetime value.
  • Search engines. The main benefit of search engine marketing (SEM) for lead generation is that the customers that are searching have a degree of intent. They are actively searching for a product similar to yours or for the solution to a particular problem that you can solve. There are two ways to succeed with SEM — via organic listings or paid search. If you can rank well organically for the queries that are important to your target audience, you can gain zero-cost traffic. But this can take a long time and a lot of investment. With paid search, you can enter an auction to appear every time a user searches for a particular term. Paid search is more immediate but can be costly.
  • Social media. Platforms such as Facebook have specific lead ads which let you collect information from people that view your ad. This can be an effective way to reach a wide audience. Linkedin has a similar solution that is more tailored to B2B lead generation, with their Lead Gen Forms. But not all lead generation on social media platforms needs to be paid. It is also possible to run successful lead generation activities with organic conversations with your audience.
  • Content marketing. Creating thought leadership content that demonstrates you have a clear understanding of your customer, their problems and needs, and have a solution that can help them is often part of a successful lead generation strategy. This content might sit on your business’s blog and be promoted across social media.

Step 4: Create lead capture forms.

If you’ve managed to engage with an unaware audience and bring them to your website, it’s important that you are able to capture information from these potential leads with as little friction as possible — often via a lead capture form.

If there is too much focus on a marketing cost-per-lead (CPL) it can often be tempting to just ask for an email address and an opt-in box, on the basis that the shorter and easier to complete a form is, the higher your likely conversion rate.

However, keeping forms as short as possible might help with your CPL, but it possibly doesn’t help with ensuring a high quality of marketing qualified leads.

To ensure the leads that are passed over to sales are as of high a quality as possible, it’s going to be helpful to have a number of questions on your lead capture form — potentially looking at business size, annual turnover, etc. to help you really make sure the leads are right for you and are worth or the sales teams time and effort.

Step 5: Collaborate between departments. 

How each department works as part of your lead generation machine is important to define upfront.

If every department is working individually in siloes, then you’re unlikely to have an effective business-wide lead-gen machine.

It’s important to make sure that targets are set for key metrics such as MQL: SQL ratios.

Step 6: Create an automation and marketing stack.

There can be a lot of moving parts when setting up lead generation across your business.

Luckily there are solutions that can help with the automation of a lot of the lead generation processes. Marketo Engage can help businesses find and engage with the right customers, grow customer relationships by building and scaling marketing, and measuring and optimizing your activity.

Step 7: Measure and optimize.

Even if you’re hitting all your business KPIs, it would be naive to see your lead generation funnel as ‘finished.’ There are always going to be opportunities for incremental improvements to help improve different metrics.

It’s important to commit to an ongoing testing plan for your lead generation and potentially a marketing automation solution to help you do this.

The areas you test might vary from month to month but might include:

  • Calls to action
  • Images and visuals
  • Landing pages
  • Lead capture forms
  • Email approaches
  • Pricing/offers

 

Frequently asked questions about lead generation.

What are some examples of lead generation?

You can generate leads through a number of different means. These can include email campaigns, content marketing, direct marketing or in-person events. By making connections with the prospects in ways they can understand and relate to, you may be able to convert them into leads and, eventually, customers. 

Who needs lead generation?

Both B2C and B2B companies need lead generation to identify prospects and convert them into customers. B2B lead generation helps companies target smaller audiences and manage longer sales funnels. B2C lead generation helps build brand loyalty and create emotional connections. 

Why are leads so important?

Lead generation builds trust, visibility and credibility in your business — specifically to the sorts of people who might be interested in your products. They help you build traffic with high-quality prospects so you can convert them to sales.