In this article we explore pay per lead vs. prepaid retainer models for lead generation services.
Are you afraid of paying a lead generation agency a fixed monthly retainer in exchange for potentially inconsistent lead flow? Shouldn’t your lead generation agency only get paid for actually delivering quality leads to your sales team?
To answer these questions let’s look at the costs and benefits of PPL vs. Retainer-based lead generation models…
Pay Per Lead vs. Prepaid Retainer Models
In a Pay Per Lead model you pay only for warm leads that are actually delivered. This means your costs reflect the number of real leads that flow into your sales pipeline in any given month.
With a Prepaid Retainer model you pay up-front for a specified number of leads. This doesn’t mean you will receive the agreed number of leads each month. Even if your agency offers a money-back guarantee this “pay me now, deliver leads later” model can have significant issues.
What Happens When Leads are Plentiful?
When demand is high leads are much easier to get. Sales teams know they must “seize the day” during these periods to fill their pipeline and land as many deals as possible.
PLENTIFUL LEADS – PREPAID RETAINER MODEL
Under a Prepaid Retainer model, when leads are plentiful the lead generation agency will stop delivering new leads when they hit the monthly target. This deprives your sales team of new opportunities and artificially caps your sales growth.
Agencies on a Prepaid Retainer model will rarely give you more leads than you paid for. Instead, when leads are abundant they will slow your campaign down and hold leads “in reserve” to cover future dry spells and extend the relationship. This is backwards (and wrong) behavior!
PLENTIFUL LEADS – PAY PER LEAD MODEL
Conversely, under a Pay Per Lead model when demand is strong the lead generation agency will deliver as many leads as possible. This is EXACTLY what you need to beat your sales targets!
What Happens When Leads are Scarce?
It’s normal for lead flow to fluctuate throughout the business year. Holidays, corporate purchasing windows, budget cycles, email delivery failures, etc. affect response rates to cold email campaigns. The reality is all agencies struggle to deliver leads during these periods.
SCARCE LEADS – PREPAID RETAINER MODEL
With a Prepaid Retainer model, you pay for leads even if the agency doesn’t deliver them. When this happens your cost per lead (CPL) skyrockets and you have to demand a refund.
The Prepaid Retainer model also creates bad incentives. Agencies guarantee lead counts KNOWING they won’t be able to deliver and will have to refund you (essentially leveraging the refund process to get the sale). But you don’t want a refund — you want the sales leads you paid for!
To make up for missing leads a Prepaid Retainer agency may unscrupulously “carpet bomb” your target market. This harms your brand and causes lead quality issues. Not good.
SCARCE LEADS – PAY PER LEAD MODEL
With a Pay Per Lead model when leads are scarce, your campaign cost goes down and your cost per lead (CPL) remains stable. You never pay for leads you don’t receive.
With a Pay Per Lead model there are no refunds required. You simply pay for the number of warm leads you get.
Your agency is incentivized to deliver more leads. But it is not incentivized to use unscrupulous tactics just to avoid a refund.
When leads are scarce the PPL model is simple, logical and 100% aligned with your sales goals.
Pay Per Lead Benefits
- Pay Per Lead maximizes your lead count and sales pipeline
- Your costs scale linearly when leads are plentiful
- You pay less when leads are scarce
- Your cost per lead (CPL) is predictable
- The lead generation agency bears the risk of delivering leads (not you)
- You and your lead generation partner are always 100% aligned; bad incentives are removed
- The agency must get better to make more money — instead of mindless “carpet bombing” they must do real research and leverage advanced data science to find warm prospects for you
- There are no excuses for bad performance
- No refunds are necessary – you simply pay for what you get
Finding a lead generation agency partner with a Pay Per Lead model rather than a Prepaid Retainer model can bring significant benefits.