What Are the Risks of a Pay for Performance Sales Model?
As a principal and founder of a B2B lead generation firm, I find myself engaging in conversations with new acquaintances that begin with the phrase, “I’ve heard from other firms like yours that they only charge when they get an appointment or a sales lead…”
This is a type of sales model I often get questions about, and in an earlier post I wrote, The Real Costs of “Appointment Only Lead Generation” I explored different reasons why this is not the model we follow at JMS Elite.
However, since it seems to crop up as a question at many an industry conference and trade show, I feel it is worth revisiting why the pay per performance sales model does not support a successful lead generation campaign where complex solutions, products or services is involved.
The lower up-front expense of a pay per performance model might be enticing, but in the long term, it could be costing you a lot more.
How is Your Company Being Represented?
When you outsource to a B2B lead generation firm, they are representing your brand.
Whether or not the prospect on the other end of the line is aware that the call is from an outsourced company, whoever is speaking on your behalf is representing your company directly.
If you have inexperienced, low-level callers on the phone, there is a risk that those callers may denigrate your brand.
Whether the prospect is interested or not, an experienced, professional, senior-level caller will do a better job at representing your company.
This is true if there is a meaningful conversation, or even simply a thoughtful voicemail. There is mindshare to be gained by that interaction.
With professional business development, the goal is to engage in a meaningful interaction no matter what the outcome. Simply put, it matters who is making the call, even if it doesn’t lead to a next step appointment right away.
What is the Real Incentive for the Caller?
One of the issues we hear from our clients who have tried the pay for performance or pay per lead model is that the leads they receive are not fully qualified.
If the caller is compensated for getting a result- like a lead or an appointment, then the pressure on the salesperson is to get that result. Certainly, if you’re selling a simple commodity this approach can work well.
But, if you have a complex product, solution, or service, the result you want is professional business development resulting in qualified leads, not a list of lukewarm appointments.
If the motivation of the caller is to get the lead, whether that lead is qualified or not is not the primary concern, and your results will be reflective of that motivation.
The risk here is a tendency of the caller not to qualify a lead too far. If a caller gets paid only to perform and set appointments, then why would they fully qualify and perhaps disqualify themselves out of the lead instead of simply making an appointment and moving on?
In my role, I’ve had the opportunity to interview many business development executives who would like to work with us.
I ask them what their goal is when they make a phone call, and if they tell me they want to “lightly qualify leads and get the appointment as soon as possible,” this tells me that they are calling an executive and trying to get them to do something – sign up for a webinar, an event, or getting them to agree to an appointment.
When I hear that, I know they’re not right for a firm like ours that specializes in B2B lead generation for complex sales.
What we want to accomplish that is very different from anything you would get from a pay per performance model is peer-to-peer communication with senior level executives.
Our Business Development Executives (BDE) are offering a complex product, solution, or service that is either helpful to a prospect, or not.
If it is helpful, then let’s talk about it. If it is not something they are looking for, the call is still successful because the BDE was able to speak as a peer and create a meaningful interaction. The prospect, even though he or she hasn’t made any commitment, will have had a good experience, and the brand will have been well-represented. We know that’s important.
The Benefits of a Meaningful Interaction
Because the goal of B2B cold calling is a meaningful interaction and a real conversation, if there is an opportunity for our client, it will be highly qualified.
It may be a great near-term opportunity, or it may be a long-term opportunity. So, we find out by getting as much detail about their particular business pain or need, the timing, budget, and perhaps even appetite for new technology.
The result? When the lead is handed over to our client, it is not only highly qualified, but the interaction was meaningful and memorable.
The risk of making the goal to simply set an appointment is that there is a good chance the call will be short and forgettable. With the appointment set, the caller will only want to move on to the next prospect.
The result is that often times the appointments don’t occur because there was no memorable interaction. If the follow-up call is made, many times the client will find out that the lead isn’t as qualified as they thought it was.
The True Cost of Pay for Performance
If you are only looking at the up-front cost, pay for performance sales model may appear to be a good business decision. But if your company sells a complex product or solution, or if you have a service that is very unique to a specific industry, then you are risking a lot by paying only for appointments.
Does your business produce a complex product or solution? Have you outsourced your inside sales to a pay for performance model team? What was your experience? Please leave me a note in the comments.
Editor’s Note: Originally published in 2016, this blog has been edited and updated in December 2018.