Why some leads convert and others don’t: The Hierarchy of Leads

Segalo MediaGoogle Adwords, Local Business, SEO, Social Media

Have you ever wondered why some leads turn into sales and others don't? Why does it seem like the leads you get from one source are just a bunch of tire kickers while you end up closing almost every single one of them from another source? 

Well, let’s take a dive into understanding why this happens. Ultimately, I want to help you make decisions on how to spend your marketing budget efficiently. 

From best to worst, here are the highest converting lead sources:

1. Word of mouth referrals

When a happy customer tells a friend or loved one about your business, or when a customer asks their network for recommendations, these are considered word of mouth referrals. And in any line of business, these leads will convert at the highest rate of all other sources. 

For many businesses, they will close upwards of 80% of these types of leads. In some industries, it can be even higher. Why? Because a past happy customer already laid the groundwork for you, talked you up, and essentially already sold your product or service for you. The only thing left for you to do is simply reaffirm why you’re the answer to their problem, give them a fair price, and close the deal. 

To run a successful business, it’s imperative that you leave your customers feeling so giddy about their experience with you that they can’t help but talk to their friends and family. You want to go so over the top and deliver such a good product that they simply can’t resist singing your praises. 

We try to help our clients understand the importance of this. Why? Because when running a marketing campaign, you can double, triple, and even quadruple your sales if you can deliver a top-notch product or service. 

When you do generate a sale through your digital marketing strategy, that customer undoubtedly has friends and family. You then have an opportunity to get access to a network you previously didn't have, and you can then capitalize on word of mouth referrals. 

When you fully understand the power this truly has, you’ll be generating multiple sales from just one lead you got through your online marketing.

Businesses that really understand this are often the ones spending an enormous amount of money on their online marketing. They know that if they generate a sale by spending, say, $100 in marketing dollars to get that, they can turn it into 3 other customers and offset their initial marketing costs. 

Word of mouth referrals can play a significant factor in helping all of the other lead sources run profitably.

2. Organic SEO (search engine optimization)

Ranking at the top of Google in your area for your particular service or product is the holy grail of online marketing. It is far and away the highest converting lead source you can attain online. Why?

Because of the intent and mindset of the website visitor when they hit your site from this source. 

From just about any other online source, there is no guarantee that your website visitor is even interested in your product or service. But when it comes from organic SEO, you can assume with relative certainty that a website visitor is in fact interested in you. 

Google doesn't just show a bunch of random results for a keyword search. They only show the end user pertinent information and results that are relevant to what they're looking for based on the keywords they typed in.

So if somebody comes from a Google search and lands on your website, assuming you have your meta information correct, you’ll know that they got there because Google showed them a set of results related to your product or service.

To give you a visual of meta info, here is what I mean - the title tag in blue and the description beneath it:

People don’t search for things they don’t need. I wouldn’t go randomly search for makeup products or piano lessons. I don’t wear makeup and I don’t play the piano. 

However, as I write this, I’ve had all 10 of my trees dump literally every God-forsaken leaf onto my lawn over the past 3 days. And you know what, I have a need. So I’m going to do a Google search for “leaf cleanup companies near me” and click on probably the first two to three companies I see. And I’ll for sure be hiring one of them. 

You see, I have intent to buy. That’s what makes me a qualified lead and a potential customer for these lawn companies. 

Marketing 101 tells us that you need to reach a customer when they have the need for your service. If you can’t get in front of them when the need arises, you won’t get their business. 

And in our modern technological landscape, the smart buyer now goes to Google to find what they need when they need it. Organic SEO gives you the ability to get directly in front of them at the exact time they are ready to buy.

And this is why organic SEO generates the highest quality lead. Which ultimately leads to you being able to close organic leads at a higher conversion rate than any other source out there. 

3. Google Ads

Google ads are what pop up above the organic search results. They have the “sponsored” tag on them so you know what’s an ad and what’s not. Here, I did a quick search for leaf cleanup and it showed me quite a few ads right there at the top:

Now, Home Advisor is notorious for ripping off well meaning service providers by charging them for leads they don't get, so I personally have an issue ever giving them my business in anything. We often end up being the breath of fresh air after some of our clients have been absolutely abused by the HA system. So in this case, I'd click the $25 off lead removal ad on here.  

The reason why Google ads also convert at a fairly decent rate is because the intent of the visitor is the exact same as the organic SEO lead.

However, the buying stage they are in can often be different. Now, this isn’t to say that buyers who are ready to make an immediate decision don’t click on Google ads, but their propensity to simply click on the first thing they see is much higher when they are just browsing as opposed to being ready to buy. 

To describe this a bit differently, imagine two scenarios: 

Scenario 1: Let’s say you have a couple of cracks in your driveway and you’re looking at seeing how to fix it. You search something like “concrete driveway repair” and a bunch of results pop up. More than likely, since you’re just looking for info, you’ll click on the first few results you see, which are all going to be Google Ads. And this juncture in your search, you are not ready to buy and are very likely going to read some info and move on with your day. 

Scenario 2: Imagine you've got a massive crater in your driveway that you've learned to maneuver around. It isn't a huge deal for you, but you end up having a few friends over for a get-together. One of them is pulling in to the driveway and hits the crater, bottoming out and busting their front bumper. Oops, should've gotten that fixed.

Now, you realize you've got to get this thing fixed ASAP.

You jump on Google and do the same search you did before, but this time you want to get a quote and get this thing fixed ASAP. And this time, you're going to make dang sure that you only click on links that are reputable companies since you're going to be making a decision very quickly. You'll look for companies with the top reviews, companies with decent looking websites, and companies that look like they know what they are doing.

In both scenarios, you do the same search, but your intent is different. One is lazy browsing, and the other is immediate need.

Again, this isn't to say that Google ads do not bring in immediate need type customers - it can and it does. Which is why we often run Google ads for our clients as well. But the conversion rates just aren't as good.

But perhaps most importantly when comparing Google ads to SEO is this:

Less than 10% of searchers actually click on ads. So if you have zero SEO strategy and you rely solely on Google ads, you're going to miss out on 90% of potential search traffic. So you can see how this becomes very problematic for companies who don't have an SEO plan.

But back to the main point here.

Organic SEO will bring in higher quality leads that have immediate intent to buy, while Google ads will tend bring in customers who are a bit early on in the buying cycle.

Google ads can still be a great option for companies, but nothing beats good SEO.

4. Facebook Ads

This final step could really encompass just about any social media platform out there, but for most businesses, Facebook is by far the best solution for generating quick leads. So that's what I want to talk specifically about it.

Let me preface this by saying that we have clients who land multiple sales every month directly from Facebook ads. So even though I'm about to tell you why the leads are often unqualified, I want you to at least understand that many companies still close a buttload of business through Facebook. And we often recommend a strategy that encompasses a Facebook ads strategy in one way, shape, or form.

The Facebook ads that we run for them are highly targeted, based on a promotional deal, and work through a specialized campaign that we run through the sophisticated backend of the Facebook ads platform. If you have questions on how we do this, go ahead and hit us up on the contact page. We do tend to get much higher quality leads for our clients than they have ever gotten on their own.

To keep with our theme, the hierarchy of leads all comes down to the intent of the buyer.

On Facebook, people do not have the intent to buy your product or hire your company to perform a service. They are on Facebook to cruise their news feed, check up on notifications, or maybe chat with a friend on messenger.

So when they come across your ad, it can certainly pique their interest, but in no way shape or form are they on Facebook specifically to hire you. Because if they had the immediate need, they'd be going to Google to search. If that doesn't make sense, go re-read everything above :).

So even though they may fill out a form or call your business with the hopes of hiring you, they may not even have had the intent to buy to begin with. So they are often likely to drag their feet and not actually close.

There does tend to be a law at play here though.

With the ads we've run for our clients, we often generate a large quantity of Facebook leads at a much lower cost per lead than we do through Google ads. This is typical across almost every industry.

It happens this way because of a few complex algorithmic explanations with regards to Google vs. Facebook advertising, but the easiest way to explain it is that Google ads are typically just more expensive than Facebook ads. And a lot of it has to do with competition in the marketplace. Google ads produce higher quality leads, so your competitors are willing to pay more for it, which drives up the cost for everyone.

Likewise, Facebook leads are usually cheaper. And since we can use Facebook ads to generate a lot of volume at a lower cost, the amount you'll end up closing is much lower since the quality of the lead is lower. That's why it's 4th on our list.

Again, customers might be interested in your service or promotional offer, and they may even fill out a form or call you, but they may not be in a very big hurry to buy.

After all, your Facebook ad could have been the first time they actually thought about their need. So it could be the catalyst to starting their buying process altogether. And that makes it fairly hard for you to close the deal. This is where retargeting ads become extremely important for Facebook ads. Remind the person over and over that they have a need...

To summarize, Facebook leads can bring you a high volume of leads at a lower cost per lead than compared to other ad platforms out there, but because of the intent of the buyer, the quality of the lead tends to be lower and you'll often have a harder time closing these.

5. For Local Home Service Providers - Pay per lead generators (HomeAdvisor, Angi's List, Yelp, etc...) 

For new home service based companies that are just getting going and don't have large budgets, these lead generators can be helpful. However, companies will find out very quickly that they are extremely expensive and don't convert very well. Don't get me wrong, there are companies out there that swear by Home Advisor and some of these companies, but I will say that is VERY industry specific.

For most industries, the lead generators provide very unfruitful leads. Or rather, the lead itself may not be terrible, but what these companies are doing is shopping the lead to multiple companies at once.

So while you get charged $50 for a lead, so are 5 other companies in your area... for the SAME lead. It's a race to see who gets to the lead first and who is able to close the client. We're all about competition but when you get charged $50 for a lead you never even made contact with, that's a problem.

The bottom line with lead generators is that if you're new and don't have a lot of money, they can be good because you're only going to pay per lead. But, you often will pay for leads you never get. And even when you do get in contact with the lead, they are often talking to 5 other companies at the same time, which will drop your close rate quite a bit.

For that reason, we put the lead generators as very last in our list because closing a lead on it is pretty difficult. The cost per conversion is often through the roof and the overall close rate is typically quite low.


In conclusion, as far as online marketing goes, SEO is far and away the superior way for you to spend your marketing budget long term because it brings with it the highest quality online lead.

Google and Facebook ads can be a viable option to supplement your leads in the interim while your SEO strategy is carried out, but over time, you'll often want to back off on the ads as your SEO takes hold. Or, as we've seen for some of our clients, they have the budget and still want to go after the 10% of search traffic that clicks on ads as well as the massive user base on Facebook.

If you're brand new and don't have a budget, lead generators can be a sufficient option for the short term. But this shouldn't be relied upon long term if you want to genuinely run a for-profit business!

To get leads from all sources can be a great plan, but just understand that you'll close more leads from SEO than you will from any other online source.


Daniel Segalo, MBA

Founder of Segalo Media

Daniel is a serial entrepreneur and founder of Segalo Media, a digital marketing agency in Kansas City, Missouri that specializes in search engine optimization (SEO). His firm has been helping their clients dominate their competitors on Google for 8+ years and have won multiple awards and accolades for their work.

Daniel founded his first company at 21, and has now consulted for, mentored, or has been on the founding team of 6 different startups.