why lead generation channels fail

Good morning Predictable Revenue community,

tl;dr

• Lead generation channels go through a channel adoption curve

• New channels start with high conversion rates and drop slowly as they mature

• Channels fail for four key reasons (misunderstood maturity, lack of product market fit, lack of founder leadership, and poor tactical execution)

Why Channels Fail

The next time you hear someone say “that channel doesn’t work” I want you to ask yourself a few questions. Did they actually try it or are they repeating something they heard? If they did try it themselves, ask yourself these three questions: 

• How mature is the channel?

• How strong was their product market fit? 

• How strong was their leadership of the channel? 

• How well did their team execute? 

As someone who’s ran an outsourced sales development service for 12 years - see below for why outsourcing is a terrible idea and I’m an idiot - I’ve seen just about every permutation of these questions. Anyone that says any channel 100% doesn’t work is wrong. They might be directionally correct but channels are rarely 100% dead. Channel effectiveness tends to decrease over time but can ebb and flow if you give it long enough. I’m sure there must be at least one person out there that’s figured out how to book meetings using messenger pigeons. 

A marketer I met once described this trend as Channel Arbitrage, where the people early to a new channel reap the greatest returns and once everyone catches on, the conversion rates start decreasing. To expand on their idea, sales development has reached maturity where most companies know what it is and how to do it. The easy wins are gone and getting an ROI requires building a complex set of team, process, and tooling. Writing this reminded me of the Technology Adoption Life Cycle, popularized by Goeffrey Moore, in the way that the early adopters of a technology get most of the benefits and the late majority / laggards get the least.  It seems that demand generation channels would follow a similar curve, the Channel Adoption Life Cycle. A key difference is that as the channel becomes broadly adopted, conversion rates will fall and early adopters react by improving their process, which increases the table stakes to be successful and drives up the cost to acquire a customer. I was building tools for sales development when this happened and we always compared it to the Cold War, it was an arms race and whoever had the best access to information/tech/process/etc… got the best results. 

Take cold email for example. In 2012, I could send a mail merge from google sheets and expect to see a 10% - 20% reply rate. The biggest tool that existed at that stage was Yesware but I don’t recall them offering mail merges at the time. The information available about the channel was fairly low, Aaron Ross and Bryan Kreuzberger were the only people I found that were actually sharing information on how to do it. Many companies had heard about the channel but weren’t sure how to implement and scale it up. Some companies were resistant to the idea at a philosophical level, some people told me it would never work, some were upset we would consider something so unseemly, and most IT folks were flat out against any cold email. Despite all this resistance, the conversion rates were fantastic. Most customers were booking 20-30 meetings a month off of very basic lists. Looking at this example, the four characteristics of a channel adoption stage would be information availability (IA), tool availability (TA), resistance to implementation (R), and conversion rate (CR). 

Channel Adoption Life Cycle 

The next time you’re thinking about adopting a channel, take a moment to consider where the channel is in its lifecycle adoption curve. Starting a new channel in either the earlier and later stages will still be challenging but for very different reasons. 

How Strong Was Their Product Market Fit 

Take outbound for example, in the middle of the 2021-2022 SaaS pullback (recession?) many teams ended up cutting their SDRs teams citing a lack of profitability. It seemed like every executive on LinkedIn had weighed in on the topic and outbound was dead. Only it wasn’t. In 2024 there are more SDRs on LinkedIn than 2 years ago. At the same time that everyone was writing outbound’s obituary, Rippling was generating 50% of its $175m ARR (in 2022) from the channel (estimated from sources: Matt Plank, CRO @ Rippling & Sacra). 

In this post, I break down Rippling’s sales development team compared to Outreach’s and it looks like Rippling is able to generate 134% more revenue per SDR than Outreach. It seems likely that the strength of their product market fit is a key factor in driving higher reply rates, booking rates, and revenue from the channel. 

How Strong Was Their Leadership of the Channel

When I say founders need to own their growth, I mean it literally. The founder needs to lead the team and the team needs to be made up of internal hires. Building a new channel is an expensive and mission critical investment. Once you’ve found product market fit, the only thing that matters is growth, yet many founders cannot wait to “get sales off their desk”. 

We once had a customer hire us to build a team of two SDRs for them. They generated 64 meetings in the first 6 months of the engagement which is a decent pace for a net new team. When conducting a pipeline review with their AE at the 6 month mark none of them had closed so I was interrogating our customers AE to figure out why. After a number of what I felt like were weak excuses, he blurted out “we’ve never closed a customer in this vertical”. Orders had come from the CEO to target this market specifically and we had mapped it out very thoroughly. They had provided case studies, examples, etc… but we had missed a small nuance that made their current market and this new market totally different. The customer didn’t stay much longer and I don’t believe they ever closed a deal from our efforts. So who’s at fault for the failure here? The SDRs made their calls and booked meetings, the manager’s built good lists, training, and process, but they didn’t generate an ROI. If the SDRs did their job, the manager’s did their job, and there were no technical issues, the only place to lay the blame is on the leadership. 

You cannot expect an SDR, sales manager, or even VP of Sales to create the go to market strategy for your company. Only the founder can do that. Sure, a VP should be able to effect change at a large organization. However, in a startup, especially one under $10m ARR, only the founder has the deep knowledge required to shape an effective go to market strategy. 

How Well Did Their Team Execute?

Did they have the right people, process, and technology to be successful? 

People

• Do they have the right structure & roles? 

• Do they have the right people in those roles? 

  • Are people a culture fit 

  • Does each team member get it, want it, and have the capacity?

Process

• Do they have the right processes? 

• Do they have the right training for each process?

• Do they have training for the skills people will need?

Technology

• Does the team have access to the right data? 

• Does the team have the right tooling?

• Have we done a good job of making the tools work together? 

The above is part of our assessment tool when we come into a sales organization and try to figure out where the gap is. If you’d like to see our assessment process overview, hit reply and I’ll send it your way. 

When you look at the strength of the answers for the above three sections, you get a rough feel for how well a team executed. We’ve gone as far to create a score in the past but find it a little redundant. We use the questions as checklists for conversations. By the time you get through an assessment the answer is usually pretty obvious.

Thanks for reading… before you go, what do you think about my Channel Adoption Lifecycle? Is it total BS? Does it check with your experience? I’d love to hear from you regardless of which side you’re on.

Collin Stewart

PS - I’m experimenting with a new channel and people hate it which is a very good sign. Hit me with a reply if you’d like an invite - I’m not an affiliate / not getting any commissions.

PPS - I’m going to do a longer write up on why outsourcing sucks, as someone who’s been helping companies do it for 12 years, but here’s the tl;dr:

1. It’s a 2 year journey and the early results always suck. Most outsourced relationships don’t survive long enough for the buyer to get any value.

2. An internal person is always going to outperform an external resource given enough time. You can ramp a new SDR in 3 months so the “outsourced” SDR advantage only lasts a few months.

3. Outsourcing typically means it’s not a founder-level priority. If the founder doesn’t believe in it AND give some of their time to own it, it’s unlikely to be successful. This is true for just about everything, not just outsourcing.