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Analysis : Economic Development "Lead Generation" Costs

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Bruce Donnelly   bruce@gdi-solutions.com    (Biography)

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Introduction

Development magazine reach Lead generation expectations Costs per expected new job created The value of magazine advertising
Advertising costs : specialty magazines Economic impact on a state The cost of our work, and business plan Bottom line conclusion
Summary : This page shares part of our ongoing analysis of marketing costs per job for "lead generation" work, such as investment in targeted marketing activities and "market reach" through various channels to find relevant capital investment projects for US state and local economic development agencies.  The bottom line is that more than $50 million per year may be spent on such lead generation work, but the average cost per job created may still seem justifiable.  Similar results might be achieved at a fraction of this cost by eliminating the enormous duplication of time and expenses invested to find rather than to win projects.

Well-qualified project referrals have been our specialty for 15 years, personally assisting over 1000 executives with their project plans, and contacting thousands of others to discuss and address their interests.  The analysis here is not a critique of advertising or marketing choices by individual areas, or of any publisher or event organizer.  Our macro analysis of this market focuses on the high total costs of state and local marketing initiatives, and their value relative to their expected and actual impact in terms of job creation, because our focus is to improve the return on marketing investments.

Our 7 year analysis of investment project trends by state may be of interest in this regard, as well as the multi-year trends in our level of daily website visits and the regional interests of our visitors.  Our April 2006 newsletter (4 pages with graphs) summarizes this market research and analysis.

Contact us to discuss lead generation interests in this market, and how we can help you.

Our response-oriented work economically shares valuable market knowledge and contacts.  Our proactive marketing work reaches out personally to top executives to find what they are seeking.  In general, our conclusion is that many areas actually invest thousands of dollars per new job which could actually be attributed in some direct way to their lead generation efforts.

Our focus is to drive down the high cost of economic development "lead generation" work from an initial goal of $500 per job to $100 per job or less.  Our plan to do this involves creating a more efficient channel through a network of top professionals in major cities and industry sectors who are independent and trusted advisors among top executives at large companies.

We independently introduce executives to community development leaders and professional service providers who are relevant to their project plans, whether through the use of our website content or by providing well-qualified personal referrals.

We do trend analysis such as the following to benchmark our own marketing performance and guide our goals and business plan for cost-effective ways to reach more investors every year.

Introduction : Scope and purpose of this analysis

In recent years, economic development agencies have routinely compared our work to other types of marketing services, even if they are not really comparable.  Their budget costs and performance expectations and results in old marketing channels are simply familiar as a value reference point.

The most common comparison they make is to advertising in specialty magazines in this market, or to the costs of consulting services related to marketing strategy, PR work, telemarketing, etc.  We have therefore shared our analysis of this below.  Another common comparison is to event marketing, such as trade shows, networking events, familiarization tours, hospitality events, sponsorships, etc.  That is a more complex topic, and better discussed individually.

The real cost of event marketing is sometimes not considered carefully, as it involves a lot of valuable staff time and resources rather than just the obvious direct cost, such as the fee for a trade show booth, production of the exhibit and related promotional materials, and the travel costs to be there.  There is a lot of pre-event and post-event work to make such events successful, so that needs to be factored into any analysis of the total costs.  Since the costs of such event work vary widely, and their expected and actual target market reach and results also vary widely, it is hard to generalize about the value of such initiatives.  Some are a waste of money, and others are valuable.  What works well for one area may also produce very little value for others.

Assumptions behind our analysis

For simplicity of analysis, assume that there are roughly 2,000 major projects per year in the United States which create over 50 jobs in a new location (rather than just expansions at an existing site or a predetermined location without serious consideration of other location alternatives).  Refer to our 7 year analysis of project trends for more details, since the volume of projects varies over an economic cycle and is also influenced by global investment flows.

In general, projects of this scale will mostly come from larger companies - because they have the resources to afford and successfully manage such growth - with the exception of some very fast-growing (and riskier?) small companies.  They often take more than a year to plan, so marketing results are not achieved immediately.  In short, not all companies have the resources to plan projects which will create 50+ jobs, and long-term strategic commitments are not taken lightly.

Unlike product marketing campaigns or point-of-sale merchandising, in which the expected impact on sales can be readily measured through indicators of short-term sales results, economic development marketing campaigns are generally to develop a "location brand" and promote a business community long-term rather than just promote one product such as an available site or building.

That makes it necessary to measure marketing performance over a longer interval of time, and in ways other than just direct response enquiries, as in brand campaigns.

Development magazines and related website reach

The following data, assembled in early 2005 from 2004 or 2005 advertising statistics, shows that the leading magazines in this market have roughly comparable total circulation, but some difference in the size of companies they reach and their website visits statistics.

These are all free magazines, supported by advertisers.  There are major differences in the number of pages which Google has indexed on their websites because of their website design choices.

FDI Magazine, published by the Financial Times, is one of the few that relies on paid circulation (as well as higher advertising rates), but it is relatively new by comparison to the magazines below, which have been in circulation for many years.  Circulation is therefore much smaller, but may be more valuable, so it is not as relevant for comparison to the advertiser-supported free magazines.

Distribution of website visitor interests and projects reported by state

As expected, given 50 states of varying levels of economic size and attraction for business, the level of serious interest in any given state will just be a small fraction of the national total.

As shown in our regional distribution analysis of visits to our Invest USA directory of economic development agencies, interest predictably centers around 2% (100% / 50), with some states closer to 1%, some at around 3%, and a few at 4% or even more.  The global analysis on the same page shows patterns of user interest in multi-state regions or other countries.  Our 7 year analysis of the major projects announced by states relative to their population is another simple tool for developing a baseline assumption for the benchmarking of long-term marketing performance.

For simplicity, some large states which have been very proactively seeking investment may hit that 3 - 4% share of interest, but most still remain close to 2% despite all their promotional activities.

Magazine Circulation - approximately - refer to their media kits for current data and 4 color page 1x rates

Subscribers with

> 500 employees

Website visits per month, and pages indexed by Google (as of Nov 1 2005) Comments - website visits are not as reliably reported as circulation statistics, and are often confusing - mixing references to "hits" and "page views" with unique visits, or just referring to peaks in weekday or month visit activity rather than ongoing patterns of usage.  "Hits" are meaningless, as they are distorted by page design (number of graphics for the server to download, etc.).

fDi - Foreign Direct Investment magazine

(FT Business - The Financial Times)

15,500  $14,600

 

6 issues per year for $385

13,175 (85%)

roughly 80% of the readers are CEOs or CFOs

A further 15% are responsible for corporate development strategies

40,000 visits

1970 pages

Published by the Financial Times group.

Advertising rates are higher than the many free magazines in the US market, but there aren't lots of small ads competing for attention.

The website was launched in February 2003 and www.fDiAtlas.com launched in May 2007.  The CPM for fDi banner ads is $100.

Media kit indicates an estimated 3x pass-along readership (3 readers per subscriber)

Targets C-level or very senior executives at major firms - not corporate real estate, facilities management, or administrative managers.

Strong global content and international market reach, rather than a 99% US focus.  40% North America, 35% Europe, 25% Asia Pacific and other regions.

Area Development 44,715    $10,300

7 issues per year

Free

12,698

36 - 40,000 visits

 

125 pages + 2710 pages FastFacility

40 years.  Roughly 3800 more copies go to most US economic development agencies.  Also operates a FastFacility website to advertise available real estate, which at the time of the statistics (2004) was being advertised on cable TV and Google to boost visits and ad sales.  Compare this to 34,900 pages on LoopNet in 2005 - or only 42 pages indexed by Google on LocationOne. 

 

Reported 12,000 visits/week at one point after a CNN TV ad campaign to launch FastFacility.  Much of the content available on the main website is apparently not indexed by Google.  Reliable data on visit levels has not been openly available.  It has multiple websites.

Site Selection 44,032    $10,120

Free

12,870

57,500 visits in May 2006

 

998 pages, plus their other websites

In circulation for over 50 years.  Formerly tied to CoreNet Global (as IDRC), Site Selection is now tied to the IAMC networking events for industrial facilities managers and maintains a close relationship with IEDC.  It has multiple websites, so reported visit totals sometimes reflect Site Selection and their other sites put together.  The data is generally just for one month, unlike the daily and monthly data we share to distinguish peaks or average visit levels.  Their websites are heavily promoted to their subscribers through e-mail broadcasts, events, and the magazine.
Business Facilities 43,000    $9,960

Free

 7,997

40,000+ visits

546 pages (for their FacilityCity site)

Published for 38 years.  Since their website also serves readers of a facilities manager publication and event which may be less relevant to this market, we don't know if their website visit data isolates the Business Facilities visitors.  The Google page count would include both.  Additional copies are circulated through trade show events and associations.
Expansion Management 45,000    $9,013

Free

  5,511

28,000 visits

1770 pages

20 years.  Part of the large Penton Publishing group.  It also does a special issue for the National Assn of Manufacturers, and organizes events for advertisers to meet site consultants.  In 2007 it was reorganized and tied into Penton's real estate and finance media.
Plants Sites & Parks (discontinued) 44,500   was $7,940 in 2004

was Free

  6,100

43,113 visits

(Jan 2004)

1700 pages

Ceased publication in Nov 2004 after more than 30 years as a leader in this market.  Had been acquired by Reed, a major publisher and event organizer.  Had an excellent website which was heavily promoted to subscribers through e-mail broadcasts and the magazine.  Reported 5000 pages of website content, but Google only found 1700 at the time.
Business XPansion Journal 22,000    $5,015

Free

est. 10,560

unknown visits

548 pages

We have not found comparable circulation statistics or website visit statistics at this time.  Trade show distribution boosts circulation.  No BPA data.  Same publisher as GCX.
GCX - Global Corporate Xpansion 10,000    $3,900

Free

est. 4800

unknown visits

257 pages

We have not found comparable website visit statistics at this time.  Five issues per year.  Trade show distribution boosts circulation.  No BPA data.

Southern Automotive Corridor not found

Free

not found

unknown visits

153 pages

We have not found comparable circulation statistics or website visit statistics at this time.  There are also two related websites for Southern Business Development and biotech.
Summary - We attracted an average of 50,000+ website visits per month in 2006 - 2007.  We launched this site in late 2003 - 2004, and exceeded 60,000 in 2007. Magazines in this niche are mostly in the 45,000 or less range despite comparable free print circulation and having been circulated for decades.  Ad rates are very similar. 6,000 - 12,000 recipients at large (>500 employee) companies are on their mailing lists.

This may reflect multiple subscribers at fewer companies

Mostly in the 30,000 - 40,000 visits range, but not as reliably reported.

See our daily visits and monthly data.

Two top magazines in this niche went out of business in 2004.  One was Plants Sites & Parks, and the other was Corporate Location (published by Euromoney in the UK), which had formerly been a leader in Europe.  The gap left by the latter was quickly filled by the Financial Times with the rapid growth of their fDi magazine.

Business Development Outlook magazine by WEDA still exists as an advertorial publisher under different management.  Expansion Solutions magazine had no website and circulation or website data is not readily available, and content is advertorial.  Only the major magazines provide BPA audited circulation statistics.  Data on website visits is generally hard to find and vague or very limited, especially by comparison to the data we openly share..

Our website visits have grown from 200,000 in 2004 to 320,000 in 2005 to more than 500,000 per year in 2006 and well over 600,000 per year in 2007. 

After promoting this website with very limited resources since 2004, our 2007 visits have grown to 60,000+ per month in mid-2007, which is higher than the visits reported by all the above magazines.  They have been in free circulation for 20 - 50 years with the support of millions of dollars in advertising each year.

As more areas participate in our services, our reach should expand because there is no comparable independent resource on the Internet for business location and site selection research.

Note that we refer above to visits - not "hits" or "page views", which are in the millions but not meaningful as an indicator of reach.

Our visitors are from around the world, and are not driven by circulation of a magazine and frequent e-mail broadcasts to the same population of 40,000+ monthly subscribers.

The magazines repeatedly send e-mail such as newsletters with website links to many of their subscribers.  This can drive up visit levels among existing subscribers - and ad impressions.  Some now organize special events, sponsored by advertisers, as another way to make money and reinforce their print and online ad sales.

We reach executives and their professional advisors (not just site selection consultants) as they search for information, or as we talk to them personally about their plans and offer referrals to help them.

Most of our visitors find us through Google because of relevance to their search interests.  Other search engines, as expected, provide many of the other visitors because this was designed as a location research tool rather than an archive of magazine articles and ads.

Advertising costs in the above specialty magazines

The published advertising rates for these magazines, such as for a 4 color page or half page ad, can be found in their respective media kits on their websites, or by contacting them.

As a simple generalization, however, these range between around $2000 for a small B&W ad to around $10,000 for a color page, with some of them more or less than this.  This makes it possible for them to produce an attractive, glossy magazine and distribute it to 40,000+ free subscribers.

Advertisers also need to keep in mind all the costs to design, produce, and conduct an effective ad campaign, including the staff time and effort involved internally, rather than just the fees of an ad agency or graphic designer or single placement costs in the chosen media.  Isolated or infrequent small ads may have little real marketing impact.

Doing it right takes considerable time and effort.  A simple little ad in isolation may not be expected to produce much, but few areas have the resources to invest in large or repeated ads in multiple media, or can easily justify such an investment by the expected and actual results.  For example, if an entire state is actually competing for a fairly limited number of projects per year, and the executives that need to be reached are not easily reached or influenced by advertising, then it may make little sense for small areas to spend much money on it despite the obviously high value of winning a major project.  It is, in effect, more like buying a lottery ticket and hoping to get lucky, rather than a marketing strategy.

How many projects are states really competing for each year?

To continue the above analysis, if there are 2,000 projects per year and the states which actively seek them through marketing initiatives generally attract a 2 - 3% share, or in a few cases 4%, then the typical expectation is to attract around 40 of those 2000 projects per state, with some less (but likely at least 1% = 20), and a few attracting 60 - 80 (3-4%).

Actual numbers may obviously vary, as will the total projects per year during economic cycles, but as a simple generalization, those provide some baseline assumptions.

For comparison, Site Selection magazine has reported 6000 major projects in each of the last three years, which roughly breaks out as 1000 new manufacturing, 2000 expansions, and 3000 "other" projects, as explained in our 7 year trend analysis.  Not all of those projects would be "mobile", involving a new choice among competing business locations - particularly in the case of many of the expansions.  Many projects are, by their nature, also limited to interest in one region.

In short, areas are mainly competing for a greater share of the "mobile" projects with interest in their own region of the country as only a fraction of that 6000 project total.  States may report hundreds of projects, but that doesn't mean that these were all influenced or the result of the marketing work, or that they were really competing for all of the thousands of projects reported nationwide.

Magazines and lead generation work, advertiser expectations

In terms of lead generation to attract project enquiries, we share the view of many publishers that this is not really what they do, even though magazines in this niche have often promoted their advertising sales on the basis of their ability to offer "leads" to their advertisers.

The volume and quality of such leads varies widely, as almost any of the advertisers can attest.

Typically, reader responses are not handled by experts in this field with valuable market knowledge and suggestions to share with the readers according to their needs, but rather as a "bingo card" distribution task to get the leads to as many advertisers as possible so that they will be motivated to advertise again.  Once again, they are publishers - not direct response lead generation services.

It is reasonable to expect ad campaigns to have some measurable impact and ROI, but lead generation shouldn't be the primary metric in that regard, because that isn't what magazine ads do in specialty B2B publications such as these.

The point, however, is that brand campaigns to help raise the visibility of an area, as in the case of ads tied to magazine editorial content relevant to their area or industry focus, may not really attract many direct responses among readers (or website visitors).  That doesn't mean it isn't worth doing, but simply that the expectation (and performance metric) shouldn't just be short-term leads.

Executives will rarely see an ad and pick up the phone to call, or fill in the bingo card or website form to request information, even if they noticed and recall the ad whenever they may someday have an interest in the area.  They are more likely to seek information at the time when it is of active interest, as few serious prospects will just gather a lot of information in advance for future reference.  They are not likely to diligently review every page, see every ad, or respond often.  An effective marketing campaign, however, may influence their perceptions of an area over time.  That typically involves far more marketing work to arouse interest than publishing a few ads, however.

Top executives are, to be blunt about it, too busy to waste their time, so it is simply unrealistic to expect a lot of valuable direct responses from magazine ads, and that is especially true of small or isolated ads in a single magazine, rather than a marketing campaign which is designed to really be noticed repeatedly over time and shape perceptions of an area among the targeted executives.

How many jobs are at stake?

Our analysis of the reported major projects (going back through the 1990's) suggests that the average new project size has dropped from around 100 to 75 jobs, for whatever reason.  Good data is hard to find, and the reported job totals may not reflect what is actually created later.

This means that the 40 projects (as above) might be expected to yield perhaps 3,000 "new jobs", plus whatever a state may get through expansion projects, which is typically much larger.  Some states might predictably do worse, such as 2,000 new jobs or less.  Large states or the few states which hit the 4% market share might attract 80+ projects and 6,000+ jobs in this simple model, with obvious variances, but that gives a rough idea of an average state performance range.  One is not, in other words, generally competing for tens of thousands of jobs per state each year, so any return on marketing investment analysis needs to be more realistic about the expected impact, which is not really tied closely to the much larger total new job creation reported within a state.

Some academics and consultants asserted back in the 1990's that around 80% of the new jobs come from business retention and expansion activities, rather than from new investors.  If that widely accepted assumption is actually valid, then 3,000 new jobs from investment attraction (as 20%) would be part of a larger total of 15,000 (by adding back that other 80%).

It should also be noted that some of these projects would still happen if the states did nothing to try to attract them, simply because there are compelling business reasons to invest there anyway.  The 80% total may also be inflated by including lots of small local projects, rather than just the major ones.  In short, most businesses are small (millions of them), so they add up to lots of job creation, but that isn't the usual focus of economic development marketing campaigns or lead generation work.  Adding them into the marketing ROI analysis simply distorts the real cost per job created by inflating the number of jobs so that the marketing costs seem more justifiable.  It is also worth noting that job losses are not subtracted, but marketing work may not influence that anyway.

This analysis also does not relate to total state job creation and unemployment statistics, which may not involve capital investment projects at all, as in the case of routine growth within existing capacity, employee turnover rates, and activity by lots of very small companies - many of which are started and fail each year (creating and losing jobs).  Our focus is on major investment projects which create jobs that may be more sustainable than a similar total among new or small ventures.

Economic impact for a state from investment promotion work

As the assumptions and analysis in the right column indicates, the impact of a marketing campaign for an average state in terms of new investment attraction (cross-border investments from other states or countries) may really add up to only around 1,000 - 4,000 new jobs per year.  Larger or smaller states may do better or worse than this just because of their economic size.  Winning those projects obviously involves far more work and expense than just running an ad campaign.

There is also far more project activity in total than this, particularly by adding up the many local expansion projects and small projects.  Those certainly have value, and may be influenced to some degree by a marketing campaign that is really aimed at a different target group of executives.

If the campaign goal is to attract significant projects (>50 new jobs) from elsewhere, then the basic point is that there are a limited number of projects per year in any region for which to compete, and their distribution around the country is not entirely flexible, since many projects are regional in focus just because of the markets they will serve.  They may consider a few neighboring states, but each state won't be competing for every project.  A company which needs to better serve their customers in California is not likely to be looking seriously at Virginia, and vice versa.

Developing baseline assumptions for projects and job creation

If the baseline expectation as above is for an average state to win around 2,000 new jobs from new cross-border investments (excluding local expansions) with little proactive marketing effort at all, and to perhaps win 3,000 - 6,000 new jobs with a very proactive investment attraction program that is sustained as a campaign over a period of years, then the expected impact of that investment attraction program is 1,000 - 4,000 new jobs.

That is before the impact of any similarly better performance at business investment and attraction above the baseline level that would be expected if there were no such marketing program.  For example, a state the size of Texas should obviously attract far more than Rhode Island, as reflected by our 7 year analysis of project announcements relative to population over time.

Visible success at new investment attraction may also influence business retention and expansion decisions to some degree.  A larger factor, however, is more likely to be the basic location (right region of the country for the intended purpose of the project) and practical actions taken to be very responsive to the interests of those existing investors.  The marketing of the region to others may have little impact on their choices.

Example : cost per expected new job for a small ad campaign

Consider the cost of a single small B&W ad in one magazine as above, or one color page.  Assume that the cost per ad insertion is roughly $2000 - $10,000, depending on the choice of ads, and that one represents a large area that is realistically competing for 1,000 - 4,000 new jobs from elsewhere (plus any impact on business retention and expansion, which shouldn't really require advertising rather than better local contact work)

It follows that the ad cost per new job created for a single insert is in the $0.50 per job range at best (4000 jobs if miraculously achieved with a single $2000 ad that attracts over 50 projects at an average size of 75 new jobs).  It would still be pretty miraculous at the $2.50 per job level (4000 jobs from 50+ projects at an 80 job average for one $10,000 ad insert).

If the single $10,000 ad led to 1000 new jobs (13+ projects at a 75 job average), that $10 cost per job created would still be extraordinary.  This is intuitively ludicrous, but the use of inflated job totals (such as by comparing the cost of an ad campaign to the total job creation reported by a large economic area in a year) is basically the same logic.

More realistically, if a single ad led to one 50 job project, that would still be surprising, and that would work out to $40 - 200 per job.  One insert might, however, consistently lead to zero new jobs.  One ad in isolation is somewhat like buying a very expensive lottery ticket.

Who is one trying to reach through ads?  How do they search?

As shown above, the economic development magazines reach around 40,000+ subscribers, but only 6,000 - 12,000 of these are at companies with >500 employees, and the level of the executives reached at those companies is not clear.  It may not be the same as the distribution of readers in the entire 40,000+ base since it is only 15 - 30% of the total subscribers.

For example, it may be relatively easy to reach top executives at small companies and get them to accept a free subscription, but quite difficult to get the attention of top executives at large companies.  Even if they accept a free subscription, they may rarely look at it.

After personally visiting more than 1000 executives over the years at their offices to discuss their active project plans, the number of times when any of the major magazines was visible in their offices (or reception areas) or mentioned by the executives was perhaps 10 times.  If they received the magazines, it wasn't obvious - and these were very well-qualified prospects for active projects deemed worth the time and expense of a special trip to meet the responsible executives personally at their offices.

That doesn't mean the magazines aren't reaching useful or influential readers.  The point is that one needs to focus on reaching and influencing the real investment decision-makers.  If you were in their position, is this a magazine you would read?  Would you reply to the ads?

Example : multiple media, multiple ad inserts

Now, suppose that you wanted to try to achieve those results with a far larger campaign, if the resources were available to do 6 inserts per year in four top magazines as above, aside from any placements in other business media, online advertising, PR work, etc.

Multiply the above costs by 24, creating a  $48,000 - $240,000 campaign range.  This would, in effect, repeatedly "reach" all of their subscribers to promote the location for a full year with either a small or large ad, or some mix between these two budget levels.  Note that one can spend far more than this if advertising in less specialized business media with high circulation to a less targeted audience for the purposes of this niche market.

One is still competing, however, to try to attract around 1000 - 4000 more new jobs per year than the expected baseline performance level of around 2000 jobs from elsewhere (plus all the local expansions) if doing very little proactive marketing at all, such as just providing a responsive service to help those executives and advisors who express interest in the area.

As in the above analysis, that works out to a "best case" range of $12 per job ($48,000 to miraculously attract 4000 jobs through 50 projects of an 80 job size through only 24 small ad inserts divided into 4 magazines), or $240 per job ($240,000 to achieve 1000 more jobs than usual through 10 more projects at 100 jobs on average from only 24 large ads).

That assumes, however, that the ads are a decisive factor in attracting those extra jobs, and that such results are actually achieved.  For example, if the $240,000 campaign only helps a state to win 4 more projects (one per magazine) for 400 new jobs (4 x 100) - regardless of how many "leads" may have come in from all their reader responses or website visitors that year, then that works out to $600 per job.  At the local level, the costs are typically much higher, because the odds of any single location attracting a project are much less than the odds of it going somewhere much larger, such as anywhere within a state.  Even small local marketing campaigns can therefore cost far more per new job actually created.

Keep in mind that the total cost of new job creation is also far more than the cost of a few such ads, because of all the other staff work and resources which go into investment attraction.  The point is simply that the cost of lead generation by advertising can easily be hundreds of dollars per job created, even if one is not too picky about which projects were really influenced  by the ads.

What size or type of company is being targeted?

If aiming to attract projects which create >50 new jobs, such as to aim for a >75 job average, then it is obvious that this is 10 - 15% growth for a 500 employee company.

For smaller companies, it becomes much harder to justify or finance projects which create >75 new jobs.  For example, if it is a 150 employee company, that would be 50% growth, so although that might sometimes happen, it won't happen very often.

Although small company projects may add up to lots of jobs, so that they are certainly worth helping, they are not the usual focus of a marketing campaign because there are so many small companies and few of them would be planning a major project in a new location.  Small companies are more likely to be planning local expansion or new projects in the 10 - 25 job range, rather than create >50 new jobs somewhere else.  It may be useful to attract small projects with solid growth potential, but the cost of finding such a small project can be disproportionately high.

By contrast, larger companies have the resources to invest in larger projects, although some may choose to do so by investing in existing operations through M&A deals rather than by growing their own operations in a new location.  The marketing campaign may have little influence on such M&A choices, and any resulting growth at the acquired company would then show up as an expansion project supported by local business retention work rather than as new investment attraction.

Once again, most new jobs come from the growth of local employers of all sizes, and a marketing campaign has relatively little impact on that.  Proactive marketing work to attract small firms may be prohibitively expensive unless the local representatives are convinced that such projects deliver sufficiently high value over time to be worth the investment up front to find and attract them.

This is really a development strategy choice and funding priority choice which each area has to make for itself.  One can target and pursue almost any size or type of project which the area would be realistically able to serve well, but given limited resources, marketing choices must be made.

The value of advertising is not the same for all areas

We are definitely not opposed to magazine advertising in economic development, nor do we compete with magazine advertising.  It is a very different channel as part of the marketing mix to reach potential investors and develop a "location brand".  It is very appropriate and useful for the marketing strategies of some areas to raise awareness of their areas, boost their image as an attractive business location, shape perceptions, etc.  The point is that "reach" in terms of subscriber statistics does not have the same value to all locations.  Will relevant executives actually notice, recall, respond to, or be influenced by such ads?  Will a few ads in isolation have any meaningful impact, or is it just a gamble?

Magazine advertising is generally not an efficient lead generation channel in this niche B2B market because that simply is not really the function of such magazine advertising.  It is not designed to be a direct-response or research channel that is actively used by top project decision-makers to find what they are seeking.  Executives don't generally plan multi-million dollar strategic investment commitments by filling out magazine bingo cards or website forms.  The ad recall and direct response rates are predictably low among top executives regardless of ad design or relevance to their project interests, so it is unfortunate that many ad placements are sold as though lead generation was the best way to measure their value.

How many magazine readers matter to any specific area?

A magazine may reach 40,000 readers, but if only 2 - 4% of them are likely to be very interested in a given state, that works out to 800 - 1600 subscribers who actually matter to the advertiser, plus perhaps a similar number for those with interests in neighboring states who might also be attracted.

It's like the old joke by a consumer products executive about knowing that 50% of his advertising was a waste of money, but never knowing which half.  In this niche market, with only a few thousand "mobile" projects per year in the entire United States market, but very high value for each such project, the challenge for advertisers is even greater.

Out of 40,000+ readers, there may only be 2500 - 5000 which potentially matter for any 3 state region.  At a 1-2% direct response rate, that's 25 - 100 useful "lead generation" responses per year (even if one receives more "leads").  Not all of those will turn out to be good prospects which might be won.  After all, if an executive requests information about only 5 "short list" locations of high interest, then that still means 4 of them (80%) are going to be disappointed in the end.  The real "hit rate" is very low for such "leads".  In any case, as explained above, leads generated per ad is not a very good metric for such campaigns.

Advertising : The analogy of investment in many lottery tickets

In terms of direct short-term lead generation, each ad is somewhat like buying another lottery ticket which may or may not win as expected today, regardless of how carefully it is chosen.  Buying many more tickets over time may improve the odds of winning something someday, but the outcome could predictably remain a total loss for a long time if one is measuring ad results in terms of short-term lead generation.

Activity such as simply getting a lead - even if it is poorly qualified or irrelevant to the area - is an even worse metric than good, well-qualified leads.  That's like celebrating getting three out of five numbers right on a lottery ticket that only pays off for all five.  No matter how you rationalize that you came closer to winning this time, you predictably lost, and will lose most of the time.  Hope springs eternal, however, that it just takes one winning ticket to make it all justifiable.  If direct lead generation is your focus, then advertising may not be the most appropriate way to spend your marketing budget.  Top executives simply don't rely on bingo response cards to plan large capital investments.  That doesn't mean advertising isn't valuable, or influential.  It just means that direct reader response isn't a good metric, because it tends to measure activity among readers who aren't really the top targets.

If there are only perhaps 2500 - 5000 relevant readers receiving an issue, then a $10,000 ad is like paying $2.00 - $4.00 per ticket for one chance to try to attract at least one project among them.  Compare that to the total cost of a very targeted direct mail campaign, or spending $200 per person to host 50 executives for a special event (including all the costs to arrange it), or perhaps $1000 per executive to personally visit 10 at their offices, or perhaps $10,000 to meet 100 or more people who show up at a trade show booth.  (Once again, how many top executives walk around trade show booths to plan their projects?)

There is also no assurance that any of the advertisers on a bingo card will win their projects.  The choice of locations is not limited to those who advertise in a particular magazine, so ads may not really improve the odds of winning unless they are very effective and influential ads.  The larger the project, the less likely that the search will be limited to advertisers.  When many millions of dollars and the future success of the company are at stake, the ad may do no more than perhaps help to get in the door for review, but not raise the odds of success at all.  That is useful, but the handling of the lead is far more critical, as is the fundamental business case for the logic of that business location for the project.  If that business case is strong, the area may get on the "long list" with or without any ads.

In the case of corporate investment projects, there is only one winner, no matter how many areas chase after the project through ad campaigns, events, PR work, direct contact, etc.

There is a point of diminishing returns for ad campaigns in this market.  It may certainly be useful to be visible and get the "location brand" out there to the intended audience as best one can through ads, PR work, events, direct mail, or personal contact work, but those marketing costs can grow dramatically without necessarily producing comparably better results.  Spreading a few ads across several magazines may not be effective.

Once again, magazine ad campaigns are not necessarily an efficient way to try to attract investment projects directly.  They may seem relatively cheap by comparison to the expected value of winning even one or two more good projects per year, but in general the role of advertising is to communicate and build up the location "brand" image and buyer perceptions of that product in a relatively small target audience for any given area.

The best ads in a large campaign may still generate very few direct-response leads of value.  That doesn't mean the campaign isn't worth doing - it just means that the cost per job of the ads is largely overhead spent to be more visible in the target market, rather than an investment in direct lead generation work.  Sometimes one may get lucky, but ad response rates in this niche are predictably low for good reason because of the way that executives actually make their decisions, and good prospects are rare among the "leads".

Magazine and event reach relative to project and job goals

As discussed above, a 2 - 4% market share of 2000 projects per year may mean that an area is competing for an extra 1000 - 4000 new jobs (above a 2000 base) through the full range of marketing activities - not just magazine advertising as one part of the marketing mix.

At an average of 75 jobs per project, that works out to seeking 13+ to 50+ extra projects.

If an effective ad campaign may only generate 20 - 120 useful reader responses per year, or perhaps 100 - 300 at a higher direct reader response rate such as 5% rather than 1-2%, then it's still going to be difficult to find and win those 13-50 projects among the ad responses.

Even if one receives more ad responses, the number which are actually solid prospects for projects which the area can win may be just a small fraction of the total responses.  One may receive 100 leads, but if only 20 are really relevant as prospects, that is what matters.  Of those, only a few may reach the "short list" stage, and even if the short list involves only 5 locations, 80% of the time (4 out of 5 locations) will be a disappointment.  Some areas will do better than others at winning once they are on the short list, which is really important as a higher priority and measure of success than all the volume of "lead generation" activity.

The market reach of the various magazines may also overlap.  Four magazines with a 40,000+ reach may actually be reaching many of the same people - or different people at the same companies - more than once.  One isn't reaching 160,000+ companies or executives and, even if one were, there may still only be around 2000 projects per year, and just a fraction of those are going to be relevant to a given region, so that "reach" is irrelevant.  It is also the case that those 40,000 readers aren't all at 40,000 different companies, and there aren't 40,000 major projects per year.  There are only a few thousand in the USA each year.

Even if they reach more than one person at a company, there may really be just one key person who one needs to reach to win a project at that company, and there is really no assurance that the subscriber is that key person, or in a position to influence that person, even if it was necessary to declare that to "qualify" for a free subscription.

In other words, the quality of the magazine "reach" is very important.  Is this a magazine that the top decision-maker will actually (A) receive, (B) read, or at least browse through quickly, and (C) regard as a useful resource when actively planning future projects?  Is the magazine website easy to use for quick research into the current interests of the executive?  Does it take more than 60 seconds, or a lot of pages, to find what they are seeking?  Similarly, is the magazine designed to make it easy to find what really interests them, and additional sources of information?  If not, do the circulation statistics really matter?  Is one actually reaching the key executive, attracting attention, and arousing interest?

Magazine reach is potentially useful, but just as one part of a larger marketing strategy.  Similarly, large trade shows and association events may attract thousands of attendees, but even a prominent exhibitor is unlikely to personally meet more than a few hundred over a few days, and only a small fraction of those may be good "leads" or serious prospects.

It may still be worth doing, but the point is that the cost per job created tends to be fairly high through such channels, even if it seems justifiable by the value of the projects.  One generally has to do the same thing repeatedly for years before getting noticed by many of the targeted attendees, because they are typically at such events for other purposes - and it is therefore difficult to attract their attention and arouse interest or be memorable.

As with advertising campaigns, the nature of such event work therefore tends to be more of a "brand" campaign to "show the flag" and let people in a target industry or group know that the area is interested in their business, or already has a relevant cluster of businesses in that market.  The results in terms of short-term lead generation activity, after one further qualifies the "leads" from an event, may be small.  In short, some events are like buying a different type of lottery ticket for a different price.  Being an exhibitor is not a marketing strategy, just as buying an isolated ad or two is not a marketing strategy.  It is just one type of marketing activity which can be effective - or not - as part of a marketing strategy.

Relating marketing costs to lead generation expectations and results

In summary, different parts of the marketing mix have different costs per real job created.

The cost of magazine ads per job created can be very misleading if one divides the campaign cost by all of the new jobs created in a state - including the 80% which might happen from local business retention and expansion projects without any ads at all.  There is some baseline level of inward investment in any area which might be attracted with no advertising campaign at all.  If advertising is relevant to the marketing strategy of an area, then it is worth doing consistently and well, rather than infrequently with false hopes.

The investment in advertising and other marketing work is generally supposed to help attract major, multi-million dollar investment commitments that would not otherwise happen, so it needs to be measured against that expected change in baseline performance rather than against everything that happens in a state.  In short, what would happen with no advertising or promotional events at all?  What will influence an executive?  Is there an identifiable change in performance over time which can be confidently attributed to such marketing investments?  Short-term reader responses are not a good metric for ad effectiveness.

Once again, good ad campaigns can be quite justifiable and valuable, and may even turn up some good short-term prospects, but direct lead generation is not their primary function.  Magazine publishers are not location advisors or site consultants despite various claims to the contrary.  They publish interesting articles and ads, and if they do it well, their subscribers may actually look at such content and renew.  They don't work as professional advisors supporting the project plans of individual executives.

Top executives don't pick their locations for multi-million dollar strategic investment commitments by filling in reader response bingo cards or website forms, especially if confidentiality is important.  They turn to trusted, independent professional business advisors - not articles by journalists or junior freelance writers without much real project experience in this field who are just trying to fill space in a magazine with something that may actually be of far more interest to their advertisers than to their free subscribers.  No matter how good or interesting and genuinely helpful the articles may be, that still isn't how executives make their choices for strategic investments.  Over time, favorable PR and advertising can be influential, but it's not a direct lead generation process that is actively used by investors to make choices at the time of their investment decision.

Good leads are found through personal contact with the responsible executives.  They are qualified for project potential by listening and talking to them about their own needs and strategies.  Ad responses may be an easy way for a few readers to gather information and explore their interests, but when top executives start planning multi-million dollar investment commitments of strategic importance to the success of their company (and their own careers), magazine articles and ads are not what they rely upon to plan their projects.

Free magazines may "reach" them, but not as professional business advisors, and it is sheer arrogance by some publishers in this niche to not recognize that difference.  Their publications may be influential over time at shaping perceptions among readers, but they are not site selection consultants or business advisors.  They are publishers.  Good publishers focus on what they do well - to repeatedly reach and maintain the interest of a specific target audience which PR content and advertising may influence over time.  Direct lead generation marketing work and site selection consulting is not really their specialty.

Executives may browse niche magazines for general background information, but they are unlikely to search through all the ads and choose who to call, or ask the publisher about what they should do to plan their own project.  They may visit some of the websites which already seem relevant to their interests, but at the end of the day the whole process comes down to personal contact and whether an area or service meets their current needs or not.  Since their needs change over time, a few small ads aren't likely to have much impact to get their attention and arouse interest in an area which wasn't already of interest anyway.

If they were already interested in an area, they could easily find relevant information within seconds with a Google or other search with no magazine ads at all.  Now, more than ever, the main function of good advertising in this niche is developing a strong "location brand" so that, when the time comes to do a location search, the area will be favorably perceived.

UK Example : A macro perspective on lead generation costs per job

A country like the UK with roughly 60 million people may report 60,000+ new jobs per year, but perhaps only 6,000 of that really comes from inward investment, with the rest coming from business retention and expansion, including lots of small projects rather than major ones which are the main focus of investment attraction marketing efforts.

Of that hypothetical 6,000, perhaps 2 - 3,000 might happen with no marketing program at all at the national level, by just having a very responsive network of regional and local agencies to help companies with their plans in the UK, or because it is a fundamentally attractive place to do business even if nobody is actively promoting it as such. 

The hypothesis that a national marketing program is more effective than a regional one is not clearly proven by UK results, so there is duplication of effort from the local to regional and national levels.  At the end of the day, all investments are local.  The competition between countries for projects boils down to competition between specific local areas.  National investment promotion agencies can be helpful, but one should think of this business as an inverted pyramid rather than a top-down hierarchy from national to regional to local levels.

In other words, national and regional work supports the results achieved by local leaders, as opposed to all the local levels supporting a pyramid of regional and national organizations, because the business deals are done locally with whatever regional or national help is applicable.  As the United States demonstrates, by having no national investment promotion agency at all, it is wrong-headed to think that the national level is the most important, even though national policies and actions matter because they support the local business environment.  National bureaucracies tend to misperceive who is supporting whom, and whose performance is most critical to the competition of one area against another, while also facing the political problem of not wanting to be perceived as favoring one area over others within the country.  The same issue arises in states and regions.  The competition for investment is local, so it needs to be driven by local leaders with higher-level support.  Political leaders can be influential in working out a winning deal (governors, etc.), but only if the local situation clearly fits the needs of the business well.  That comes first.

The millions that the UK spends on field offices in the USA and elsewhere in the world, along with a wide range of marketing investments (ads, events, PR campaigns, networking, etc.), probably adds up easily to an investment of thousands of dollars per new job attracted through such efforts.  It is not clear, however, how much would happen without them.  Once again, the United States has no such investment promotion program at all, so the question is how much investment into the UK is actually influenced by such promotional efforts.

That is in addition to the value of all the staff time, travel, and support overheads at the UK national, regional, and local levels (plus any direct incentives to the investors) to win the project after a good lead is found.  A lot of time and resources are wasted chasing projects which predictably are not won, but which show that the various marketing staff and other bureaucrats are staying very busy.  Many projects are actually found through contacts at the regional or local level, rather than through national marketing representatives, even though at some point the project plans may involve the national officials for their support role in a deal.

In this context, the real total cost per job created (not just lead generation marketing costs) can be staggering relative to the annual salary of the new jobs created.  It may still be a good investment over time, because that is an investment up front to win jobs and other social benefits - including tax flows - which may endure for many years and grow to create even more value over time if the new companies are successful.  New jobs may also stimulate the creation of other jobs, directly or indirectly, and bring other social benefits.

From a net present value perspective, the benefits of winning a project accrue over more than one year, so the total costs per job created may be more justifiable than they appear at first glance.  The point, however, is that the total cost of investment attraction work can easily add up to thousands of dollars per job as a social commitment at all levels - national, regional and local - to attract new business to an area.  Few economic development organizations measure and report lead generation costs and performance in a reliable, consistent, and comparable way.  There's a lot of fuzzy math rather than hard data.

The cost of our services

Our response-oriented services to highlight the benefits of an area range from $500 per year to $1000 per month.  This provides many ways for small communities to benefit from our work in the same manner as the largest, while keeping the cost down by design.  We now attract website visits at a pace of more than 500,000 per year, typically in response to their Google searches.

We can also do short term projects, such as to arrange and report on site selection consultant familiarization visits to an area, or to help with promotional work and the scheduling of introductory meetings at events.  This includes other services to help organize B2B networking events.

Our proactive targeted marketing services range from $1000 to $10,000 per month, or more for custom projects according to the time and resources required.

We can also do some types of marketing work on a base plus success fee basis to reward performance such as well-qualified introductory referrals, "inward visits", and actual jobs created by projects.  This ties our fees directly to results.  (Try getting an ad agency or PR firm to do that, or an advertising channel such as a magazine, or even a good telemarketing firm or event organizer to take the risk of working on that basis.)  In short, if we are not confident of our ability to deliver the results you expect, we won't enter into such deals.  We aren't in business to waste your money.

Contact us directly to discuss your marketing plans, and what we can do for you.

Our business plan and structure as we grow to scale

Our 2006-2010 business plan is to develop independent working relationships with networks of executives, professional advisors, and communities through regional offices for project referrals.

The gist of the plan is to develop a team of professionals who can provide well-qualified project referrals as an ongoing service for our clients.  The role of the team is basically to be readily available and well-known to business leaders and professionals throughout their region through personal contact, local networking activities, and targeted marketing work within each region and industry of interest to those who support our work.

For example, many areas and service providers are "targeting" the same groups of companies, whether for the same or different services in this niche market.  Instead of pushing such areas or services directly on an exclusive basis at high cost, our shared marketing role is more like a concierge - finding out what the executives want, and then introducing the relevant contacts.  We can do exclusive market research and personal contact work to arrange valuable introductions, but this generally takes more time and resources to reliably achieve the desired results.

This business was developed by Bruce Donnelly (biographic profile) after a decade of experience at regional investment promotion and the sale of site selection consulting projects across North America for PricewaterhouseCoopers.

This is a unique marketplace for business location research

There is typically only one "insertion" in our direct-response work to promote an area through this website for a year, unlike monthly magazine ads or multiple events each lasting a few days.  Useful information about an area is shared, and then simply updated as appropriate to keep it timely.  Unlike a piece of paper, it is easy to find at any time.

That typically involves work to highlight an area in many ways, on various relevant pages, but we charge for the work involved to share content that will help to attract attention and arouse interest, rather than according to our market reach or the number of times that an ad image is displayed on paper to somebody or attracts a click-through on a website.  This is not advertising.  Our work is more analogous to point-of-sale merchandising and personal assistance to help buyers find what they are seeking in a convenient store.  Our focus is to share useful local market knowledge and contacts in a globally consistent way so that it is easy for executives and advisors to find what they are seeking, and quickly recognize whether an unfamiliar business location or service may be relevant to their project plans.

It takes only a few days of work together to share better information about an area, and we don't have the high costs to produce and distribute a glossy magazine.  We can focus our work on getting to know your area better, and then openly share that knowledge all year, and update it as appropriate.  We don't just print an ad once, and then charge to include it again and again.

If you just want to share your display ads for a year through our website, there are very inexpensive options to do that, because it is easy to do within hours.  We don't charge thousands of dollars for that, and one benefit of our Ad Recall feature is that your ads can then be found by their text content through search engines at any time, and by thumbnail images in our relevant directories.

We share useful content to help executives and advisors discover why an area or service may be relevant to their interests.  They can easily visit your website for details or contact you directly.  We just need to periodically update or improve that content as appropriate, including our analysis of what seems to be working or not to attract the attention of visitors, arouse interest, and develop well-qualified referrals or direct-response contact.

The result is that, as shown above, our response-oriented lead generation work usually costs less per year than a single magazine ad insert in one publication.  For anything larger than that, our focus shifts to proactive, personal contact work among top executives to identify and develop relevant working relationships for major capital investment projects.

Our services have been designed to drive down the cost per new job created in this market.  Our analysis suggests that, even if they don't measure and report it this way, the cost of lead generation for many areas is actually several thousand dollars per new job created, and even some of the most successful area would work out to more than $500.  Our goal is for our proactive marketing work (direct personal contact with relevant executives) to deliver results at less than $500 per job created, and for our response-oriented website work to drive those costs down to well below $100 per new job created.

Our focus is on project referral work, not producing a magazine

Unlike magazines, our focus is on direct contact with executives about their future project plans and support needs, and on the capabilities of professional service providers and local communities to meet those needs.  This is a professional service to help executives find what they are seeking.  We are not a publisher distributing a magazine full of articles to a base of free subscribers.

Similarly, events such as trade shows, professional associations, and other networking or promotional events have value as part of the total marketing mix.  We can do things to be supportive of event marketing work even though we do not compete with such services.

Our response-oriented work is inexpensive because it doesn't require a lot of time and resources.  We already built up the websites through a major research and development investment up front to support global referral work, and continuously improve them.  Our proactive work is more expensive because of the time it takes to personally identify and reach top executives about their project interests, which may turn out to not involve any serious interest in a particular business location or service no matter how well researched and "targeted" that personal contact work may be.

As indicated above, an area can easily spend $10,000 - $50,000 on a relatively small ad campaign or event work such as trade shows and association meetings with little assurance that anything of value will come out of it.  Once again, the real total cost of ads and events adds up quickly, and the full value of internal staff time is often overlooked.

Large ad campaigns or PR initiatives in this niche market can easily exceed $100,000 or $250,000, and some are vastly higher even though the target market is relatively small - such as the example of 2000 major projects per year in the US market, for which any given area will just be competing for a small share of them, such as less than 100 which are "mobile" and very relevant to their region.

In other words, if one spends $250,000 or more on a mix of advertising, events, PR work, direct mail, promotional publications, website improvements, and other marketing initiatives, that is all still targeting the same relevant share of those 2000 or so projects, such as perhaps 100 or less, and one won't win far more of the viable prospects by simply spending much more on an ad campaign.  At some point, more ads deliver little added value.

As a niche market with a limited number of projects per year, one hits a point of diminishing returns at some level.  A critical factor is to consistently win more of what one finds, especially because such success may then get noticed and help to attract more interest among more investors.

Companies are not going to do more capital investment projects because development agencies do more advertising.  It is not a consumer market in which one can stimulate additional demand.  This is a market in which states and local areas are competing for a larger than usual share of whatever volume of projects the national economy makes justifiable for growing companies each year.

The macro perspective on lead generation costs per job

If it costs $250,000 per year to win 500 more new jobs than are reliably achieved otherwise, then that is a cost of $500 per new job created, which is easily justifiable by the high value of such jobs to the community over time.  On the other hand, if that $250,000 produces only 100 extra jobs, then the $2500 / job cost of lead generation marketing activities (aside from all the other costs to win such projects) is much higher, but perhaps still quite justifiable given the long-term impact. 

After all, how much are 100 good new jobs worth to a community over time?  It is, in effect, an investment up front to achieve that desired outcome over time, so a net present value analysis of the local value of projects over a period such as 10 years can provide a useful perspective.  Even the cost of doing nothing (such as having 100 people needlessly unemployed) may be a factor.

That is really a choice for each state and community to make, but the obvious point is that states are actually investing millions of dollars per year when you add up the state, regional, city, county, and local organizations.  Their combined spending on advertising and events in this market easily exceeds $20 million per year, plus the value of the time, travel, and resources of literally thousands of economic development professionals who invest part of their time on lead generation work as a very difficult and frustrating "needle in a haystack" marketing challenge for any single location.

There is also the value of internal work.  If 1000 economic development professionals spend only 50 of their work days per year (roughly 20% of their time) on lead generation work, with the rest of their time devoted to other priorities, that adds up to 50,000 days of work, or roughly 200 man-years.

In reality, there are probably far more professionals spending even more time than this on lead generation activities, so that should be an extremely conservative estimate.  To illustrate, if 500 representatives spend 3 days at an event such as CoreNet Global summits twice per year, plus 3 days on preparatory and follow-up work, that's already 6000 man-days or 24 man-years.  Add to that all the time spent attending or exhibiting at trade shows or organizing and attending events.  It is not difficult to conclude that, in total, well over 200 man years are spent on lead generation work.

If the total cost per person for the people who are doing such work is only $150,000 on average (salary plus all office overheads, travel, taxes, benefits, promotional materials to support lead generation, administrative staff support, etc.), those 200+ man-years add up to $30+ million more - beyond the $20+ million spent on advertising and events each year.  In reality, hundreds of man years of work are probably invested in such lead generation activities.

From a simple macro perspective, that means the states which actively pursue major projects are probably spending well over $1 million per year on average just for their marketing lead generation costs - before considering the higher cost of everything else which they must do to win what they are finding, plus business retention and expansion work or other local services they provide.  Note that this lead generation cost also excludes all the time and money that areas spend to develop their targeted marketing strategies and things such as websites and promotional materials.  This analysis just focuses on the direct costs of work to develop well-qualified project leads for an area.

If they are all competing for a pool of perhaps 2000 major "mobile" projects per year which create an average of 75+ jobs, then that works out to $50+ million being spent to develop leads for 150,000 jobs, or roughly $330+ per job created just for lead generation activities.  In reality, each state may only be competing actively for 100 or so of those projects, so the value of a lead for a good prospect which they wouldn't otherwise find at an early stage of planning can be much higher.

If there are more projects and jobs, then the average cost per job may be even lower.  If the $50 million can be driven down by millions of dollars and achieve largely the same outcome, however, then the lead generation cost per job created should go down significantly.

The professional service provider side of this market

The analysis here focuses on marketing investments in lead generation work among economic development organizations.

It is worth noting that site selection consultants rarely invest in advertising, trade shows, or other types of event marketing work other than perhaps to attend for networking purposes or to appear as speakers, preferably with their expenses paid.  It's interesting that so many areas "target" the site consultants as a source of referrals when few consultants can afford to do much marketing work, or serve more than a few client projects per year.  They work on some very good projects, but they probably get more leads from their contacts among development agencies than vice versa.

Some of the other service providers, such as CRE brokers and engineering / construction firms, do invest in advertising and events.  They are generally far larger in scale, and can therefore afford to make such marketing investments, often including support of local development agencies as a potential source of valuable leads.

Most site selection consulting practices are small, have very limited resources (even if they are a part of much larger firms), and handle few projects per year at a relatively low fee level.  They can't really afford to spend much on lead generation work other than the value of their own time as they network among past clients and anyone they know who might have useful contacts.  That is usually sufficient to find enough work to sustain but not significantly grow their staff.  In a recession, there is typically high turnover as staff cuts are made quickly for lack of projects.  In a recovery, there is a lag to hire and develop enough trained professionals, so there may be significantly more potential demand than they can reach.  They soon become too busy to look for many new clients.

In any case, the point is that development agencies are not the only organizations which are motivated to reach executives at an early stage of capital investment project plans.  Brokers, architects, engineers, construction firms, law firms, banks, tax advisors, HR service providers, and other professionals are all motivated to some degree to seek new clients as companies grow.  Unlike site selection consultants, they may derive higher value through larger services and ongoing working relationships.  That's why they invest more in marketing than site selection consultants, and serve far more projects per year through larger networks of existing business relationships.

If one analyzes how much these organizations spend on lead generation marketing activities related to this niche market, the simple point is that together they probably spend far more than all the development agencies put together, in part because of the very high value of the time of the top professionals who lead their marketing work.  Even if they spend little on advertising or events, as in the case of the site selection consultants, their cost to develop well-qualified prospects for new client relationships is very high, but the potential value of such relationships is also very high.

In effect, that high cost of sales gets passed on to their clients through the fee levels they charge for their services.  Site selection consultants are at a disadvantage in that regard, because their work is mainly for one project at a time and only lasts for a few months, as opposed to services which involve an ongoing working relationship with a new client of high value for many years.  The present value of finding a new site selection consulting client is typically very limited.

As a simple example, one need only compare the fee value to a CRE brokerage firm of closing a deal on the sale of a 100,000 sq ft building, or the value to an engineering and construction firm to design and build such a facility, to the fees earned by a site selection consultant.  If there is any doubt about this, think about how many site selection consultants there are in North America, and compare that to the number of CRE brokers.  Site selection consulting work just reaches a very small (but valuable) share of the total market as companies expand or relocate their operations.  Brokers, for example, may earn a lot from local lease renewals involving no space changes at all.

This business was designed to support the lead generation interests of both economic development organizations and professional service providers by creating an independent process to find the executives who would welcome help with their project plans, and provide well-qualified referrals.  That can drive down the high cost of lead generation work for both groups and be more responsive to the needs of executives as a more efficient distribution channel for such service providers.

This cost-benefit analysis guides our business plan and client work

In short, it should not take 200+ man years of work by 1000+ economic development professionals at an estimated cost of $30+ million, plus $20+ million in advertising and event work, to find 2000 projects per year and refer them to the relevant contacts.

Our estimate is that 20 - 40 top professionals in key cities and industry sectors should be able to consistently find and refer a very high percentage of all the "mobile" projects per year at an early stage of planning.  The gist of our business plan is to build up such a professional team with very strong networks of contacts and personal relationships as trusted advisors to many executives, and drive down the lead generation marketing costs for participating areas over time.

That's why our goal to drive the cost per well qualified lead down to less than $100 per job, starting with a goal of $500 that should already be far below the total costs for most areas, and why many of our services to small areas are designed to cost only $1000 - $5000 per year in recognition of their greater challenge at finding well-qualified prospects.

We will, in short, focus on doing larger work for those areas where the expected results readily justify it.  Small areas may attract new projects infrequently, so they should spend less on proactive lead generation work but still be just as fast and easy to find - whenever they are relevant to the needs of an investor - as the largest areas which spend a lot on advertising, events, and other marketing activities every year.  The larger areas may spend more to achieve more, but areas of all sizes should benefit.  The lead generation cost per job created should be justifiable for their own situation, as it is obviously much harder to find good prospects for some areas than others.

Our analysis suggests that many areas spend very little at all on lead generation work other than the hidden (and high) cost of the staff time they spend on it.  They expect dismal results from the high costs of advertising or event work.  Even if they are just sending out some direct mail or e-mail newsletters to targeted databases, or attending networking events and meetings with consultants, or making phone calls to try to arrange introductory meetings with targeted executives, that work all takes time and money.  It is a common mistake to not measure the value of their own time and all the related overheads and expenses which may be buried in separate line items in the budget.

We identified more than 1000 US development agencies which have invested in advertising and events in the last few years, and we estimated the value of all such spending (total ad pages, exhibits, sponsorships, etc.).  We are also the recipient each month of a huge number of promotional mailings and e-mails.

Our analysis therefore reflects far more research work over recent years than is shared here.

Bottom line : How do your own marketing cost per job metrics compare?

The point is that those areas which proactively seek projects are, as best we can estimate through both macro analysis as well as reported budget and performance analysis for a variety of areas, spending far more than $500 per job created today.  Some areas are investing thousands per job.  It is even higher if one looks at how many projects were actually identified through lead generation activities (as would be the case to be comparable to our work seeking what isn't found otherwise).

Reliable data rather than anecdotal evidence is very hard to find.  A cynic might infer that such performance data is not shared because it would be easy to criticize, or deemed unjustifiable.  Our perception is that non-profits rarely measure marketing performance as reliably as profit-motivated businesses.  The value of lead generation work is hard to measure, easily misperceived, and not a popular metric to discuss openly, particularly because this is a long-term market involving major investment cycles so that lead generation performance is hard to manage for consistent results.

In some areas the total lead generation cost easily adds up to thousands of dollars per job, which may still be quite justifiable if the local need is great and the resources are available.  In summary, the averages reflect many places spending little beyond internal work, while a small number of places spend a lot of money even if they may not achieve proportionately above average results.

In some areas the cost appears at first glance to be lower, because the number of jobs is inflated by adding expansion projects rather than those which needed to be found through lead generation marketing work, and by neglecting to include many of the internal costs related to lead generation work.  The analysis can also be distorted because multiple organizations are involved, so that the real cost per job created needs to reflect their total rather than separate lead generation costs.

In conclusion, this research was an initial attempt to quantify the value of lead generation work per job created through proactive economic development marketing initiatives, and we welcome comments and suggestions according to the experiences of specific states and local areas.

Our best estimate is that US development agencies are spending well over $50 million per year on lead generation marketing activities which could be outperformed for $10 million or less by working together, with a large part of the cost covered by the value of this to professional service providers.  That is the basic premise of our work - to drive down lead generation costs, such as from an average level estimated at well over $500 per job (and many times more than that in some areas) to $100 per job or less.  What is really critical for areas is to compete for relevant projects once they are identified, preferably at an early stage of planning, rather than to duplicate lead generation marketing efforts and expenditures.  Our work can free valuable time to focus on that priority.


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