Why an hourly rate model drives better results, protects your brand and long-term growth.

Article published: Thursday, April 3, 2025

If you are talking to multiple telemarketing providers, you’ll quickly find there are a real mix of pricing models. We often find ourselves in discussion with prospective customers, looking at the pros and cons of a cost-per-lead (CPL) versus an hourly rate model in driving sustainable business growth. It is a subject we have written about before and one covered in the FAQs on our pricing page.

Of course, each requirement is unique and there are some scenarios where cost-per-lead is the right choice. CPL can be effective for businesses with well-defined, narrow target audiences and clear qualification criteria, particularly when promoting transactional propositions. For example, simpler, lower-cost products or services that require minimal customer education, consultation, or long-term engagement—such as utility switches. In these scenarios, the lead quality is easier to maintain because prospects are typically ready to make quick decisions and need less nurturing to convert.

In contrast, for more complex propositions—such as high-value B2B offerings, consultative services, or products with long sales cycles—the CPL model is less suitable. These require deeper engagement, education, and relationship-building over time. In such cases, the focus shifts to nurturing and guiding prospects through the decision-making process, which goes beyond simple lead generation. The short-term nature of cost-per-lead can hinder the careful nurturing required for these complex sales, where consultative selling is key.

Based on our experience over 35 years, however, we believe an hourly rate model delivers the best value for our customers. While CPL may appeal to those looking to mitigate upfront marketing costs and focus on immediate lead generation, it comes with significant downsides, particularly in the context of telemarketing.

What are the potential pitfalls of a CPL model?

1. Short-term mindset: CPL pricing encourages a focus on quick wins rather than a long-term strategy. This approach may work against sustainable business growth, as it prioritises immediate lead generation over nurturing prospects and building sustainable pipeline.

2. Misalignment of goals: A CPL model can create a misalignment between the agency's objectives (generating quick wins to meet short-term revenue goals) and the client's broader goal of building long-term relationships and nurturing future pipeline. This disconnect can undermine the effectiveness of the brand’s overall strategy.

3. Quality versus quantity trade-off: Cost-per-lead incentivises agencies to prioritise generating a high volume of leads over ensuring the quality of those leads. Since the agency is paid based on the number of leads, they may focus on hitting the numbers without thoroughly qualifying the relevance, intent, or readiness of the leads. This often results in low-quality leads that may not convert, wasting time and resources for the client and ultimately reducing the effectiveness of the campaign.

4. Limited value beyond leads: Agencies under a CPL model focus only on delivering leads rather than offering broader insights from valuable conversations with key decision makers, such as sector insights, proposition feedback, updated customer data and intelligence. This reduces the strategic value of the partnership, as the agency has no incentive to offer deeper insights that could enhance future campaigns.

5. Unsustainable outreach: Agencies working to a CPL model may employ aggressive, high-volume outreach tactics to generate leads quickly, which results in "burning through" a contact list in a short period. Rather than driving sustainable business growth, this approach can exhaust the audience prematurely and potentially alienate future potential prospects.

6. Limited multichannel strategy: Effective telemarketing today involves integrating phone outreach with a broader multichannel strategy. The CPL model may limit agencies to focusing only on immediate lead generation via phone, rather than using a thoughtful cadence and multiple touchpoints for sustainable outreach.

7. Lack of audience nurturing: Cost-per-lead does not incentivise long-term engagement with prospects. Instead of developing a relationship and converting leads when they are ready, the focus is on generating immediate leads, which sacrifices potential long-term business growth. As the famous quote by Katherine Barchetti highlights, the long-term value of a customer relationship is much greater than that of a single sale.

8. Lack of agility and flexibility: CPL models limit the agency's flexibility to adapt and optimise the campaign based on changing needs. For example, if a client wants to adjust lead criteria, test new audiences, or refine targeting, it often requires renegotiation, slowing down the process and hindering optimisation efforts.

9. Performance improvement over time: The quality of telemarketing lead generation often improves with a strong client-agency partnership over time. However, cost-per-lead pricing doesn't account for this gradual improvement. Creating a solid pipeline is the key to unlocking the potential of any telemarketing campaign. This typically requires a minimum of six weeks to build in order to warm data, nurture interest, refine messaging and test assumptions. It is generally only in the second or third month when lessons have been incorporated that a campaign reaches its peak performance.

10. Higher costs due to "risk premium": Agencies tend to add a "risk premium" to CPL contracts to account for unpredictable performance, which ultimately increases the buyer's effective CPL. This drives up costs and reduces the overall return on investment (ROI) for the client.

By focusing on short-term gains, cost-per-lead often sacrifices long-term audience engagement and quality. In telemarketing it can also promote aggressive, short-term tactics that risk damaging a brand’s reputation and undermining long-term strategy. It constrains both the client and agency, raising costs, limiting flexibility, and preventing deeper collaboration needed for long-term success.

At TTMC, we believe in fostering long-term partnerships with our clients, which is why we advocate for an hourly rate model. This approach enables us to focus on nurturing relationships, delivering high-quality insights, and driving long-term business growth. By working this way, we ensure that our goals align with our client’s strategy and create value far beyond just generating leads.