leads
Leads Alone Don’t Determine a Marketing Program’s Success
Many marketing organizations use lead volume as the primary way to evaluate program effectiveness. This metric, however, is too limiting. Why? Because focusing on lead-centric metrics may work against you if you don’t look further into the buying process.
While one program may produce more leads than another at a lower cost and appear more efficient, the true measure of effectiveness is how many of those leads can be converted to the next stage in the buying process.
Even if a program is more expensive but yields a higher conversion rate, it is actually more effective. By evaluating a marketing program only in terms of qualified leads generated and cost, you risk eliminating programs that may result in a higher conversion rate. It, therefore, makes sense to move beyond the lead as the key marketing metric and instead use metrics tied to something more relevant, such as consumption, purchase, and/or revenue.
First Glance Is Misleading
Imagine you have two new customer acquisition programs in play: Program Excalibur produces 100 qualified leads, and Program Camelot produces 50 qualified leads.
At first glance, it might appear that based on volume or the quantity of qualified leads, that Excalibur is the better program. For the moment, let’s set aside whether each program met its performance target and explore why tracking just the number of qualified leads may take you down the wrong path by pursuing Excalibur and terminating Camelot.
Most marketers would agree that cost is an important metric, so let’s add cost to the illustration. The cost per lead for Camelot is $5 per lead, and it is $15 per lead for Excalibur. Again, ignoring for the time being whether these costs were within the target zone, it might seem that Camelot is worth further investment because while it didn’t produce as many leads, it produced quality leads less expensively. Do we have enough to make the decision? Maybe. But what if we added conversation rate as a metric to the equation?
Of the 100 qualified leads produced by Excalibur, 25 (25%) convert to sales-accepted opportunities. And for Camelot, only 10 (20%) convert. To keep things simple, let’s say both programs have the same close rate of 10% (two deals for Excalibur and one deal for Camelot). With this additional color, Excalibur once again looks like the champ.
What if we add velocity to the equation? Upon analysis we learn that it took only 15 days for Camelot leads to convert to prospect stage, and it took another 45 days on average to convert those prospects to customers. But for Excalibur leads, it took 30 days on average to move them to the prospect stage and 90 days on average to move to the customer stage. This means that the time and cost to close is less for Camelot deals than Excalibur deals. Now Camelot is back in the game.
Let’s weave in another bit of information into the equation. The average order value for the Camelot deals is $50,000, while the average order value for the Excalibur deals is $75,000. Excalibur once again is back on top.
Lastly, we can consider the performance targets that were set for each program. There were 200 qualified leads from Excalibur at $10 per lead with a 30% conversion rate, and there were 50 qualified leads from Camelot at $5 per lead with a 30% conversion rate. If we can improve the conversion rate for Camelot deals and understand why the average order is lower, you can see that Camelot has the potential to outperform Excalibur and is worth investing in. However, if we had made our decision solely based on volume of leads, we might have prematurely dismissed Camelot.
We can use the chart below to illustrate the example. This example identifies several important pipeline metrics beyond lead volume. Cost per lead, lead velocity, average lead value, time to close, and win rate are all important metrics for analyzing the success of programs and making investment decisions.
In addition, the performance targets set in advance provide valuable insight because they reflect how well marketing executed the program. As you evaluate marketing’s contribution to the opportunity pipeline, you should include these metrics in the analysis.
As the above scenario illustrates, cost per lead, lead volume, and lead quality together can be helpful metrics. But alone they are insufficient to evaluate the success of marketing initiatives. As you create your marketing metrics associated with the customer acquisition process, other metrics such as marketing contribution to the pipeline volume, the rate at which marketing generated opportunities move through the pipeline and convert to wins, and marketing’s contribution to pipeline value may serve you better.
Getting Sales to Accept More Qualified Leads
Would you like to reduce the number of qualified leads passed on by marketing that sales rejects? It’s a relatively easy disconnect to resolve. All it takes is marketing and sales collaborating around the definition of the various stages in the opportunity pipeline and a scoring methodology.
If you want to get serious about opportunity management, just follow these three steps:
1. Define Each Stage in the Buying Pipeline.
When marketing, sales, and management all speak the same language regarding opportunities in the pipeline, everyone can work together to nurture those opportunities most promising from a sales and revenue perspective. Therefore, it’s important to create a glossary of standard terms for what your company considers a contact, suspect, lead, qualified lead, prospect, and so forth.
The best way to do this is to outline the customer buying process based on observable behaviors, then mapping these to the appropriate opportunity stage. In this first step you will do your best to identify the behaviors of your customer buying process you can observe. But of course, you will want to validate this truly is their process.
To illustrate this idea, let’s suppose based on experience, research and customer input, your customers’ buying process includes the following behaviors:
• Registering for a Webinar.
• Subscribing to the company newsletter.
• Downloading a white paper.
• Downloading product literature.
• Participating in a live demo.
• Requesting or scheduling a meeting with their decision-maker.
• Requesting pricing information.
• Offering buying criteria.
• Providing budget and timing information.
• Requesting or participating in a product trial.
• Contacting references.
• Requesting an RFP.
• Conducting an internal review of all RFPs.
• Holding meetings with the top 1 to 2 suppliers selected from the RFP process.
Again, based on experience and research, determine which behaviors go into which stage of the pipeline. Using this example, we might map the behaviors below as follows:
• Registering for a Webinar and subscribing to the company newsletter represent the contact stage.
• Participating in a live demo and requesting a product sample represent the suspect stage.
• Requesting pricing information and scheduling an appointment with the decisionmaker represent the lead stage.
• Providing buying criteria, requesting to participate in a product trial, and requesting an RFP go into the qualified lead stage.
• Contacting references and holding meetings with the RFP finalists might represent the prospect stage.
While these most likely exemplify just a few behaviors in the buying process, hopefully you grasp the main idea: By using observable behaviors and mapping them to the pipeline, there is much less ambiguity. Once you complete and validate the behaviors and stages, create and publish an opportunity pipeline glossary that documents how your company defines each stage. This will help avoid confusion later.
2. Establish Ideal Behavioral and Fit Criteria.
Now that you’ve completed the first step, you can use the process to establish the criteria for the ideal opportunity. We recommend working from two key categories: the buying behaviors and fit. The latter helps determine whether the opportunity would be an ideal profitable customer for your organization.
Using all the behaviors you identified, select those that would suggest the opportunity is ready to buy. Then make a list of criteria for your fit category. For example, the opportunity is in a target vertical where you have domain expertise. Or your product is a “plug and play” way for them to solve their problem.
Now establish your threshold criteria. Select those criterion that serve as the gate for passing an opportunity to sales.
3. Develop an Opportunity Scoring Methodology.
A key part of your qualification should be the opportunity score. The concept of opportunity or lead scoring is relatively simple. Essentially, you assign points based on how well an opportunity meets each of your qualification criteria. To create your scoring method, assign points to all the buying behaviors, as well as the fit criteria. Then create some ranges to help with the granularity. This way you can assess an opportunity both in terms of the conversion potential and fit. To illustrate this idea let’s say we score some of the behaviors and fit as follows:
Fit
• In a target vertical where you have domain expertise: five points.
• In a target vertical where you don’t have domain expertise: three points.
• Not in a target vertical: no points.
• Your product is ideally suited to solve their problem: five points.
• Your product will solve their problem with some customization: three points.
• Your product will not solve their problem without a major investment on your part: no points.
Behaviors
• Meeting held with decision-maker: five points.
• Meeting held with recommender: three points.
• Meeting held with influencer: one point.
• Provided product specification and buying criteria: five points.
• Indicated they are funded: five points.
• Indicated budget is approved: three points.
• Contacted references: five points.
• Requested references: one point.
• Participated in on-site demo: five points.
• Participated in online demo: one point.
You will need to complete this point assignment process for all of the behaviors and fit criteria. As part of your scoring method you will also want to consider the volume of actions exhibited by the opportunity within a period of time as part of your criteria.
Establish your point criteria and volume thresholds—that is, what is the minimum number of points, minimum criteria, and minimum number of action an opportunity needs to meet in order to pass the opportunity to sales? You now have three components that comprise what constitutes a sales-worthy qualified lead: point, volume and criteria thresholds.
Sales agrees to accept opportunities that meet these thresholds and marketing agrees to only forward those opportunities. So for example, qualified leads must be at least 20 points and must include (at a minimum) the behaviors indicating they are funded, participated in an on-site demo, and are in a target vertical.
Now, score each opportunity. As a team, discuss what to do with those opportunities at various stages in the pipeline that don’t meet the thresholds, so they are appropriately nurtured.
Keep in mind, lead scores should evolve as you see changes in customer buying behavior. This will help optimize the accuracy of the lead score and your marketing efforts.
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