B2B sales & marketing optimisation: Measure what matters

19th Sep 2012

Dan McDade unlocks the secrets of the optimisation process in three steps. In part one, he examined aligning market, lead definition and message. In this second article, he explores measurement of the progression of leads through the sales process.

In average companies, sales reps close about one out of five leads they qualify. Note that, on average, sales reps only qualify about one third of the leads they are provided—so close rates measured against delivered leads are often less than 10% in average companies. 

Optimised companies close just a little less than one third of the leads they qualify— and they qualify roughly half of the leads they are provided. Close rates for optimised companies are close to 150% of those in average companies.

How can optimised companies do so much better than average companies? It’s simple—they measure what matters.

Here’s a corresponding case in point: This real life example is classic—and repeated over and over again in most companies. Over the past year marketing has generated thousands of “leads” from many sources with the most preferred source called Downloads from Content Syndicator—see table Lead Source Analysis.

The team was thrilled with their results. Sales executives, however, were not thrilled. During the year, marketing spent a lot of money driving thousands of so-called leads—while sales reported that they got absolutely nothing of value from marketing. A deeper dive pointed to the fact that the relatively low cost per lead was offset by the relatively poor quality of the leads as indicated both by the percent of qualified leads generated, 1.28% as a percent of raw leads, and the overall percent of qualified companies.

In fact, proactive outbound prospecting produced the most cost-effective method of highly qualified sales opportunities while other sources cost substantially more—as much as two to nine times more.

The following are actual statistics though the source names have been changed to protect the guilty:

Table: Lead Source Analysis


(Click on the image to enlarge)

What to do? In a white paper called “How Much Should a Lead Cost?” (available for the asking), I ask and answer the question as follows: “So, how much should a lead cost? More than you probably think, but probably a lot less than you are paying.”

In addition to analysing the actual cost of a qualified lead (not just the cost to generate a raw lead), you should also carefully measure the progression of leads through the sales process. You are probably saying to yourself right now: “We do that” or “That is what I pay sales managers to do.” But I guarantee you that it is not happening.

Here is why: In the average company the close rate on qualified leads is about 20%. That means the average sales rep loses four out of five times. What sales rep wants to sign up for that? So, what happens is that sales reps provide visibility into the status of leads only when they are sure they are going to be closed (and won). That is why when you ask the average sales rep what percent of leads they close they will tell you 60% to 80% if they are qualified. That is just baloney.

In truth, you may partially be responsible for why this is happening in your company. A new rep might provide more visibility than an experienced rep…until they find out that they spend more time reporting on each and every potential deal than they do selling because everyone wants to know the status of every deal—practically real time.

Relatively small improvements in what is called the demand waterfall from marketing-qualified lead to sales-accepted lead to sales-qualified lead can make a huge difference on the top and bottom lines. If you have defined your market, media and message and if you are inspecting outcomes and conducting in-depth analysis at every step, you can substantially improve results.

In the final article in the series, we look at the third step in prospect development optimisation: Deliver fewer, but better, leads to sales.

Dan McDade is president & CEO at PointClear. For more information on the topics discussed in this series, download the white paper, Point C: From Chaos to Kickass – 3 Steps to Sales and Marketing Optimization.

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