By Jim Lenskold, President, Lenskold Group
This is the second article in the four-part series on Maximizing Lead Generation Marketing ROI. The other articles in this series include:
You run your marketing, generate those high quality leads we discussed in Part 1 of this article series, hand these leads off to the sales team, and wait. Hey guys, anything happening over there with our leads? Dead silence. The execs are asking about the ROI on your marketing efforts but you seem to have lost sight of the financial returns which may or may not be present in the black hole where you pass your leads into. The financial success of lead generation marketing is very much dependent on how those leads are managed after the marketing handoff to sales.
The need to better align the sales and marketing organizations is generally well-known. These two organizations are connected through their shared roles in motivating customer purchase activities and divided by different cultures concentrating on different portions of the customer purchase funnel. No one can argue with the fact that alignment is good, but what must you ultimately accomplish to drive performance and profitability?
The big opportunities are tied to driving better informed actions, which is a combination of what you know, what you do, and knowing how well you did. Marketing (and the sales team) can prioritize their efforts, allocate budgets, and design high-impact strategies by managing insights, alignment and actions in the following key areas:
• Lead Transition
• Funnel Tracking
• Sales Effectiveness Support
You’ve invested marketing dollars into generating those leads with the expectation that as many as possible will proceed on their journey to become closed sales. Just like passing the baton in a relay race, the handoff of leads from marketing to sales must be as seamless as possible during this transition stage. The key metric to manage here is the ratio of Marketing Qualified Leads to Sales Qualified Leads (MQL/SQL) which represents the percentage of leads sales qualifies and accepts.
There are two primary gaps in this transition that work against generating positive ROI from your lead generation. The first is lead quality, which we covered in Part 1: Lead Quality Counts. We showed the economics behind prioritizing lead quality over quantity and also stressed that feedback from the sales team is essential to align marketing’s view of lead quality to sales’ definition of quality.
The second gap that is all too common and is a pitiful example of poor management processes is the lack of follow-up contact from sales. The opportunity to generate good returns on lead generation marketing investments quickly fades without timely sales contacts as those good leads in the mix turn cold.
Why would the sales team not follow up on marketing leads? The three primary reasons are:
• Poor lead quality – We’ve already established that marketing must own lead quality as long as sales is providing feedback to define lead quality. However, if you have just recently improved quality, your challenge is to overcome old perceptions of quality problems.
• Sales capacity – This is another critical area where marketing needs a feedback loop from sales as well as a process to effectively manage the peaks and valleys of capacity. When volumes are exceeding capacity, marketing must work with sales to manage lead handoff by either holding and nurturing leads or tapping into external sales support resources.
• Compensation Structure – There are some situations where the sales team earns more compensation on sales-generated leads than on marketing-generated leads. If they are putting more effort on their own leads instead of contacting marketing leads, you have to determine if it is best to change the compensation structure, add more sales staff (internal or external), or cut back on lead generation marketing.
The ROI analysis used to assess lead generation marketing helps to prioritize the process changes necessary to improve the communication flow and alignment with sales. Leads that get lost in the transition are a wasted use of marketing resources and a missed profit opportunity.
As your leads successfully make it through the transition to the sales organization, you are now interested in their travels through the purchase funnel. This is an area that is all about building insight on customer behaviors and marketing/sales effectiveness. This insight is ideal for enriching strategy and targeting. But of course, you are still dependent on the sales team for feedback on the lead outcomes as they progress through the funnel.
The insight you are after includes:
• Leakage points – You need to know where leads fail to progress to the next stage of the buying cycle, either because the competition won them away or they stalled or cancelled their purchase decision.
• Leakage drivers – In addition to where leads leak in the funnel progression, you want to know why. This insight should identify strategies that can be used to modify branding and lead generation marketing, improve sales management, create new marketing initiatives, and enhance product and pricing decisions.
• Quantify Lost Value – Through sales management systems or rough estimates, the opportunity value can be used to quantify the lost revenue and profits associated with specific leakage points and leakage drivers. When you establish a financial value to problem areas such as leads not contacted, opportunities lost because of no budget or opportunities lost because of no management approval, you can then create the business case for new marketing strategies that address those drivers.
More detailed purchase funnels, preferably described from the buyer’s perspective, allow for better assessment of your weak points. But even with sales automation that captures funnel performance and leakage drivers, too much detail will become a burden on the sales team. Instead, use survey research to periodically conduct a more comprehensive analysis.
Sales Effectiveness Support
As you break down these barriers between marketing and sales, you will find additional ROI potential for marketing within the sales cycles. This is more than just basic sales support where marketing provides collateral or presentation decks for the sales team to use as needed. You want to leverage the insight you gain with funnel tracking to strategically develop marketing initiatives that improve your profitability through:
• Better funnel conversion rates – As we mentioned in Part 1 of the article series, if 90% or more of leads are not converting into sales, you have a lot to work with. Converting more marketing leads to sales helps the ROI of both the additional marketing support in the sales cycle and your initial lead generation marketing.
• Incremental customer value – Marketing running concurrent with sales management of leads can help shift purchase decisions to higher value and higher profit margin products and services. The sales team is going to put their emphasis on closing the sale while marketing can concentrate on making the better mix of products and services more appealing.
• Increase lifetime value – In addition to improving the value of the current purchase, marketing can work on motivating repeat purchases and retention to extend the value of the customer. Analyzing purchase behaviors and profiles of long-term customers provides insight on how to better influence the customer relationship in earlier stages.
• Shorten the sales cycle – With a detailed ROI calculation that includes the cost of sales resources, your marketing efforts to shorten the sales cycle can be quantified in the reduced cost of sales time. Shorter sales cycles also tend to increase conversion rates.
It is generally more profitable to increase conversion of existing leads than to generate more leads. Think of this as a continuation of your lead generation effectiveness instead of a separate effort.
Alignment between marketing and sales involves sharing insights on lead outcomes and managing lead success jointly through the entire process. Improvements come from understanding and strategically addressing leakage points and leakage drivers. Your ROI analysis will help prioritize and allocate budgets where you can have the greatest influence on the primary profit drivers of increasing conversion rates, improving customer value, and reducing costs for both marketing and sales.
Now that we have established the insights you need to know, Part 3 of this article series will conclude with measurements and metrics for lead generation.