It's the fourth quarter of the fiscal year. Let the finger-pointing begin!
All across the land, marketing and sales people are reconciling leads, proposals, bids and sales. Those responsible for Web marketing, email and advertising are busy tabulating campaign yield figures. And those who selected and staffed industry trade shows are comparing their leads with ones coming from other sources to rule out "double-counting."
All of them are hoping to show that their efforts were the ones that "converted." At first glance, getting accurate conversion statistics would seem to be a simple matter. Just divide the cost of generating leads by total sales (stir in the company's "time value of money" formula), and you've got your lead-generation ROI.
Right? Well, not exactly….
What we hear instead is this:
- "Well, it didn't turn into a sale, but it helped our brand recognition."
- "The lead was great. It was the salespeople who…."
- "The lead was great. If we were only more competitively priced…."
And so on. The maddening thing is that these responses are as likely to be right as they are to be wrong. It all depends on the expectations that were set and agreed upon at the beginning of the year.
The key to accurate lead-conversion ROI calculations is "self-honesty." While every company has the right to create its own definition of "R" to compare with "I," it is critical to look back at the justification that was used to support lead-generation activities prior to funding.
When 'R' Means Sales
If the justification was based on sales and sales alone, then "R" means sales attributable to each lead-generation source and activity. While the reasons behind failure to capitalize on leads can be debated by sales, marketing, product development, finance and other players, the bottom line is simply this: the lead failed to deliver a sale.
And rather than point fingers, the players would be better served by determining where along the selling (and buying) continuum the lead failed to pass an intermediate conversion "gate." In other words, what happened immediately before the lead was "dropped" or pronounced "dead."
Lead Assessment: Diagnostic Tools
The tools for conducting a productive investigation into "dropped" leads include the following:
- A customer relationship management (CRM) or sales force automation (SFA) system pipeline report that captures and displays the last efforts before the lead went "cold"
- Win/loss analysis that includes in-depth interviews with prospects that chose not to buy from the company
- Various other market research techniques (surveys, focus groups, etc.)
Actions Based on Lead Assessment
Once the assessment is done, the company is able to take targeted action (based on facts) that may include the following:
- More rigorous lead qualification: Prior to investing time and energy in a prospect, salespeople need to discover, and rationally assess, the company's ability to match or address prospect values, needs, price tolerance/budget, urgency and competitor perceptions. In addition, salespeople need to know if their contact has the authority to either buy or seriously influence the buying decision.
- Market reality-based sales training: Training based on win/loss analysis data helps a sales team anticipate and appropriately respond to prospect needs, concerns, values and preconceptions.
- Segment-focused online and offline advertising, promotion and PR: Promotional messages that use language and content proven to resonate with buyers have the best chance of generating leads that pay off. This has upstream implications for organic search engine marketing and pay-per-click strategies and tactics.
- Development and testing of pricing and financing options that allow quicker, less complex decision-making: Understanding the decision-making thresholds of those involved in the buying process can lead to deal shaping that wins.
Simply stated, tracking leads and getting to the bottom of why people do or don't buy allows a company to change the elements of a sales process that kill deals.
A Broader Definition of 'R'?
If the "R" anticipated in the justification process was more broadly defined, then outcomes other than sales (brand recognition, "future potential" contacts and accounts, etc.) can be counted.
However, to pass the "self-honesty" test, the client needs to put non-sales outcomes into a conversion table that allows the generation of a dollar-denominated value for results that come short of sales. This done, the conversion table values and the sales generated by leads can be added together to provide a fact-based assessment of lead ROI.
For example, a lead that did not convert into a sale, but provided a salesperson with a contact at another company that did convert to a sale has some calculable value. The same can be said for leads that don't provide revenue in the current fiscal year but have potential for closing at some point in the near future. And any lead that provides the basis for a friendly, supportive business relationship may pay dividends down the line.
Like all "soft money" calculations, such non-revenue payoffs need to be handled consistently and conservatively. For example, a company could state in advance that "non-sales, soft-dollar" figures could only account for 10-15% of the ROI calculation for leads from a given source.
This would mean that the lead source would have to show some near-term value (real money) before the "soft" money value is recognized.
The other imperative in "soft money" lead conversion calculations is robust tracking, capture and analysis. For example, if the interaction with the selling organization resulted in a negative experience for the prospect, the lead should not be counted in any "plus" column.
The same can be said for leads that were "lost" at some point during the sales process (e.g., no return calls or unable to reconnect). Only those leads that resulted in a positive contact at a company with potential to buy or recommend should be assigned any future value.
Don't Be Blinded by Results
Everyone is concerned with business results. And, while a fixation on results can positively influence business decision-making, it must be tempered with patience to provide long-term success.
Sometimes the cause-and-effect linkage between actions designed to generate revenue and cash inflow are strong. For example, in "one-call-close" outbound telemarketing environments, the call either results in a sale, or it fails.
However, in most B2B environments, there is a fairly predictable sales cycle, with "conversions" each step of the way. Sometimes the time lag between intermediate and "final" conversion (the sale) is significant.
When evaluating lead-generation activities, you should consider both short- and long-term payoffs. The evaluation criteria need to be clear from the outset to everyone involved in the sales process.
Then and only then can you honestly and accurately say, "This is the value of our lead stream."
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