Tuesday, January 13, 2009

Quality or Quantity: That is the Question In The Current Lead Gen Debate

By Susan Cordts, President and CEO of Adaptive Technologies, Inc.

In today’s competitive marketing landscape there is one measurement that matters: ROI. With that benchmark in mind, lead generation practitioners must first resolve an important question – quality or quantity? Is it possible to have both?

The answer lies in the ability for a company to balance. There are arguments for both sides of the quantity vs. quality debate. It depends on the profitability of the companies being targeted and the amount of prospective leads. Falling on the wrong side of this balance can cost a company dearly. We at ATi have analyzed this important marketing question through the prism of a single company and found a significant financial loss when they focused on driving the quantity of prospect leads without knowledge of how likely the lead was to convert to new business.

Analysis of three years of data from this company exposed the importance of identifying the tremendous potential revenue gains in striking an optimal balance between quality and quantity of leads. At this particular company, in dollar terms, ATi’s analysis revealed that $2.4 million in revenue gained from pursuing all leads came at the expense of $2.8 million in profits. The position of using quantity to drive demand generation, while ignoring the quality, was costing the company significantly.

The proponents of marketing based on “quantity” suggest that a company should cast a broader net to generate significantly higher numbers of targets to “fish out” the prime opportunities. Simply said, more is better. Advocates of quantity-based demand generation campaigns assume that mass appeal generates a higher propensity to reach “every” prospect and leave no opportunity behind. This is often a gratifying marketing value proposition to a hungry sales team. It sounds good.

On the opposite side are the proponents of selective target marketing who pursue “quality is king”. They believe that prospective buyers must be pre-qualified by restrictive demographic and socio-graphic qualifications and eliminated from the prospecting base if they do not meet the exact profiling criteria. Simply said, the quality approach produces higher response rates and greater likelihood of conversion. The issue with this approach is that there may not be enough “quality” leads to meet the organization’s revenue goals.

ATi has proven business leaders need to balance quality and quantity of leads to maximize profitability. Over-emphasis on quantity means low value prospects are being targeted and negatively impacting profits, while concentrating on quality leaves potential revenues on the table.

ATi’s research discovered that successful organizations blend quality and quantity to differentiate the value of current and future customers. They know the potential profitability of the lead and use this information to balance their approach. They know what actions to take and how these actions will ultimately reduce marketing costs and improve campaign results. An examination of the profitability of a customer often reveals overall profits are optimized on only 50-70% of the current customer base. ATi’s predictive analytics solutions identify who to target for what offer, when to communicate that offer, and which media to use so that one can maximize returns.

Thus, the argument of which provides the best return on marketing investment can only be determined through science and technology. Utilizing predictive analytics technologies to answer quality versus quantity by first identifying one’s goals and objectives and the associated value of customers to these goals positively impacts marketing return on investment (MROI). You can learn more about predictive analytics by downloading the research findings at www.adaptiveinc.com/Research/white_papers.php.


1 comment:

Steven Woods said...

you make a good point that a debate needs to happen on what we're looking for in leads, but I'm not sure that the correct way to look at it really is a single dimension of "quality" where we can trade off quality for quantity.

In phrasing the quality side of the debate, you refer to restrictive demographic and socio-graphic qualifications, but in phrasing the quantity side of the debate you refer to wanting to “fish out” the prime opportunities. The asymmetry of "who" (demographic) vs "when" (interest/opportunity) is clear.

To succeed, we need to look at both of these dimensions; leads must be scored based on who they are (right executive, right industry) and also whether they are interested (right activities and response to messages).

If we don't score leads on both dimensions, we run the risk of providing leads to sales that are unqualified either because they are the right executive, but are showing no interest, or they are highly interested, but have no buying authority.

I posted on this topic here if you're interested: http://digitalbodylanguage.blogspot.com/2008/12/dimensions-of-lead-scoring.html.