Wednesday, March 25, 2009

Evaluating the ROI Potential of External Lead Gen Sources

By Dennis Head, Principal eDemand Leads LLC

While I was working at Avaya, we had developed very effective lead metrics that allowed us to track the various lead sources from our marketing tactics. We were able to compare the conversion rate of each source into a qualified enterprise lead through our telequalification process. This conversion rate scorecard was reviewed weekly to determine the volume of various lead sources and the percentage of conversions. We consistently delivered leads that converted from Marketing Qualified Leads (MQL) to Sales Qualified Leads (SQL) in the 70% to 80% range.

The challenge in generating very high quality leads is finding sufficient warm lead inquiries to meet your MQL volumes. We were seeking alternative lead sources that could generate a high lead conversion rate at an acceptable cost. As we discovered new lead sources, our process was to do pilot evaluations to measure how these purchased leads converted into qualified leads.

As we analyzed our marketing investments, it was clear that some of the traditional lead sources that made up a significant portion of our lead budget were not performing as well as they had in the past. Our biggest decline was in the area of direct mail campaigns; we found that the response and registration rates had dropped significantly from a historical perspective. We also found that of those responders we were not hitting the targeted enterprise segment, but rather a large percentage from the SMB market. The net result was our cost per qualified enterprise lead from these sources had doubled over the previous years.

As part of the ROI analysis, we determined the average cost per lead inquiry, including the campaign expense, as well as the telequalification costs. Added together, it gave us a dramatic view of the wide cost range to generate a qualified enterprise leads. The costs ranged from hundreds to thousands of dollars depending on the source.

We were seeking alternative lead sources that could:

1. Reach the target enterprise market segment (100+ employees per site)

2. Deliver a higher lead conversion rate from lead inquiry into a marketing qualified lead (MQL)

3. Reduce the total cost per lead, including the combined lead source purchase and the telequalification costs.

We discovered two external lead sources that significantly improved our performance in the above three areas. It was purchasing targeted and prequalified leads from external sources.

The first source was from our primary database vendor that provided site and contact information for our sales force and our marketing campaigns. To ensure their information is current, they call and survey their entire base every six months. This allows us to include an additional survey question to be asked and buy the results from that question. We asked, “Are you going to be making a decision to change out your phone system in the next 12 months?” We purchased the names of those who responded “yes” and fit our criteria for enterprise customers. Cost per lead inquiry was under $100.

The results from those leads was very favorable:

1. A conversion rate from 20% to 30% into qualified leads (MQL) - nearly double the average for all other lead sources

2. The ability to pay only for leads that met our enterprise market segment size (Employees = 100+)

3. The low cost of the purchased lead inquiry coupled with the cost of the telequalification resulted in an overall cost per qualified lead that was roughlyhalf the cost of our traditional lead sources

The second source of highly qualified leads was from a business media company that publishes Internet-based content across a range of vertical markets. They provide a lead inquiry called a HQL (Highly Qualified Lead).

1. These leads were more expensive (in the $200 to $300 range) but the conversion rates were in the 35% to 45% range, which was two to three times higher than our average lead source

2. We were able to purchase only those leads that met our market segmentation criteria for the enterprise market

3. The total cost per qualified lead including the lead source and the telequalification was about 60% of the traditional lead source

Lead sources such as these can help enhance your lead program. These sources are not exclusive to you; your competitors may be buying the same leads as well. The first step is to test before you buy. You need to have a process to accurately measure your conversion rates and compare them to your traditional sources. Continually monitor your conversion rates from all of your lead sources to identify how they are performing.

A key success factor is your criteria of lead quality and the dollar size of the opportunity. This approach worked for larger enterprise leads that have longer-term sales cycles and average sales price exceeding $50,000. For smaller SMB where the value of the sale is much less, the same process can work if the cost of the lead inquiry is also much lower.

Dennis Head is a nationally recognized Sales/Marketing Management Executive with expertise in building quality lead generation programs that guarantee sales and revenue profitability. He is a frequent speaker at major conferences, like Marketing Sherpa and the Direct Marketing Association. Dennis worked as the director of eDemand lead Generation Programs at Avaya from 2000-2008. He holds an M.B.A in Business Administration and a B.S in Marketing from Michigan State University.

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