Maximize Lead Gen ROI By Focusing On Conversion, Quality

By Jim Lenskold, President, Lenskold Group

Marketers responsible for lead generation are all too familiar with some common challenges –getting closed-loop feedback from the sales organization, measuring marketing effectiveness beyond just lead quantity and cost per lead, and building strong alignment with the sales organization. As we presented in the MarketingProfs’ research report, “B-to-B Lead Generation: Marketing ROI and Performance Evaluation Study,” effective lead generation marketing is very much tied to overcoming these challenges to prioritize lead quality over lead quantity.

The research report released in June 2008 showed that companies rating their lead generation marketing as more effective than competitors were three times as likely to report a strength in closed-loop sales tracking and measuring the ROI (return on investment) of their lead generation marketing. More than half of the marketers with more effective lead generation marketing (56%) expect that their sales organizations would rate the quality of leads as positive (top two scores on a 5-point rating scale) compared to just 20% of those with less effective marketing.

Lead quality is critical to managing and improving bottom line performance. In addition to these research findings, basic ROI analytics can be used to make your case to prioritize quality over quantity and guide your decisions to deliver greater performance and profitability. You ultimately need better insight into the two primary dimensions of quality – average profit per sale and average conversion rates from lead to sale. With insight into lead quality and ROI, the marketing team can unlock untapped opportunities with:

1. Better alignment of the marketing spend to value potential
2. Improvements to marketing strategy
3. Better tracking and metrics
4. Earning buy-in from the sales organization

We’ll run through some basic math first to build the support for acting on the strategy, metrics, and alignment opportunities.

Marketing Investment Levels Aligned to Value Potential

Cost per Lead is a very commonly used marketing metric (used by 34% of B2B lead generation marketers according to our research). It can be an insightful metric but it is highly dependent on all leads having the same value and conversion potential, which is rarely the case. If your cost per lead goes up but you bring in better quality leads with either higher profit per sale or conversion rates, it will be a worthwhile investment. Marketing effectiveness can be improved with “value-tiered marketing investments” that align marketing spending with the expected returns for better ROI performance.

For example, you may be marketing to a target audience that has an average profit per sale of $4,000 (based on $16,000 revenue * 25% gross margin) and a lead-to-sale conversion rate of 7%. To achieve an ROI of 25% the maximum Cost per Lead is calculated as $224. The calculation is presented below.

Maximum Cost per Lead = ($4,000 / (1 + 25%)) * 7% = $224

But suppose the target audience is made up of three equal-size segments with the following performance patterns:

Segment A has the highest value, while Segment B has a highest conversion rate. It does not make sense to manage our marketing investment using the average Cost per Lead. Instead we run the basic calculation to determine the maximum Cost per Lead per segment.

Now we can see that more marketing can be invested into Segment B based on the higher quality of the lead. In fact our previous marketing to Segment C that averaged $224 Cost per Lead was actually costing more in marketing than the profits returned and therefore hurting the company’s financial performance.

This is a very basic financial analysis which can be replaced with more advanced versions that take into account the sales investment in addition to the marketing investment and multiple stages of conversion rates from initial sales acceptance of leads through the sales pipeline. The other benefit of improving lead quality is that the cost of sales resources will be reduced as the leads unlikely to convert to a sale are removed from the sales pipeline. In the advanced versions of the ROI analysis, this becomes apparent.

Regardless of the level of sophistication, we have at least established the economic view of why lead quality and targeting are important to drive effectiveness, performance, and ROI. Segmentation of targeted prospects based on the two dimensions of lead quality allows you to invest more in high profit-potential segments and reduce spending with low profit-potential segments.

Improvements in Marketing Strategy

There are a number of key areas of marketing strategy that can benefit with better insight into lead quality. The most significant driver of ROI is targeting so improvements here are a top priority. Lead generation marketing can reach a broad audience with many different types of marketing tactics. The goal is to concentrate additional tactics and offers on the top segments of prospects. This is where lead scoring and predictive modeling can be used to set the priorities and establish investment levels based on the conversion probability and value probability.

Better marketing conditioning and nurturing of leads prior to the hand off to the sales team improves conversion rates. Improvements in the effectiveness of this stage of marketing can be assessed using lead-to-sale conversion rates and incremental customer value per sale. Once again, a basic ROI calculation can demonstrate how investing in additional marketing touchpoints prior to handing leads off to sales can generate significant returns from increased revenues.

The focus on narrowing the marketing efforts on fewer but better prospects to deliver higher quality leads always sparks the same question – “but what if the volumes drop too low?” If you apply the ROI analysis shown above and identify the point of diminishing returns – that is the point where the cost per lead is too high to reach your ROI target – it is certainly possible that your total lead quantities will decrease. But when you reach the point where your lead generation marketing will no longer be profitable, quantity will not help. You must then shift your priorities to improving effectiveness with the leads you are already generating. To achieve this effectively, marketing must be working in step with the sales organization to improve conversion rates within the sales pipeline.

Keep in mind that improving conversion rates in the sales pipeline has very high profit potential, even if lead quantity is not an issue. If only 2% to 10% of leads are converting to closed sales, that means 90% to 98% of the leads are leaking out of the funnel, offering plenty of room from performance improvements. Marketing organizations that are restricted to lead generation with a minimal role in supporting the sales pipeline should look closely at the opportunities here to build the case for better alignment and integration.

As part of your overall funnel management and getting the most value from the leads generated, ROI insight tied to lead quality can also support decisions for marketing to nurture rejected or stalled leads.

Better Tracking & Metrics

Marketing ROI is driven by three primary drivers of profitability – incremental customer value (ideally long-term profits), lead-to-purchase conversions rate, and cost per sale. Add “Total Sales Volume” to that list and you have the four most critical metrics for managing performance – keeping the company’s overall financial performance on track and guiding marketing and sales priorities to reach and exceed goals. These same metrics work at the campaign level to prioritize segments for targeting and guide budget allocation, as addressed earlier in this article. Other marketing metrics should align to these core metrics to provide greater depth of insight that can be acted upon. For example, a metric such as Average Value of First-Time Buyers may serve as an early indicator of a likely decline in future revenues if your marketing is now attracting leads from lower value segments.

In order to use better metrics that reflect lead quality, you must have better tracking – in particular the closed-loop feedback from the sales organization that captures the lead outcomes such as sales acceptance, funnel progression, and conversion to closed sale. The ratio of marketing qualified leads (“MQLs,” which represent the leads marketing deems ready to hand over to the sales organization) to sales qualified leads (“SQLs,” which represent the leads sales accepts as qualified for a sales contact) is very important. Marketing can improve this MQL to SQL ratio when provided with feedback to understand the drivers of rejected leads and profiles of the accepted leads.

Additional tracking detail from the sales organization that can support improvements in lead quality includes:
• Lead screening reasons (i.e., why MQLs are not accepted as SQLs).
• Lead progression rates through key funnel stages to show leakage points.
• Average days from lead hand-off to sales contact (reflecting sales capacity and the “freshness” of leads contacted).
• Good reporting on leakage reasons (i.e., why they dropped out of the sales pipeline).
• Joint win-loss analysis to assess leads lost late in the sales pipeline.
• Analyses of closed sales to provide information on both net close rate and incremental customer value (sometimes available through financial systems instead of sales reporting).

Marketing also has to take responsibility for tracking and maintaining quality data for performance analysis. The Lenskold Group/Kneebone 2008 Marketing ROI & Measurements Study showed that access to data under marketing’s control was a weakness yet had a strong correlation to achieving highly effective and efficient marketing. In particular, marketing must maintain detailed tracking of outbound and inbound marketing touchpoints to prospects during the lead generation process. This information is critical to applying more advanced measurements that can properly attribute sales contribution to multiple touchpoints instead of just crediting the most recent lead source.

Earning Sales Buy-In

Simply wishing for, or even requesting, that the sales organization put extra effort into providing tracking information to marketing is not enough. Marketing must make the case that it can and will act on the information provided. As established at the beginning of this article, lead quality benefits the sales organization as well as the financial performance of the company. Leads with higher conversion rates use sales resources more efficiently. And higher conversion rates and higher value per sale both contribute to achieving sales goals.

The B-to-B Lead Generation: Marketing ROI and Performance Evaluation Study found that companies outgrowing their competitors had better alignment between sales and marketing than companies growing slower than competitors as shown in the chart below.

One of the most effective ways that we have found to break down the barriers between marketing and sales is to identify and work with a pilot team within the sales organization. The pilot team is typically a group that sees the potential value of lead quality, or is willing to experiment in order to improve performance. The tracking efforts are done without major investments into systems infrastructure or organization-wide process changes.

The closed-loop information provided back to marketing is then applied to improve lead quality from the initial targeting and tactical investments, to marketing’s lead qualification and contribution to the sales pipeline. A basic ROI analysis is used to run scenarios that indicate the key priorities for where additional marketing support can most effectively lead to incremental sales and profitability. Improving lead generation marketing is a continuous journey, but one that offers significant profit potential.

Jim Lenskold is President of Lenskold Group and author of Marketing ROI, The Path to Campaign, Customer and Corporate Profitability (McGraw Hill, 2003). Founded in 1997, the Lenskold Group (www.lenskold.com) provides consulting services to deliver a comprehensive approach to marketing ROI management, marketing measurement and analytics, and profitability planning tools. Jim’s career began in the mid-1980’s at AT&T where he managed a $20 million marketing budget for retention marketing and new strategy development. He also successfully launched and grew a technology firm before starting the Lenskold Group. The Lenskold Group serves Fortune 1000 and emerging companies in the US, Canada and Europe. Jim can be reached at jlenskold@lenskold.com This e-mail address is being protected from spambots. You need JavaScript enabled to view it or (+1) 732-223-8886.

Turning Your Current Customers Into New Business Evangelists

By Brenda Gelston, President, Marketing Momentum Associates

Periods of intense change often bring improvements due to paradigm shifts in the way we conduct our business. During times of change assumptions are challenged, boundaries are forced and better ideas emerge from the rubble of the status quo. We are currently going through this type of paradigm shift whereby the sales process is changing to meet the demands of empowered customers. So, in this environment how does a marketer establish credibility and custom tailor the marketing outreach to anticipate and meet customer needs? Carefully designed demand generation programs will integrate your customers into the lead nurturing process and help propel your marketing efforts with renewed energy and relevancy.

Here are some clear strategies to help bring your current customers into the future growth of your business:

• Know thy customer: Most companies collect loads of information from their customers but only the successful firms integrate the voice of the customer into their sales process. This requires that the firm recognizes who their most profitable customers are and have an ongoing dialog with these customers by following category trends, industry advisors and trade hot button issues. The content collected can be an excellent source to enrich your demand generation program. It will not only be relevant but it will also help establish credibility and authority in your selected segments.

• Listen: It is a generally accepted sales process that the foundation of successful selling is the ability to listen. According to Nielsen, companies include surveys, advisory board discussions and social media as part of their marketing. The insight gained from monitoring tools helps the firm polish its value proposition and deliver consistently relevant content that helps build relationships.

• Customers are best referral sources. Nothing says that a firm excels at what they do better than having customers endorsements prominently displayed in their marketing material. A targeted program like opinion pieces or industry trend reports will help a company become a thought leader.

• People move around – network, network, network. Marketing professionals often serve at their post less than two years. They remain in a marketing role even when they move from one company to another. Often these professionals stay in the same category so someone who is not able to do business with you due to internal conflict may be hired by an organization that may be free to work with you. It is always a good idea to keep regular check points with known contacts and to constantly develop new contacts. It is much easier and cheaper to keep your database fresh on a regular basis.

• Ensure minimum of 5 touch points at each company. It takes a minimum of five contacts at a company to secure repeat business. This is especially true in complex business to business purchasing decisions. Once you sign on with a customer it is good practice to ensure more people at the same firm know about you and your services. It will help you stay top of mind and carve the path for repeat business.

Current customers can be a very effective genesis of a successful marketing outreach. A business that is very clear about what its customers really value will make efficient decisions about how to acquire new customers. Through listening, encouraging two way dialog and truly interacting with the customers your firm will be able to craft an effective demand generation program that will bring in the desired results. The important thing to keep in mind is that targeted communication going out to your prospects requires different dynamics than the one you send to your customers. Customers’ priorities and information needs are different. Your expectations and success metrics from a deliberate customer communication program is also different. But they should both lead to the same overall outcome; business growth. Therefore, your demand generation outreach must include both segments. Current customers are an important segment in your new business efforts and they require a deliberate and targeted outreach as part of your overall marketing plans.

Brenda Gelston is a Strategic Marketing and Business Development professional who helps companies intelligently go to market, understand and effectively communicate to their prospects, and generate the most leads at lowest possible cost. Having labored in the marketing trenches since 1990, she has worked extensively for marketing agencies, small and middle-market firms, and international organizations. Her experience has been focused on developing marketing strategy, content marketing, business development and account management, primarily working with professional service organizations. She holds and M.B.A in Business Administration and a B.S. in International Marketing from University of Phoenix.

Top 10 Mistakes To Avoid To Improve Your ROI On Telemarketing Campaigns

By Mike Wallen, CEO, Lead Dogs

Today, B2B sales lead development is often conducted by phone and, unfortunately, a great deal of it is poorly done. When speaking with marketing and sales professionals, they often complain about their previous lack of telemarketing results, and share how they were disappointed in the low ROI. Want to know why ROI is low? Because too many companies are making the following errors:

1. Using the telephone as a spray and pray device.
Yes, the telephone can be a great tool to reach many people, but it only adds value when used effectively. Often times, companies use telemarketing as a mass marketing medium and make "one size fits all" calls to large lists of people. Instead, the ideal approach is to differentiate your call from the masses and ensure every call has a purpose and is part of a systematic sales process when being made.

2. Working with bad lists.
Too many wrong numbers, outdated contact info or poor quality leads are just some of the indicators your list is bad. This is especially common when list purchase decisions are made based on price per name, very simple demographics info, the speed in which it’s needed, etc. Instead, it is much more effective to approach list selection as a critical component of your lead development effort. Invest the time to find higher quality lists, such as those that are targeted around event or organization affiliations. After all, the better the quality of the list you start with, the more likely it is you can uncover qualified opportunities for your company. The ideal sanity check: do your existing customers show up on lists you acquire?

3. Not assuming lists will be bad.
In an ideal world we would always strive to tee-up lists for reps that are inclusive only of contacts that are not only still employed, but also the right contact – but it’s simply not reality. Expect and plan for the worst. We are seeing invalid rates (‘no longer with company’ being the primary contributor) steadily increase as the workforce turnover and consolidation of roles increases. In addition, we’ve always found that lists, to be good, need simply to be directionally accurate in that we are within a degree of separation from the ‘ideal contact’. Referral and replacement contacts are entering our queues at a rate of 12-14%, roughly double 6 months ago. From those, we are seeing results 3-4 times what is seen from contacts supplied on lists.

4. Measuring the wrong metrics.
Common telemarketing metrics, such as "number of dials per day" or "talk time minutes" were derived from B2C boiler room practices. For companies that focus on those type numbers, the results speak for themselves: conversations that go nowhere, low ROI, and high call rep turnover. Instead, companies should focus on quality oriented metrics like measuring average conversation length and depth, how many phone calls resulted in speaking with real decision makers, how many conversations resulted in moving a prospect to the next step in the sales pipeline, like scheduling a demo or a meeting, and advancing measurements.

5. Measuring the effectiveness of the postal service.
Often times, a telemarketing script will include, "I'm just following up to make sure you got our mailing?" Now why would that be compelling to the already busy person on the other end of the line and how is that going to help you? Most likely, they aren’t going to remember your mailing, and all you're really doing is measuring the effectiveness of the postal service. Instead, when you call, your purpose shouldn’t be “to confirm receipt,” it should be a more succinct and compelling message geared to the recipient.

6. Not doing homework before making calls.
I can't stress this enough, but if you're calling B2B decision makers, you have to be prepared. Instead of a telemarketer doing a zombie like recital of a canned call script, you must research the industry and the company to know your target's pain points and speak their language. Additionally, tailoring the messaging to the pains of a specific goal will help ensure early traction in the dialog. If you want to increase marketing ROI, you simply cannot begin a call by mispronouncing the person's name and then barge right into a sales pitch. Instead, you need to have a strategy in place to compel the prospect to have a dialog with you and quickly establish a rapport with them.

7. Trying to sell on the first call.
If you're selling complex, high-end products with long sales cycles, it is a complete waste of time to try and sell someone on the first call. So don’t even try to say “Hey I have this great widget, it is only X Million and how many do you want?” This type of polling approach will net dismal results – especially in this economy. If it wouldn’t work with you, don’t do it. Instead, it would be much more effective to have the objective be around starting a longer term relationship with the individual. An example: "Good morning Mr. CTO. I just read an article about your (initiative) in the WSJ.com and believe we may have a good fit between your initiative and our (product or service). Did I catch you at a bad time?"

8. Focusing on appointment setting with unqualified prospects.
Given the current economy, I’ve seen a big emphasis on “setting as many appointments as possible” for sales professionals. The challenge becomes wasting the salesperson’s time as often the person they meet with wasn’t truly qualified, or when the salesperson shows up the individual has no idea of the purpose of the visit. Instead, it is much wiser to focus telemarketing efforts on uncovering qualified and sales-ready opportunities.

9. Sending materials that weren’t requested or not sending them at all.
Sometimes people send materials that weren't requested in the initial dialogue in order to "push" a sale. Don't do it. People won’t respect that behavior and most likely won’t read it. Also, don't assume prospects are asking for information just to get you off the phone, and hence you don't send anything. Instead, send promised fulfillment within 24 hours with a note on the outside envelope or email subject line: "The material we discussed is inside [or attached]." People often ask for information to be sent because they want to look it over at their convenience, and giving them this information promptly is a good first step towards building a relationship with them. Treat it as homework by agreeing to a time in advance to hear their reaction of what they will review.

10. Not having a systematic sales approach that moves prospects through the buying cycle.
In B2B lead development, each conversation has to build on prior conversations in order to move a prospect along the sales cycle. Moving telemarketing call reps from one account to another or failing to keep track of conversations in a CRM system all lead to poor conversations. Instead, you should ensure all communications are documented so a sales rep can review the history of an account before reaching out to them again.

Mike Wallen is CEO of The Lead Dogs, a lead development and sales outsourcing company working with today’s top business to business sales and marketing professionals to drive revenue by finding, developing and closing complex B2B sales deals. He can be reached at 512.990.2000.

Adding Revenue Contribution To ROI Measures Connects Marketing to Real Dollars

By Chris Frank, Director of Marketing, TreeHouse Interactive

There’s an old saying about marketing: “Marketing is the last in and first out.” What this means is that marketing is often the last team brought on at a company and the first to leave. It’s a scary thought in this economy. Maybe that’s why several conferences I’ve attended over the past year talk to the growing executive mantra of “accountability” when it comes to marketing and the need to show return on investment (ROI).

How do you measure your revenue contribution though? Fortune 500 marketing VPs often tout the success of multi-channel campaigns that have microsite, nurturing, and layered campaign elements. They recount measurable success that resulted in X more dollars to the company. Complex campaigns with real ROI metrics behind them. What they fail to mention, more often than not though, is the massive marketing team they have behind it—pulling it off.

Using technology to prove hard-dollar ROI to your executive team is essential, regardless of whether you sell B2B, through partners, or online. Without it you’re left helpless to address the trickle-down “accountability” mantra, secure more marketing funds, or focus your efforts against larger competitor marketing. Demand generation solutions can level the playing field in this respect. What you quickly move from is not just the ability to acquire leads like you can with any email service provider (ESP) solution, but the ability to qualify and distribute leads intelligently for your sales team—collecting hard ROI data as it moves from opportunity to close.

If this demand generation concept makes sense to you, then let’s add the following ROI metrics that you should be able to report on to the mix:

* Hard dollars for business closed as a result of your campaigns
* (B2B, partner, and online sales models)
* Hard dollars still in the pipeline as a result of your campaigns
* Total cost per click for your email campaigns (primarily online sales models)
* Total revenue per click for your email campaigns (primarily online sales models)
* Collected hard dollar results for multi-channel campaigns

There is a paradigm shift in how marketing teams are measured. Now there needs to be a shift in what marketing teams are able to deliver. By being able to measure what your exact results are—in dollars—for campaigns, you can demonstrate your team’s value to executives and more competently make decisions about future marketing projects. You can also secure the budget necessary to execute on these projects.

While the concept of going beyond simple email marketing to demand generation may be apparent, but hard to implement for some, the importance of doing it right to get at real ROI is even more important. Otherwise, you’re left with the same fuzzy value marketing often claims they contribute to a company’s bottom line.



Chris Frank is the Director of Marketing at TreeHouse Interactive, a provider of SaaS solutions for partner relationship management (PRM), sales force automation (SFA), and demand generation. Mr. Frank has also served in a variety of director and consultant roles over the years. Specialties include everything from demand generation and PRM to eCommerce.

Sales 2.0 Author Urges Rethinking Of Sales, Marketing Strategies

Anneke Seeley has never been shy when the topic is sales. Back in the 1980’s she was employee number 12 at Oracle and set up the internal sales operation there. Now she is the CEO of Phone Works, a company that specializes in sales strategy and has authored a new book about Sales 2.0.

While there have been quite a few definitions of the term Sales 2.0, Seeley puts hers squarely in the middle of humanity and technology. “I describe Sales 2.0 as a more effective and efficient way of buying and selling,” she says. “It is enabled by Web 2.0 technology. It is a combination of the art of collaborative selling coupled with the new culture of measurement.”

Her book, Sales 2.0, co-authored with Verint executive Brent Holloway, does not mince any words about the dangers of old school selling

Companies stuck in sales and marketing that do not take advantage of the visible data made available by new processes will favor information control over customer self-service, will encourage internal competition over collaboration and will measure only short-term revenue.

“Lead management is a very important part of the sales cycle and all parts of the company must respect that,” she says. “When it comes to lead management it’s about strategy, process, and people. Now we have a lot of new technology that can improve strategy, and it can enable a smoother lead management process, and entire sales cycle is certainly faster as a result. But what I see companies do wrong is that they start with technology before they look at people and process. Understand your lead generation issues first. Is my problem identifying prospects? Is it in finding a good group to target? No technology can help you understand where to start.”

Seeley just returned from the Sales 2.0 conference where was surprised by the amount of executives attending in person as well as online. The online access of an entire conference presentation is indicative of the change that customers have brought to the world of information. She expects those preferences to continue to evolve and sales people need to adapt. Relationships between buyers and sellers can be formed, strengthened, and maintained without the face-to-face meetings that used to delay sales progress.

“Face to face meetings are rare,” she says. “Some bigger customers will go all the way from pitch to close without a face to face meeting. That means that sales and marketing executives must be more effectively aligned. They are truly contributing to the sales process in a shared fashion. They should share all available metrics and maybe even have a shared compensation package. The process of Sales 2.0 is in the process of being redefined constantly. The job for sales and marketing is to make it as easy as possible for the customer to buy.”

More information about the book is available at www.sales20book.com.