Expert Point of View

Dan McDade

President and CEO
PointClear, LLC

Winston Churchill once said, “I never worry about action, but only inaction.” I’ll be blunt. The problem with most companies’ sales and marketing today is confusion about what action really is. Activity is not action. The vast majority of companies today are filled with people executing activities—with little action, hence little effect.

The average company closes just 2.8 deals for every 1,000 inbound inquiries. Optimized companies close 14 deals for every 1,000 inbound inquiries.

Based on these statistics, what company wouldn’t want to get to Point C? As a senior executive, you can easily do your own math to understand what achieving an optimized level of prospect development could mean to your bottom line.

Three Steps to Point C

1. Agree on lead definition. Walk out of your office and ask the first three marketers and the first three sales executives you encounter this question: What constitutes a good lead?

I suspect that you will get six almost entirely different answers to this essential, strategic question. The definition of a lead is not shared by marketing and sales (or even within marketing or sales). If there is not agreement on what a good lead is, there will continue to be infighting between organizations, as well as waste. Is a good lead only one where a decision will be made in the next quarter? Or do we recognize the value of a longer-term lead and the opportunity we have for developing a relationship? Is a good lead only one where a C-level executive is involved? Or do we prioritize influencers in a larger-size deal? This kind of detailed definition, based on testing and analysis, is key to efficiency and effectiveness, staying on course and achieving the benefits of prospect optimization.

2. Measure what matters. In average companies, sales reps close about one out of five leads they qualify. Note that, on average, sales reps only qualify about one-third of the leads they are provided, so close rates measured against delivered leads are often less than 10 percent in average companies.

Optimized companies close just a little less than one-third of the leads they qualify—and they qualify roughly half of the leads they are provided.

How can optimized companies do so much better than average companies? It’s simple—they measure what matters.

Here’s a corresponding case in point: This real life example is classic, and it’s repeated over and over again in most companies. Over the past year, marketing has generated thousands of “leads” from many sources, with the most preferred source being Downloads from Content Syndicator. The team was thrilled with their results. Sales executives, however, were not thrilled. During the year, marketing spent a lot of money driving thousands of so-called leads while sales reported that they got absolutely nothing of value from marketing. A deeper dive pointed to the fact that the relatively low cost per lead was offset by the relatively poor quality of the leads as indicated both by the percent of qualified leads generated (1.28 percent as a percent of raw leads) and the overall percent of qualified companies. In fact, proactive outbound prospecting produced the most cost-effective method of highly qualified sales opportunities while other sources cost substantially more—as much as two to nine times more.

So what can be done? In a white paper called “How Much Should a Lead Cost?” I ask and answer the question as follows: “So, how much should a lead cost? More than you probably think, but probably a lot less than you are paying.”

3. Deliver your sales force fewer (but better) leads. The whitepaper, “Why Your Sales Force Needs Fewer Leads,” opens with: “Contrary to popular belief, sales reps don’t need more leads. They need fewer leads—or more accurately, fewer raw, unfiltered, unqualified leads.”

Sales reps need leads that have been carefully qualified, properly and consistently nurtured, and appropriately developed, increasing the likelihood of a completed sale. The problem is that there is so much confusion (and snake oil) out in the marketplace today that:

  • Marketing is paid, and in fact rewarded, for lead quantity and not quality.
  • Technology solutions push more poor-quality leads to sales faster and more efficiently than ever.
  • Sales reps have been conditioned to expect poor quality-leads from marketing.

Here is a report from marketing: “We’re on track for a great quarter in lead generation. This month we generated 1,278 leads from all sources—that’s a 30 percent gain over last year! And in spite of higher PPC costs, we continue to keep our leads under $100.”

When sales executives receive these so-called leads from marketing, here is how they respond:

  • Not a senior-enough executive? Out!
  • Budget undefined? Goodbye.
  • Next-year decision? No way.

Here is what marketing should be reporting: “This month, marketing added 14 new prospects to our optimized prospect development program. A total of 41 sales opportunities are currently under development by marketing. Last month, sales received 10 fully nurtured sales opportunities representing $3.5 million in potential revenue. Attached are the details.”

What is missing in most companies, from an execution standpoint, are the following:

  • A process to measure the quality and cost per real lead.
  • A judicial branch (a C-level executive) that provides the checks and balances needed to keep the other branches (sales and marketing) honest by evaluating opportunities that are not worked by sales to see if there is a quality or an effectiveness problem.
  • A group to nurture leads until they are sales-ready and to take opportunities back if sales cannot gain traction for one reason or another. Right now, these opportunities are disappearing into a black hole.

Here is what I recommend:

  • Work toward a universal lead definition. Leads either measure up, or they don’t. If quality leads are squandered by sales, fix it. If sale reps receive non-qualifying leads from marketing, fix it.
  • Measure what matters. What matters most is that no lead is left behind. Understand the following metrics: cost per raw lead, percent of leads accepted by sales, percent of leads qualified by sales and percent of leads closed by sales. Leakages that occur between each stage in the demand waterfall are called lead purgatories. You can only improve results when you eliminate lead purgatories.
  • Deliver fewer, better leads to sales—and hold them accountable for results.

 

About the Author

Dan McDade is President and CEO of PointClear, LLC, a prospect development firm that helps B2B companies drive revenue by nurturing leads, engaging contacts and developing prospects until they're ready to purchase. The Sales Lead Management Association named McDade one of the 50 most influential people in sales lead management for the last four consecutive years. His first book, The Truth About Leads, is a practical, easy-to-read book that helps B2B companies focus their lead-generation efforts, align their sales and marketing organizations, and drive revenue. Read McDade’s blog (ViewPoint l The Truth About Lead Generation) or contact him by email at dan.mcdade@pointclear.com.