The lack of physical events this year has left many a B2B marketer or sales director staring at a gaping hole where their sales pipeline used to be and thinking to themselves “What the actual flip?!”.
The volume of leads these event-centric businesses have been able to generate has tanked. But underneath that tanking lies an unfortunate and uncomfortable truth for these businesses…
That the volume of leads generated is a really crap measure of marketing success. Are 1000 dud leads that never go anywhere really better than 20 highly qualified leads that all turn into opportunities?
“But bigger numbers mean bigger success, right?”. Not if that bigger number of leads results in F all being added to the BIGGEST of all the big numbers your business cares about…
So, before hair is pulled out or knickers are got in a twist about the lack of leads there’s some questions for you to ponder:
- Do you know what you’re paying for leads right now?
- Do you know what a lead is worth to your business?
- Do you know why the difference between the two is crucial to understand?
It’s a trio of questions that trip a lot of people up. But fear not if you’re struggling for answers. That’s why we’ve written this blog.
All the wordy goodness from here on will help you get a better understanding of your own lead generation activity and why you should always be going for quality over quantity. Strap yourself in, break out your calculators and let’s get going…
Calculating Your Lead Value
This is the easier of the two to do, so let’s knock this out first. It’s a simple sum of:
Cost / Leads Generated
So, if you generated 100 Marketing Qualified Leads – when we say ‘leads’ from here we mean MQLs – and it cost you £3,000 to run some activity to do so, your lead value would be £30. (We’re really putting our GCSE maths to good use here).
But it’s handy to remember that the cost of generating leads isn’t just in what you’ve spent on activity. If you want the full picture you’ve got to factor in other costs that indirectly impact lead generation.
It’s a bottom up approach that needs to take into account salaries, systems/platform subscriptions, equipment, utilities and all that jazz. They may not be directly attributable to the lead generated but without paying them the lead gen wouldn’t have happened.
So, once you’ve included everything in the mix, you’ll have a clearer idea of what you’re paying for a lead – what its value is. Let’s say as a nominal figure each of those 100 leads costs you £250 a piece to generate.
But is that the amount you should be paying for a lead?
Calculating Your Lead Worth
Lead worth on the other hand is all about – as the name would suggest – what a lead is worth to your business as a whole, not just what you pay for it. It’s also directly linked to the current performance of converting leads into won business – which is crucial.
Let’s dig into that if you’re a bit “What are you on about?” about it.
Say at the very top level you have an average deal size of £1,000,000 (sticking to those nice round numbers). Then say that right now, looking at your pipeline conversion rates:
- You win 50% of the proposals you put in front of customers
- 25 % of Opportunities convert into Proposals
- 25% of SQLs (Sales Qualified Leads) convert into Opportunities
- 25% of MQLs convert into SQLs
(The reality of those conversion rates in your business will hopefully be much higher. These are just some conversion rate figures plucked out of the air for ease).
So, extrapolating backwards from that £1m Average Deal Size you can determine the nominal worth of everything at each stage:
- Proposal is worth £500,000 (50% of Average Deal Size)
- Opportunity is worth £125,000 (25% of Proposal worth)
- SQL is worth £31,250 (25% of Opportunity worth)
- MQL is worth £7812.50 (25% of SQL worth)
You can then keep on going if you want and work out what the value of an unqualified lead, contact, or whatever categorisation of pipeline stage you want is worth. We’ll stop here for the sake of the wordcount of this blog…
So, in our example we’re saying that a properly qualified lead is actually worth just shy of £8k for your business… but you’re only paying £250 for it. What an absolute bargain, right?
It may sound like the deal of the century but 99.9 times out of 100 if something looks too good to be true it is. Yes, you might roll the dice and get lucky every now and then low-balling things, but if we KNEW something was worth £8k and someone said we could have it for £250 we’d be super sceptical. (And we’d advise you to be too).
Whats the point of all these sums?
Now, we’re not saying that you should be paying almost £8k for a lead either. That’s not where this is going.
We’re saying that having this clear idea of how much a lead is worth helps to shift focus for your marketing activity away from a quantity-first approach to lead gen – “LETS GET AS MANY LEADS IN AS CHEAP AS POSSIBLE!!!” – to a quality-first approach – “Let’s get high-quality leads in that actually qualify through at a reasonable level of investment”.
When you can prove that a lead is worth almost £8k (or whatever it is to your business) you start to reframe how investment is made in marketing and the expectations around what will be delivered.
If EVERYONE – sales director, CFO, CEO – knows that a lead is worth almost £8k it quickly becomes unreasonable to expect marketing to deliver leads until the cows come home for £250 a pop.
Sure, you’ll want to consistently come in under that £8k-ish level to prove the ROI of what marketing does, but no other function would be expected to deliver what was required with a tiny fraction of the budget needed to do so. And marketing should be no different.
And when you’ve worked this all out based on accurate and realistic facts and figures the quality over quantity approach becomes almost impossible to argue against.
Shifting Perceptions Too…
You can also use this data-lead/worth-based approach to shift perceptions of marketing away from just being seen as a cost to your business, too.
If you just use a Value lens to analyse your led gen activity through, you’ll always be talking about cost. “We spent this much and got this number of leads for it. This is what our lead gen cost us”.
Whereas if you use a Worth-based approach, you’re instantly talking about the active contribution you’re making to delivering the revenue the business needs whilst framing your marketing activity with very positive ROI. “The leads we’ve generated are worth £XXXX to the business, and we’ve invested this much to do so”.
It can be a game changer for marketers in proving their worth to the rest of the business.
Doing Lead Gen Proper, Like
When lead gen’s done properly and it generates those highly qualified leads (not just contact details from a database or information scraped from LinkedIn) it does take significant investment – financially, time-wise and in effort – to get right. It’s not something you can just “turn on” and expect MQLs to drop out instantly.
(It also needs to be part of a longer-term approach to marketing that includes demand generation activity too, but that’s a whole other blog post.)
Don’t be seduced by the latest shiny piece of SaaS everyone’s chatting about or the promises from people on LinkedIn they can help you generate leads from LinkedIn – PLOT TWIST: You’re one of those leads.
Focus instead on who your ideal customer is (at an individual level), where they exist and what you can do to grab their attention long enough to start a conversation. Then back that all up with some provable, accurate data and you’ll have a much clearer view of what lead generation success really looks like for you and your business.