Squeezing Revenue From Tired Old Sales Leads
Few C-level executives today are happy with the return on their marketing campaign investments. Yet each quarter these same unhappy executives continue to pour billions more dollars collectively into the same lead-generation campaigns and produce the same mediocre ROI.
Stuck Between a Rock and a Hard Place
For every 100 qualified leads generated in a typical campaign, an average of two to five turn into revenue a low rate of return, but considered acceptable among upper management as an unavoidable cost of doing business. At best, this number represents a miniscule 5 percent yield, which to put it in blunt manufacturing terms is worse than a 95 percent scrap rate! Not many other departments in an organization are allowed to provide a sub-5 percent process yield. Yet despite this low efficiency, many businesses are stuck between a rock and a hard place unhappy, but unable to stop investing in leadgeneration campaigns because they are such an integral part of the revenue creation process.
Interestingly, the processes of lead-generation campaign execution have remained largely unchanged for many decades and so has their return. New channels have been added to the media mix, such as fax, email and the Internet, but the basic process of running a campaign has changed very little. Clearly a different approach is required in order to make the process more efficient. As Albert Einstein said, Insanity is doing the same thing over and over again and expecting different results.
Overcome the Hurdles and Improve
Improvements to lead-generation efficiency are inherently difficult to make because any proposed change must cross departmental boundaries; as leads are produced by the marketing group, they are consumed by the sales team. Marketing and sales are parts of the same whole, yet they are frequently at odds with each other as each operates with slightly divergent goals. Marketing is on a mission to produce more leads, and if a lead does not convert into a sale, marketing tends to attribute it to the sales does not know how to sell explanation. The sales team wants only leads that they can convert, and if a lead does not convert, the team attributes it to the marketing sent over poor leads explanation. Having many sales leads that do not convert to revenue is infinitely worse for the sales team than having just a handful of leads that do convert, because each unproductive lead has to be processed and followed up on, and each lead consumes valuable resources. Marketing is typically less familiar with the sales process and has no incentive to learn. To add to the fray, the sales team rarely gives the marketing group detailed feedback as to why a lead was poor or what type of leads are needed to sell more effectively. Without a closed-loop feedback process between the two groups, its not hard to understand why so many lead-generation processes today remain inefficient and disconnected.
To make the process smoother and more efficient, the marketing group must be realigned with the way leads are consumed. Using a new sales-driven orientation to lead generation helps marketing focus on the common company goal of closing more sales, and become closely synchronized with the sales process.
Fruit Picking and Sales Leads
A major cause of lead-generation inefficiency is the single shot campaign model: Campaigns are typically executed in isolation and leads that did not convert immediately are discarded in favor of new leads. It is a bit like an orchard farmer during each harvest season who collects all the fruits from the trees and picks out and sells the ripe fruits, while throwing away all the fruits that are not yet ripe. An orchard farmer would not stay in business if he had to throw away as much as 95 percent of his fruit because they are not ripe when they are picked. Yet, 95 percent is about the average number of not-readyto- buy leads thrown away from a typical lead-generation campaign.
Interestingly, roughly 45 percent of all respondents to a leadgeneration campaign will make some type of purchase within 12 months this is known as the marketing rule of 45 that was discussed in the Marketing Management Journal, Volume 3, Issue 2 in 1994. This means the revenue potential in the leads that didnt convert immediately is actually quite high. Smart orchard farmers quickly figure out that if they wait a while for the fruits to ripen, they can squeeze out more profits. Perhaps this is a lesson for the marketers as well.
Why do many leads fail to convert immediately? The answer is complex and multifaceted: even for a prospect that has a project that is already budgeted, situations change, the project team may change, and the timing may be delayed. With each change, a potential purchase can be pushed out by several calendar quarters or more as a hot lead quickly cools down to a warm lead and then a cold lead. When it falls off the sales forecast, it doesnt necessarily mean that the lead will no longer convert, it just means that it probably will not convert right away. Eventually many will still convert to a sale. But how long can your sales team economically stay engaged? Depending on your sales cycle, most salespeople will probably not engage beyond the current calendar quarter, because their compensation structure motivates them to pursue other more immediate opportunities. Since sales has no time or interest to follow up on these cold leads, another process must be put in place to give the lead time to ripen, without sometimes irritating pressure from a salesperson. The logical place to nurture these leads is within the marketing department, and such a process involves engaging the cold leads periodically, collecting insights from them that the sales team can later use and monitoring them until they are ready to be converted.
This process of gently squeezing more revenue from cold leads can be broken down in the following detailed steps:
Step 1: Centralize Prospect Information
Since the ability of a sales team to convert any lead into revenue is directly related to the quality and quantity of lead information, a robust central lead information repository is a must-have for any lead improvement project. Whether a lead originates from a trade show, an email campaign, a referral or a website, it must be entered, cleansed and stored into a central repository. There are several important benefits to this. First, a central system aggregates the results from various lead sources and standardizes the information content and definition, so the prospect and customer insights can be easily reused and leveraged by other systems downstream. Second, with all the insight data in one place, businesses can deliver coordinated prospect interactions across channels and across campaigns; for example, treating a prospect registering for a webinar differently if that prospect had responded to an earlier email campaign. Lastly, a centralized system ensures the integrity of the lead and contact database by eliminating duplicates and erroneous data so the lead list is always clean, unique and up to date.
The lead repository should be easily configurable to store a rich information set one that goes beyond the basic demographics and contact information to include additional data such as insights to business pain points, relevant system configuration and preference. And to prevent premature consumption by the sales team, the repository of unqualified prospects not ready for engagement should remain unexposed until the right time. The perceived quality of leads by the sales team can strongly affect the lead follow-up rate; therefore this perception must be carefully managed. The best practice is to publish only cleansed, qualified and verified leads into the salesforce automation system. Lead information is the only tangible asset to result from lead-generation campaigns, and to protect and maximize this asset requires a comprehensive central lead repository system.
Step 2: Lure Instead of Spear
Once a lead turns cold and the contact is no longer interested in your product or service, chances are that even if your sales team wants to call, the cold lead will not want to talk to your salespeople. As most people who have spent any time selling know, trying to coerce an uninterested prospect into talking to you is a dreadful task. If using salespeople to call on reluctant prospects is like chasing prospects down with a spear, then engaging the prospects with attractive soft offers is far more akin to luring them in, like bears to a honeypot.
Selling always becomes more effective when prospects engage willingly, so the secret to engaging cold prospects, who are not currently interested in your solution, is to lure them in with something else they might want. For every prospect segment, it is possible to identify a handful of useful soft offers of interest. A soft offer is a useful offer that does not directly promote a specific product. Examples include topical information, industry best-practice write-ups or items with a high utility value. The CFO might enjoy a webinar on Sarbanes- Oxley. The CIO might be interested in a white paper on new ways to secure the network, and the programmer could be hooked with a book on new Java programming techniques. A prospect responds to a soft offer because the offer is useful, and most prospects are willing to divulge some information in return. Skillful selection of soft offers will not only increase prospect response rate, but also will educate the prospects through a less obviously biased format and build the foundation for a credible channel to learn about the strength of your solution. This, in turn, will help stimulate long-term demand. Repeated prospect exposures to the appropriate soft offers from your company also will build up mindshare and establish your company as a reputable expert in the space.
Step 3: Gather Actionable Insights to Arm Sales
Once you have attracted cold prospects with an inviting soft offer, the next step is to leverage this interaction instance to help your sales team convert this lead. A good salesperson will tell you that the key to advancing a sale is the ability to be relevant to a prospects needs. When a prospect feels understood and that all of his pain points are being addressed, youre more likely to see a sale result. Unfortunately, it is not easy to determine the prospects needs because this information is not often volunteered and can change frequently. Using the low-pressure lure approach, a prospect will typically volunteer insights in order to obtain a desired soft offer. Statistically, the higher the value of the offer, the greater the response rate and accuracy (e.g., a free book offer will elicit more respondents and more accurate responses than a simple white paper download).
Collecting deeper insight information requires technologies more advanced than the standard static Web forms. To more effectively collect prospect information that can be useful to the sales team, queries must be tailored for each prospect. A CEO should not be asked about programming tools any more than a developer should be asked to respond to questions about strategic initiatives. To increase accuracy and understanding, tailor the phrasing of question-and-answer options according to the prospects role and industry. A VP from the medical industry requires a different approach than a line manager in the insurance industry. The more individualized the prospect experience is, the more relevant the interaction will be. The result is more accurate and actionable lead information.
Step 4: Entice Sales to Follow Up
A lead that is not followed up cannot convert into revenue. The one thing that all salespeople will respond to is greater compensation. So the best way to draw the sales team to follow up on a lead is to provide a clear path to more commissions commissions that may land in their pockets in the current calendar quarter. Top salespeople develop instincts for quickly determining poor leads so as to avoid wasting time on noncommissionproducing activities. But in most occasions, these instincts are overly sensitive. It is therefore not surprising that most salespeople have no interest in following up on recycled leads that they have seen before. The challenge therefore is to convince a salesperson that the recycled lead being passed down for the second time can be more viable and that it represents a commission for the current calendar quarter.
One way to do this is to provide actionable details about why a lead is worthy of an immediate follow-up. Marketing, therefore, must be able to detect and report on one or more recent buying condition changes for the prospect. For example, previously the salesperson could not close a specific prospect, because at the time of the first call the prospects company was too small. The salesperson enters this disposition information into the salesforce automation system and moves on to other prospects. The relationship is then turned over to marketing for nurturing. Marketing continues to engage with the prospect and monitor for any buying condition changes (see steps 2 and 3). Eventually, the prospects company grows to become larger, and a customized qualification threshold is crossed. The salesperson is then alerted of this new buying condition change (i.e., a qualified company size), and subsequently is more eager to get back into the account. To achieve this effectively and economically, the marketing department must have the capability to automatically monitor each prospect for unique buying condition changes.
Squeeze Gently, Harvest Well
In todays competitive global marketplace, many companies are finding that their traditional lead-generation process is broken. However, there is hope of an effective fix. By realizing that lead generation is an intermediate step to the revenue-generation process, businesses can integrate these efforts into the bigger context of the sales process and gain visibility into possible areas of improvement. Through a deeper understanding of how customers buy and how sales teams sell, this step-by-step recipe provides a way to help supercharge your leadgeneration process. More specifically, it offers a means to gently squeeze more revenue from the large pile of old sales leads that have yet to convert. Happy harvesting!
