The Sales Lead Paradox
Conventional wisdom has it that more marketing leads at the top of the funnel will generate more qualified opportunities for sales in the middle of the funnel. And those will drive more closed deals at the bottom. Higher volume in, higher volume outright?
Actually, there is a sales paradox at work: Delivering fewer, better qualified leads will lead to more sales and higher revenue, but more about this in a moment.
First, let's set the stage. One fraught with a number of significant challenges. Economic recovery is happening at a less than desirable pace, and prospect companies are investing cautiously, at best. The proliferation of enterprise solutions presents many viable choices to self-educating buyers who sense that providers look and sound the same, who now control the buying process, and who engage with reps much later. Add to these even more challenges proving your solution's effectiveness and conveying its value.
With longer sales cycles and more sales teams missing quotas, the first impulse is to deploy programs that generate high volumes of prospect names with the assumption that more leads drive more sales. Here's a closer look at this entrenched approach.
Strategy 1: More leads, more sales
Incented by lead volume and low cost-per-lead, marketing proudly distributes a monthly report that begins like this:
"We're on track for a great quarter in lead generation. This month we generated 1,250+ leads from all sources, that's a 30 percent gain over last year. And in spite of higher ad rates, we continue to keep our cost-per-lead under $100."
The collective "wow" in marketing is soon replaced by groans in sales when reps receive stacks of leads and discover very few are qualified or even documented with compelling needs, decision makers, budgets, and timelines. Many of these so-called "leads" are only inquiries, and others require nurturing prior to hand-off.
Sales complains, and marketing, lacking the resources to filter or nurture, pushes back by saying, "That's not our role." It's no surprise that many recent sales surveys report an overwhelming majority of marketing-generated leads are not being followed up because quality is perceived to be poor.
The reality is that drowning sales in more leads, especially those of poor quality, can actually make things worse. Rep calendars are cluttered with unqualified meetings. Real opportunities drop through the cracks and are lost to competitors. Money, resources, and times are being wasted on marketing and sales lead generation programs that simply don't work.
Strategy 2: Fewer, more highly qualified leads are better
What sales teams actually need are fewer, but fully qualified leads that have been carefully and consistently nurtured, appropriately developed-until they are ready to be delivered as high-value, sales-ready opportunities. Reps can then focus their time more effectively on the most likely buyers.
When marketing and sales groups are aligned on this approach and accompanying best-practice processes, the monthly marketing report looks much different:
"This month, marketing added 14 new prospects to our Prospect Development program. A total of 41 sales opportunities are currently under development by marketing. In June, sales received 10 fully nurtured sales opportunities representing $3.5 million in potential near-term revenue."
These fully-nurtured sales opportunities are characterized by the following:
- Each has already been contacted at least eight times.
- Each has graduated from unknown or long-term status to a near-term-decision making mode.
- Each is accompanied by a complete contact history; individuals involved in the decision; pain points; a budget overview; and the decision timeline.
The sales reps who are presented with a lower number of better qualified leads give them priority attention as they know from experience that these leads are real or they would not be getting them. They know relationships have already been built with decision makers who are expecting their calls.
The true measure of successful marketing should be how well marketing creates opportunities that have a high potential for developing into sales. The true measure of sales should be how well they close these valuable leads from marketing.
By taking a "less is more" approach and engaging in systematic prospect development, it's possible to send only the best opportunities to the field. Overall sales efficiency improves as sales managers can accomplish more with fewer resources, and highly compensated reps can focus on doing what they do best: close deals.
In the end, delivering fewer, higher quality opportunities means greater return on sales and marketing program investments, more closed deals, and higher revenue.
Dan McDade is founder and president of PointClear, a sales and marketing services firm.