By Steve Turley, Published November 6, 2014
Have you ever heard the phrase: “You made your own bed, now you have to lie in it?” This is the perfect example. As marketing seeks to become smarter and evaluate leads quantitatively, the initial impact to the lead pipeline is going to be a sudden drop in volume. This will happen virtually every time. And the inevitable reaction from sales is a predictable as the sunrise: “We need more leads!” Let’s examine why giving in to this lie is a terrible idea.
Remember how we got here?
Let’s first recount how we got here. We came to an agreement between marketing and sales on what constituted a “sales-ready lead.” Those attributes were quantitative and measurable. Marketing created a Lead scoring system to evaluate every contact on the basis of those agreed-upon criteria. What is being passed to sales fits those criteria. They have a name and are no longer generic Leads but MQLs or AQLs. Remember?
This is where the rubber meets the road, and demonstrates the importance of previous steps of gaining sales agreement on the criteria for determining the meaning of “sales-ready.” This is also where sales either becomes marketing’s greatest ally or greatest enemy. And it’s your choice. But, before we get to your decision, let’s look at the math. Yes, math.
Look at the math. Because math is indisputable.
Let’s start with the demand before you, “We need more leads.” And, for the sake of clarity, let’s call them by their proper name, Marketing Qualified Leads, or MQLs. The total number of MQLs is a function of two factors:
1. Number of contacts in your marketing database.
2. Conversion rates between funnel stages.
3. Velocity of those contacts from prospect (or your top-of-funnel designation) to MQL.
How many contacts do you need?
The number of contacts affects your MQL output as a simple multiplier. For example, if your ratio of MQL to prospect is 0.1 (10%), then you simply determine the number of MQLs you require by dividing that number by your ratio. In this case, if you need 1,000 MQLs, your simple ration equation is 1,000/0.1=10,000 contacts in your database.
Calculate your Conversion Rates.
Conversion rates are much more complicated to change, but should always be top-of-mind for demand center managers. Small changes to conversion rates have a big impact on your ratios and, by extension the required size of your marketing database. The 10% MQL-to-prospect ratio above is likely a combination of conversion rates between multiple steps, something like Prospect à Inquiry à MQL. If prospect à inquiry conversion rate is 50% and inquiry à MQL conversion rate is 20%, you net out at an overall conversion rate of 0.5 * .0.2 = 0.1, or 10%. By improving the conversion rate between prospect à inquiry by 20%, we move that ratio to 0.6 or 60%. And, let’s say we move the inquiry à MQL rate by 25%, we move that ratio to .25 or 25%. Now let’s look at the math: 0.6 * 0.25 = .15, or 15%. We actually moved the total ratio by 50%! Our calculation now looks like this: 1,000/0.15=6,667 contacts in your database.
Velocity has impact.
Finally, the velocity calculation can increase your throughput to MQL. However, this calculation is difficult to measure and has the least impact on your ratios. Regardless, you should know it and be able to calculate it for your MAP platform. Velocity is simply time in stage. Velocity impact is time-in-stage*volume-in-stage. By reducing time-in-stage, we successfully improve our pass-though volume by the same percentage. For example, if your average time-in-stage for inquiry is 20 days, this means you have inquiries stacking up behind a 20-day “dam.” This analogy is a great way to visualize the velocity effect. If you can lower the time-in-stage by 25% to 15 days, you are allowing more volume through your dam by lowering its threshold. Imagine lowering a dam on a diver from 20 feet to 25 feet – what would happen? Initially, a flood of backed-up leads would flow through. Remember, you will need to maintain the volume of incoming lead flow to maintain this volume, once the threshold is lowered!
We now know what needs to change. The “brass tacks” question is how do we effect those changes. We need to ask these three questions:
1. How many contacts do we need at top of funnel to meet the required number of MQLs?
2. What can we do to affect out conversion rates at each stage?
3. What can we do to affect the time-in-stage to increase velocity?
The WRONG response!
In many cases, the immediate response is to take the easy road to answer question 2. The easy road is to artificially lower the dam by reducing or eliminating the agreed-upon criteria for a “sales ready” Lead. (Bypassing Lead Scoring.) This leads directly to Cause A, and negates one of the key benefits of a Marketing Automation platform. It is quick, easy and completely wrong.
Change the conversation.
Let’s go back to the original demand, “We need more leads.” The conversation usually goes something like this:
Sales: What happened to all our leads? We’re dying over here.
Marketing: Lead scoring has reduced the quantity, but improved the quality of the MQLs.
Sales: What? I don’t care. I need more leads NOW!
Marketing: But we agreed on the criteria for MQLs, and we are sending exactly what you require.
Sales: I don’t care! I have 200 reps sitting around not making phone calls because the pipeline is dry! Do what you have to do to get me more leads today!
Marketing: That’s not so easy, since we set up the system to do what you requested.
Sales: I’m calling the SVP. This is BS. We need people to call. The sky is falling and the world is coming to an end by noon.
Marketing: Okay, okay, I’ll turn off lead scoring!
And, you just wasted hundreds of thousands of dollars on Marketing Automation.
Instead, let’s have this conversation. We’ve established and agreed upon the definition of a “sales ready” Lead. We now have the calculations to demonstrate exactly what we need to generate the required number of MQLs. Based on this equation we can know ahead of time what it’s going to take to generate the required number of MQLs. Here are the two options:
1. Marketing is provided the necessary funding to perform the necessary actions to meet the required number of MQLs, or;
2. Sales can reduce its staff of sales reps to meet the number of MQLs that will flow through the system at current capacity.
How many times is option number two even contemplated? Is that just because sales screams louder? Data will answer the screaming and help prevent marketing from falling for the “We need more leads” trick at the expense of maintaining the quality of those leads.
You must agree with sales on the definition of a “sales-ready” lead.
There are only three components of lead volume marketing can control.
Learn to calculate each of these components and let the math do your talking for you.
When the boss asks you how to fix it, you need to be ready with the answers!