The Truth About Leads
Chapter 4: Reaping the Value of Long-Term Leads
The most effective approach for long-term sales lead generation comes from hiring a lead farmer. That is, an outside company that can provide appropriate lead nurturing, slowly cultivating the long-term leads while sales and marketing can focus on the flash-in-the-pan short-term leads that are their bread and butter.
Table of Contents
- The importance of long-term sales lead management
- A new approach to sales lead generation, management, and nurturing
- Nurturing a long-term lead with CRM strategies
The Proof Is In the Numbers
Most managers would gladly spend $4,920 to generate $1,995,080 in incremental revenue ($3,936,040 minus the $1,940,960). Here are some reasons why this perfectly logical idea is so infrequently executed, much less well executed:
- The sales force is driven by quarterly results (often due to the fact that public companies live and die by those numbers). As a result, even the best-intentioned sales executives cannot afford to focus on long-term leads as they search, often without success, for shorter-term opportunities.
Marketing is faulted for generating both too few leads, and leads that are not of high quality. Yet, marketing infrequently receives feedback on individual leads. Often marketing hears nothing at all, or general feedback that “the leads were no good.” As a result, a frustrated management creates a numeric metric—measuring marketing’s success based on the number of leads generated, or the cost-per-lead. Given this collision of circumstances—little detailed feedback on leads, and incentives based on quantity and cost—marketing ends up being driven to buy the greatest number of leads for the lowest price possible, rationalizing that “sales is probably just going to complain anyway” and “I have been told by management to drive the cost-per-lead down.”Here is what I recommend:
- CAREFULLY define a qualified lead. No matter how tight you think the definition is, you will be surprised if you ask every marketing and sales executive what their definition is. You will get a different answer from each of them.
- Make sure that your market is targeted. Most companies’ prospect lists are so broad that a lot of money is wasted marketing to non-prospects.
- Measure the cost of short- and long-term leads. And measure the value.
- Make sure that front-end costs (cost-per-lead), as well as back-end costs (cost-per-closed-sale), are measured. If you are not doing this, figure out what it is going to take to do it and start now.
- If you value your current lead-generation efforts, put all short-term leads on the forecast at 10 percent using your average deal size. Require a sales management executive’s approval to remove one of these leads from the forecast. Use this process to both measure the quality of the leads generated and measure the effectiveness of your sales force in following up on leads. Lead audits, or what we call Prospect Satisfaction Analyses, are incredibly powerful and accomplish both needs.
- If you do not value your current lead-generation efforts, do something about it and then follow the steps above.
If you are ignoring your long-term leads, you are wasting significant dollars, energy and other resources. Systematic nurturing of long-term opportunities is your best strategy for effectively increasing your marketing and sales program, and succeeding for the long haul.
Lead Nurturing: Who’s Minding the Lead Farm?
Research shows that 45 percent of qualified leads will end up buying a solution from someone within a year.
Think of lead qualification as a funnel. Marketing pours raw, unfiltered leads from a variety of sources into the top of the funnel. Ideally, what emerges at the other end—ready for professional handling by a lead-hungry sales force—is a steady supply of qualified opportunities, each with a defined process and time frame for buying.
Reality, unfortunately, rarely matches the ideal. All too often, no one is managing what happens to leads once they enter the funnel. Marketing, by focusing on lead cost instead of quality, thinks it has done its job simply by dumping in the unfiltered leads. No one contacts or qualifies the inquirers. No one augments the leads with demographic and firmographic data. No one nurtures long-term suspects into short-term prospects. No one evaluates the effectiveness of the lead sources.
In this garbage-in, garbage-out scenario, you can’t blame sales representatives for ignoring the output. Who, then, should process leads?
Since only a small portion of freshly generated leads typically fall into the short-term category, the root of the broken lead-generation system is that little or no effort is being made to determine whether each raw lead has any potential at all, much less whether it is short-term or long-term.
Whose job is lead filtration, qualification and development? In my observation of how hundreds of companies treat leads, the bulk of the work overwhelmingly rests with sales—and that is a recipe for failure. Even if leads are pre-qualified, salespeople are notoriously poor at following up on any leads but the hottest. In fact, experts say that sales does not follow up more than 70 percent of leads provided to them.
Management rightfully motivates and compensates salespeople to focus on making the immediate numbers, not on building a pipeline of prospects. To fully leverage the talents of your sales force, don’t expect sales representatives to filter leads, qualify them, and then cultivate the long-term ones until they are qualified sales opportunities. They just won’t do it!
Traditional marketing departments are also not the best equipped for this important job. They are filled with brand builders or communicators who do not possess lead-management skills and technology, and/or they are being measured on response rates and cost-per-lead, which are the wrong metrics.
In my experience, best practices suggest that a separate group, inside or outside the company, needs to take control of the vital lead-development function. Think of this group of specialists as lead farmers—they qualify raw leads, nurture lukewarm prospects into the hot category, and turn the developed leads over to the sales force for harvesting. Often this process takes months.
A developed lead is one that sets the stage for relationship selling. A lead farmer equips the sales representative with in-depth knowledge about the prospect. With advance insight into the prospect’s motivations, pain points and buying plans, the sales rep can engage the prospect in a consultative conversation rather than launching into a cold-call presentation or a discovery interview.
There has always been a lot of confusion around lead nurturing. It is sometimes called drip marketing and it can also be confused with closed-loop marketing. Recently, many companies have come to view marketing automation solutions as the holy grail of lead management and nurturing—thinking, incorrectly, that these systems are so powerful you can theoretically automate the prospect experience from web visit to sales hand-off.
The fact that not every person wants to be treated like the human equivalent of a pinball—receiving personal attention only after hitting the right bumpers and scoring the right points—is a major problem for companies that overly depend on marketing automation. Without appropriate intervention a tremendous amount of opportunity is lost (the vendors offering these exciting solutions are the first to agree).
I will provide a sample lead-nurturing schedule, but first want to talk about the numbers behind lead generation and nurturing and how the first three cycles of lead generation work prior to moving toward lead-nurturing cycles.
I’ll start with the numbers.
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