How many of your marketing leads convert into sales? Data from SiriusDecisions shows that 98% of MQLs (marketing-qualified leads) will never result in closed business.
If most leads don't become customers, it seems misguided that marketers keep reporting on lead volume as their key lead generation metric. MQLs, SQLs, and other lead gen KPIs aside, if the goal of a marketing team is to grow the company’s business at a lower cost, marketing metrics should be aligned with that goal.
By focusing on lead value and revenue generated, marketers can allocate marketing budget in the most effective way and choose channels that yield the most incremental revenue. Here’s how.
Define a lead
For starters, let’s define a lead. Most B2B marketing organizations qualify leads into several categories by stage:
- Marketing-qualified leads (MQLs)
- Sales-qualified leads (SQLs)
There’re also SALs (sales-accepted leads) and other stages depending on the company’s sales process, but we’ll discuss MQLs and SQLs here. Very simply, marketing lead “qualification” means that the marketing team decided that a lead is ready to be handed over to your sales team for the initial contact.
How “ready” is sales-ready? Buyer personas are usually a good starting point. Lead qualification factors often include demographic and firmographic data (industry, company size, location, and buyer’s role) as well as behavioral information. For example, people who download a company’s one-pager, spend a certain amount of time on a pricing page, and opt in to receive news and updates from a company can be considered marketing-qualified.
A sales-qualified lead, on the other hand, is a lead that has been researched and vetted by your sales team. If a lead has met your sales team’s criteria and expressed an intent to buy a product, such lead is sales-qualified.
How to find out how much a lead is worth
To understand the value of each lead, find your average sale/revenue per customer and your conversion rate by lead source. For example, if your average revenue per lead is $10,000, and 0.2% of leads from your AdWords CPC campaign convert into customers, your average lead value is $20.
$10,000 x .002 = $20.
Not all leads are created equal
Knowing that your average lead value for AdWords is $20, you probably don’t want to pay more than $20 per click. On the other hand, you might want to invest in a channel where a click costs lower or equal to $20.
Understanding your lead value by source will help you make smart investments that are not tied to CPC benchmarks or industry averages. Say, you’re selling to HR directors and decide to sponsor a newsletter whose audience fits your target market description. It might cost you $40 per click, twice as much as you paid for that AdWords campaign, but if 10% of quote requests coming from that newsletter campaign become customers, it’s worth it.
$10,000 x 0.1 = $1,000
And if 1% of your webinar leads close into customers, that’s $100 per each webinar lead.
As you can see, three different sources, three different price tags for leads generated by each source.
Measure your lead generation with closed-loop reporting
In B2B marketing, a buyer’s journey is incredibly complex, especially if you’re selling software at a high price point. In addition to calculating lead value by source, you need to see the full picture of your performance at each marketing touch point -- from the first “hello” email to a trade show booth visit, to a white paper download and “request a demo” form-fill -- all the way to a steak dinner and signing the contract, if you’d like.
Closed-loop reporting software for paid marketers helps simplify and untangle B2B attribution for paid marketers. Using calculated metrics in AdStage, you can forget Excel and all that Algebra above and get quick insights into your cross-network campaign performance at a glance.