How to distinguish valuable leads from sales funnel cloggers

James Weller

Posted on: August 10, 2020

Reading Time: 4 minutes

Category: From lead to sale

How to distinguish valuable leads from sales funnel cloggers

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A lot of effort goes into converting leads. And we don’t need to tell you that!

Unfortunately, a lot less is often spent on following their journey from handover to sales to becoming a customer (or not), and then on to tracking their lifetime value.

Most businesses will struggle to place an undisputed revenue figure on the value of converted leads that came, for example, from marketing to sales. At best they may rely on a bit of educated guesswork to fill the knowledge vacuum.

In large part, this is an area where sales and marketing are not fully aligned: you can bet your bottom dollar that nearly every company could instantly reel off accurate figures about how many leads convert into sales opportunities. But after this the trail runs cold.

Without converted lead metrics it is pretty impossible to optimise this part of the sales process. No one is 100% on what is working and what is distracting.

The converted lead metrics required, however, are not that difficult to obtain.

All you need is a CMS and a plan.

We’ll provide the plan – assuming you already have the CMS.

What is a converted lead?

For the purposes of this post you’ll need to accept our definition of a converted lead.

A converted lead is one that has passed a threshold lead score and is now viewed by sales as an active opportunity.

Here’s a typical journey from lead to converted lead:

  • Prospect downloads whitepaper =>
  • Email sequence is generated =>
  • The prospect visits core pages on site, views videos and downloads more information =>
  • Their lead score reaches the qualification threshold =>
  • A qualifying call is made by sales and the prospect passes =>
  • They now become a converted lead (or an ‘opportunity’).

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What are converted lead metrics?

The four most important converted lead metrics that you should be tracking to understand the key drivers of your business are:

      1. Revenue contribution
      2. Opportunity win rates
      3. Average opportunity size
      4. Opportunity win rates (by lead source and campaign)

                    1. Revenue contribution

This measures the revenue contribution of converted leads compared to that of opportunities that did not come from converted leads (i.e. from existing accounts).
This information gives you the essential background context for other lead conversion metrics.
If you are a new start-up company, you might expect the contribution from converted leads to be high, but well-established companies will typically see a lower figure as repeat business is strong.

                    2. Opportunity win rates

This metric allows you to compare the win rate of opportunities from converted leads compared to those from existing accounts.
The win rate is the ratio of opportunities won versus opportunities lost in a set time-frame. It can be expressed by volume (number of deals won and lost) and by value (revenue resulting from deals won).
Typically, the win rate for converted leads will be lower than that for direct opportunities. In most businesses, it’s easier to win deals with existing customers than it is with new prospects. However, the value of these can often be less.
The sorts of questions you should explore to evaluate how effective is the time being spent include:

  • Does a low win rate from converted leads indicate inadequately qualified leads?
  • Is there a disproportionate focus from sales on the volume wins available from existing customers, rather than the higher value but harder to attain wins from converted leads?

                    3. Average opportunity size

This metric compares the average value of deals that came from converted Leads with deals created directly.
If, for example, the average deal size from existing customer opportunities is higher than for converted leads you may wish to look into if this is to be expected or an anomaly.

  • Are existing customers typically making smaller, repeat orders or is your sales model a ‘land and expand’ one where high value follow-on orders are expected?
  • What is happening over time?
  • Are your converted lead orders growing in value or shrinking?
  • And, most importantly, why is this?

                    4. Opportunity win rates (by lead source and campaign)

Lead source is the channel from which a lead came. This may be, for example, web, trade show, purchased email list or phone enquiry.

Typically leads that come from referrals have a higher conversion rate but tend to be smaller in volume than other sources.

The same sort of information can be gleaned by looking at the sin rates of converted leads by campaign. Here, rather than channel, leads are grouped by the marketing campaign which generated them.

This helps you instantly assess the value of campaigns not by leads generated but by actual business generated. This can be critical information in deciding on the types of campaign to focus on going forward.

Do you need a prospecting tool or service?

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