When there is a revenue shortfall, the finger pointing starts, and the chief finger pointers are often marketing and sales.
Consider this hypothetical dialog:
Marketing―“We’ve spent hundreds of thousands of dollars developing leads for you. But you don’t convert them into customers.”
Sales―“Your leads are no good.”
Marketing―“How would you know? You never follow up on them.”
Sales―“It’s not worth the effort.”
Revenue Growth Levers
There may be plenty of blame to go around, but the first question is “What is sales doing with the leads it does consider qualified?”
Improving the revenue growth sales levers may be a lot more cost effective than asking marketing to spend more money developing leads. This is particularly true if Sales isn’t handling leads well, anyway.
Put another way, the ROI on fixing the sales process could be much higher than the ROI on increased lead flow.
The Revenue Model
Below is an example of a hypothetical company with $12.5 million in revenue generated from marketing developed leads for a specific program. The revenue is directly attributable to the lead development effort.
Marketing created 100,000 potential leads and 5,000 qualified leads over the course of a year. Sales closed 250 or 5% of the Marketing Qualified Leads.
The Levers’ Impact
Let’s say the company wanted to increase the revenue from this program by 20% or $2.5 million.
The company could do this without investing another nickel in lead development. A 6% to 8% improvement in the three sales levers could generate the 20% revenue increase.
Let’s look at this another way. Sales has 2,500 leads that it considers qualified. Yet it’s closing only 10% of those (250). Can’t blame Marketing for that!
If Sales closed 12% of those leads, that would generate the 20% revenue increase.
How to Pull the Revenue Growth Levers
So, what would it take to improve the three sales levers?
- Sales Strategy―A well thought out (and clearly communicated) sales strategy enables the sales team to pursue that target market with a compelling message. This means selling the right things to the right people.
Impact―Sales Cycle, Close Rate, Sales Price
- Opportunity Analysis―This goes well beyond the target company’s “firm-o-graphics” such as industry and company size. The analysis creates a score based on the prospect’s need and the likelihood of closing a deal.
Impact―Sales Cycle + Close rate
- Buyer’s Journey―This requires understanding the buying process and educating the buyer through the journey with appropriate content and information.
Impact―Sales Cycle + Close Rate
- Follow up―Consider these statistics from a forbes.com article by Ken Krogue of insidesales.com.
- The typical sales rep makes only 1.3 attempts to reach a lead.
- Only 27% of leads are actually contacted (sales rep speaks to the lead).
- 35% to 64% of leads never get called at all.
- 87% of leads are abandoned.
Effective follow up is essential. The company needs proper sales procedures and tools such as a CRM.
- Selling Value―Sales reps can’t sell products. They must sell value. A prospect must see a ROI for the purchase.
Impact―Close Rate + Sales price
Getting Started on the Revenue Growth Programs
What’s necessary to implement these five programs? Mostly, it’s training and coaching.
That investment is a lot smaller than the cost of advertising, trade shows, direct mail, and other marketing programs.
Don’t turn on the lead development spigot until Sales can handle leads effectively. Otherwise, you’re flushing money down the toilet.