The Changing Dimensions of Lead Flow

One of the more interesting ways of assessing the revenue performance of an organization that we looked at in thinking about revenue benchmarking was via an overall plan (whether just an adjustment of historicals, or a forward-looking revenue projection). However, in building an end-to-end plan for managing your overall revenue performance, it is important to stay aware of how the “dimensions” change over time. As a marketer or salesperson interacting with a prospective buying audience, how that audience is defined changes as a more direct connection is made with them. While this change is unimportant if each stage is dealt with separately, it becomes important to understand and model correctly as the entire process begins to be viewed with the same lens.

- At the earliest stages of interaction with buyers, as they are just entering into the awareness and education stage, the metrics that are trackable are around interactions and views. Whether it is views of a banner ad, anonymous visitors on a website, or searches being performed against key phrases, these views are often anonymous and may occur multiple times for the same individual.

- As individual prospects become known, uniquely identifying them by an identifier such as an email address or other id becomes possible. At this point, multiple interactions with one person can be tied together and that individuals actions can begin to qualify them as potentially being a marketing qualified lead.

- As a marketing qualified lead is handed to the sales team, and an opportunity is created to explore the interest that is expressed, the opportunity is generally with the purchasing company, with multiple interested individuals associated to it.

- The opportunity itself, as it is explored in further detail, will begin to have an approximation of size associated with it. Depending on what is being sold, this is associated with an annual contract value, total deal size, or other measurement of bookings.

- When a deal is closed, and services begin to be rendered, this bookings number will translate to a flow of revenue, based on the appropriate accounting standards being used.

At each point in an overall plan that a change in the "dimension" of what we're measuring will take place, this transition must be taken into account. If a conversion rate between website traffic and inquiries, or between leads and sales opportunities, is being benchmarked against as part of the plan, it must take this change in dimension into account. In most cases, this shift in dimensions can be built in as part of any conversion rate that is used in an applicable situation. For example, if 15 opportunities are created out of 1000 leads, a 1.5% conversion rate can be quoted (although I'm sure that the more rigorous mathematicians amongst us will cringe), and planned against without problem.

However, it’s important to realize that this change in dimensions did take place, and if any change in buying pattern or marketing approach takes place, a change in the number of individuals involved in a deal could shift this number without any underlying change in the likelihood of an opportunity to be created.

In your planning, are you clear on what the "dimension" is that you're measuring at each stage? An individual? A company? A dollar? Read More...

Predicting Revenue through the Marketing Funnel

Predicting revenue is a difficult task for any organization, and it has historically been only attempted in the sales organization. With a buying funnel modeled from the top of the funnel, however, it is possible to begin understanding whether there is enough in the marketing funnel to support the desired and planned revenue goals.

For each stage in your buying process, based either on best-in-class metrics or your own historical results, you can look at two key metrics; the ratio between how many leads enter a stage and how many progress beyond it, and the average time in the stage for those that do progress beyond it. Note that it is critical to have leads degrade from a stage after an appropriate period of time. Without this, your calculations will be misguided as you will be basing your numbers on leads that are no longer sufficiently engaged to be accurately counted as part of that stage.

From there, with the conversion rates known or approximated, simply work backwards up the funnel. If your average deal size is $100,000, and you need $10M in revenue, then you need 100 deals. If the Sales Accepted Leads (SALs) close at a 10% close rate, that’s 1000 SQOs. With a 40% conversion rate of SALs to SQOs, this means 2500 SALs.

In order to create those SALs, sales need to be provided with MQLs that they accept. With an 80% acceptance rate, this means marketing needs to create 3125 MQLs. If the Interested Inquiry to MQL ratio is 10%, that means you need 31250 Interested Inquiries in order to make that $10M number.

However, time is an important element of analysis of the marketing funnel. If it takes, on average 2 months for and inquiry to become an MQL, a SQO is only created after a few initial calls, taking on average 1 month, and the sales process takes 3 months, those 31250 Interested Inquiries will not convert into $10M in revenue for 6 months. This is obviously a very simplified example, but the importance of taking time into account cannot be underestimated. The more your model of the buyers’ buying process evolves to include multiple stages, the more insightful this analysis can be. Seeing gaps in the funnel early can give you insight into revenue shortfalls many months in advance.

It’s important to note though, that is is only a model for deals that are generated by marketing. If you have a partner channel generating deals on their own, or your field sales team generates their own opportunities, this revenue will be over and above the revenue modeled with this calculation. Read More...

Loose Coupling and Analysis of the Marketing Process

When analyzing the flow of leads through your marketing organization, and into your sales organization, how you design the stages in the process has a significant impact on both how you are going to be able to analyze it, and how you are going to be able to optimize it in the future. Without the ability to both analyze and optimize a process, you will find that errors begin to creep into the process due to the lack of visibility, and your ability to adapt the process as your business changes or grows is minimal.

The best approach, when you have a hand-off between one team and another, is one that is “loosely coupled”. Your marketing team, for example, may pass marketing qualified leads (MQLs) to your sales team. However, what the sales team accepts should not be termed the same thing – MQLs – as this does not allow the system to account for, and measure, a drop-off in the acceptance rate. Instead, these leads that are accepted by sales should be termed differently – in this case Sales Accepted Leads – SALs.

Even in a system where your current design parameters state that 100% of MQLs should be acted on by sales, you should still name and handle them separately. The reason for this is two-fold. For one, no system involving people can ever operate at 100% accuracy. Some of your lead will slip through the cracks due to bad data, absent employees, or inattentiveness. Without having both MQLs and SALs to measure, and thus a SAL/MQL acceptance rate, it is not possible to measure how close to 100% your system is operating at.

The second reason to avoid the tight coupling that is implied by having the same name in subsquest process stages is that most marketing organizations will change their processes over time. Perhaps your current design specification is a 100% acceptance rate of MQLs within the sales team. This may change in a quarter’s time if you decide to open up the funnel a little bit, and pass more leads to your sales team, while allowing them to selectively choose. You may reduce the design parameter to 60%. Without the “loose coupling” that having unique naming provides, it will require a full change of your marketing funnel process just to shift this one parameter. Instead, build in the flexibility up front by having the pre, and post-handoff leads named separately.

The example of MQLs being passed to sales is an obvious one, but this becomes a more interesting challenge when the names are not as obvious. For example, if you have an inside team focused on lead generation. They would take a lead at some level of quality, place a call, confirm interest, perhaps budget and authority, and deem the lead ready for the field sales team. If this team is part of the marketing organization (in some organizations, this team is part of sales), then you might wish to call the output of this team’s work an MQL. However, the question is, what is the input to this team?

Obviously, you will be scoring the leads prior to handing them to this team, so you might call them “Qualified Inquiries” to differentiate them from the raw inquiries you see on your website. The Qualified Inquiries that are then picked up by the inside team might be called “Qualified Inquiries Accepted” in order to allow you to manage the handoff between your marketing campaigns team and the inside team and allow that handoff ratio to be adjusted as needed.

The loose coupling provided by having unique names for each relevant stage of the buying process allows you to both analyze the operation of your process and also make adjustments as needed. Some upfront planning to define sufficient handoff points to allow the right amount of adjustment later can save you significant future rework. Read More...