Do You Know Why Lead Generation is So Important [Calculator]
If you take the time to design and build a business based on the numbers, then you will know that having a steady stream of leads coming into your Marketing and Sales pipeline is critical to your success.
Why You Should be Projecting Future Leads and Marketing Budgets Required to Attain Sales Goals
That is why you should learn how much a lead is worth to your organization. It is the only way you will know how much effort you need to expend on the lead at any stage in the sales process. If you have established a specific sales goal, you can use your current lead conversion rate and cost information to know how many leads you will need in order to achieve that goal.
Without knowing this information, you really can't predict how much money you will make. Investors might like to know not only what you're projecting revenue wise, but as well, just how you determined the value of a lead.
Lead Generation Website
In today's modern marketing environment, lead generation can occur both offline and online. But to truly scale your operation, you're going to need to master the art of digital inbound lead generation with a customized lead generation website.
Systems such as Hubspot, which provide one of the most complete Inbound Marketing platforms available, allow you to measure not just every activity of every visitor to your website, but to determine the value of a lead at any stage of your pipeline.
This is not easy to do, to be frank, and requires some fairly deep and determined expertise. You will need to know not just the Inbound Marketing methodology but most importantly, how your own sales process works. It is often surprising how little we know about how sales are actually happening within our enterprise.
Average Order Value and It's Impact of Lead Value
If your average lead value is declining, it might mean you're generating fewer leads. Or, it might mean that your cost per lead has gone up. In another example, if your revenue for the month didn't increase significantly despite a rise in the number of leads, it means your Average Order Value (AOL) must be down, i.e. leads must be spending less per transaction. This is one of the key reason you must ensure marketing efforts are ROI-driven: You can determine if the money you invested in PPC, SEO, social, or email campaigns is yielding ROI or not by looking at your lead value.
Lead Generation Channels
Of course, with today's analytical tools, you can and should measure results from every marketing channel you use, including:
- Organic Search
- Social Media
Because leads can and do come in via different channels at different times, one of the more important, yet difficult task of setting up marketing campaigns is deciding on a lead attribution model. When you are spending large sums of money on advertising, you will want to strive toward having data driven lead attribution, as Google especially, says that it delivers the best overall PPC value in terms of Return on Investment and overall ROAS (Return on Ad Spend).
Engineering Lead Generation
Once you are able to measure your results for each of these channels, you can then calculate the value of leads from each of those channels. You can intelligently reallocate your efforts to the channels that pay off the best based on inbound value - essentially, you can take an engineering approach to lead generation. For entities like SAP Partners, this is especially critical as they are often faced with making the trade-off between events, such as SAPPhire of Developer Wars versus pursuing a digital marketing strategy.
Of course, just knowing the results from any or all of these channels is only a first step in mastering lead generation. Your system needs to help you keep score, more specifically, it needs to provide lead scoring for each and every lead in your sales funnel. And it needs to communicate automatically to your sales team when a lead has scored high enough for sales to initiate their process, using whatever criteria you have established to indicate a certain lead quality has been reached.
Sales Ready Leads
Of course, though we wish there was never a disagreement between marketing and sales about lead quality, the reality is, sales always believes the lead quality sucks. That's why you need to know the value of a lead in your pipeline. Without it, it is very easy for a sales manager to simply demand (read ask marketing to spend more money) more leads, of a higher quality.
Any organization that wants to survive and thrive will, of course, listen to what Sales has to say about lead quality and ultimately conversion rates being achieved. On the other hand, once you realize what it cost to generate a lead and what each lead is actually worth, using a tool like our lead value calculator (developed by our value engineering team), you may well start to treat each one with much greater respect.
Remember, even a lead you qualify out early on can and will come back into your pipeline, sometimes, years later. That's why re-marketing is such a big deal. It just takes people a while to make a decision. This can come down to many factors, but there are 2 we have seen over and over, one, the organization isn't equipped to evaluate your solution or two, they fear losing money on their marketing investment.
Predictable Revenue Generation
Knowing what a lead is worth, using a tool like our lead generation value calculator, at each stage of your funnel, is just one part of a more important task - sales forecasting. All companies want and need to be able to reliably predict their expected sales revenue and thus focus intently on forecasting sales and then meeting those sales forecast.
This is much easier to do when you have highly defined marketing and sales processes that yield a reliable flow of leads and sales. That's really why you want to know the value of a lead. By knowing this number, for each stage of your funnel, you can not only predict your future revenue, you can also work backwards and estimate how much more or less you need to spend on marketing to hit your sales targets.
Set a Dynamic Market Budget
You should set your marketing budget so that it sustains your company, including enough Paid Advertising budget so you buy enough advertising in order to achieve those leads. Knowing the value of a lead also ensures you don't pay more for your advertising than what your leads are actually worth.
Lead Value By Source
It's also extremely useful to calculate lead value by source. You can determine how much of your marketing budget is best spent on particular channels, ensuring you get the right bang for your buck. It's important to note that you don't want to start tracking leads using some variation of "How did you hear about us?" It's easy to fall into the " mention the ad " trap, especially since customers may be unclear of just where they first heard about you.
Pro Tip: If you use Google Analytics, you can set goals with values to not just track the value of your leads, you can do highly granular re-marketing to help you maximize profitability.
So How Much Is a Lead Worth To Your Business
Once you understand the math behind the lead value formula, and are able to determine the value of a lead to your business, you will want an easy way to calculate the value of a lead any time you want.
Getting to Profitable Lead Generation
You will want to know profitability of each lead and lead source cost. You will want to know the customer lifetime value. We got tired of doing it with a spreadsheet and decided to just develop an online value of a lead calculator, which you can use yourself. Just click the button to determine your own value of a lead with 4 simple inputs. How cool is that!
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