It’s a Numbers Game. What’s yours?

Clients often ask us numerous metric-related questions regarding the lead-to-sales pipeline. They sound like this: What percentage of leads will become qualified? How many leads do I need to generate to get an opportunity into the pipeline? What should my close rate be? What should my cost per lead be?

All of these are great questions, yet difficult to answer as an outside consultant with limited information. The reason is that while it is easy to provide generic ratios and metrics, based on experience or surveys completed by leading marketing sites, I question the value in them.  For example, if I were to tell you that it should cost you $150/lead, and that you will need 20 leads to have 5 be qualified, 2 to hit the pipeline and 1 to close, are you any closer to understand the true dynamics of how your lead-to-sales pipeline will operate. I argue not.

In our experience, every product/service, sales cycle, and lead-to-sales process is somewhat different. Some organizations struggle to get leads, others to move them through the pipeline, and others to close. Hence, while one may use an average or generic ratio for planning purposes, it will do very little to understand or help the situation your organization is facing.

So, what should organizations do? First, they should start by measuring every stage of the sales process, from lead-to-revenue, so they understand the metrics at each stage. Only once they have and understand these metrics can they focus their marketing efforts at the parts of the sales process which will net them the biggest improvement in overall effectiveness. For example, if you have enough leads, but very few hit the pipeline, you are probably facing one of two issues. Either the message that generates the leads are not in sync with your offering/capabilities generating initial interest, but no follow through, or your sales reps are inappropriately or over-qualifying them. Now, you have narrowed down the specific components in the process you can work on to improve the overall hit ratio.

Yes, the lead-to-sales pipeline is truly a numbers game… do you know yours? Companies using the best practices are measuring heavily, analyzing frequently and acting to refine and improve their close ratio. Now, that’s a path to generating revenue.

By Sami Jajeh – October 27, 2010

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