The Truth About Sales Leads
Everybody knows that sales leads are the start of the business pipeline. More leads are always better, right? But what if that's - pardon the pun - misleading?
The business purpose of a customer relationship management (CRM) system is to capture new customers faster, grow them more predictably, and keep them as loyal repeat customers. A CRM system should streamline the revenue business process and make every dollar of revenue more profitable. And it will — providing you focus on optimizing the overall revenue business process, not individual point measurements like "new leads."
"If you can't describe what you are doing as a business process, you don't know what you are doing" — W. Edwards Deming
So let's take a look at the revenue business process. It starts with market planning, audience targeting and outreach campaigns, and it ends with collections. The process spans the marketing, sales, customer service, delivery/fulfillment and accounting departments. While the sales cycle may take only a few weeks, the complete revenue process cycle is several months (if not several quarters) in B2B environments. A flow-chart of the revenue business process will often take up an entire wall, and will include a surprising number of question marks. Trust me, it's more complicated than you think.
So Why Do Sales Leads Lie?
Leads lie because we think they're saying something they aren't. A lead is not ready to buy. They're typically not even ready to talk with one of your sales reps. A lead is merely somebody who indicated "tell me a little more" by clicking on a link, responding to an email, or registering on a site.
Marketing wants to look good, so they market the value of the leads they generate. They're easy to measure. Some companies even will sell you leads. So declare victory.
Unfortunately, Sales wants to make money this quarter, not "sometime in the future." Sales will optimistically jump at the idea of 100 new prospects a day. But they quickly find that those 100 leads don't want to take a meeting, aren't ready for a serious conversation, and feel totally unqualified. So the inevitable frustration with marketing starts to set in.
If you think of the revenue business process as a refinery, it takes in low-grade ore and purifies it to gold. Leads are the low-grade ore — often with conversion rates of 1 percent or less — that is ready for refining but not for final use. Until the Leads are cultivated, nurtured, qualified and converted into Contacts, there is no sales cycle. In many B2B and B2C businesses, the unqualified leads that are in the nurturing cycle may be numbered in the millions. Industry statistics show that up to 40 percent of leads may do their first purchase after having been in the "remarketing database" for 18 months or longer. Of course, the exact statistic depends on your industry and target market, but this principle applies equally to B2B and B2C markets. This is the whole purpose of marketing automation systems that integrate with your CRM system.
David Taber is the author of the new Prentice Hall book "Salesforce.com Secrets of Success" and is the CEO of SalesLogistix, a certified Salesforce.com consultancy focused on business process improvement through use of CRM systems. SalesLogistix has more than 50 clients in North America, Europe, Israel and India. David has more than 25 years experience in high tech, including 10 years at the VP level or higher.