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PreviousWhen Do Sales Leads Lie?
For most companies, a large number of leads is — by itself — almost always meaningless for the big picture. Leads are a nice indicator of market interest, but like measures of "visibility" or "market impressions," it is not a direct predictor of pipeline, let alone sales volume.
Leads start to get meaningful when you include measurements of lead quality, such as conversion ratios, scores, and frequency of activity. Leads get more and more significant as the leads pass through qualification and conversion steps. But understanding and assessing all the subtleties takes way too much time for most users; they just want to see a single number that's meaningful.
And the meaningful number — both for Sales and the overall business process — is the number of sales cycles started in a period. The number will be much lower than what the execs like to throw around — and it's throttled by the speed and skill of the sales reps. But by focusing attention on the number of sales cycles started, it forces the marketing, pre-sales and sales teams to work together. They have to think about what it takes to create and execute a first customer meeting, and figure out how to do that more repeatably. Instead of trying to load up the CRM system with 10,000 new leads, marketing will be trying to figure out how to get 100 people interested and motivated enough to take a call. They'll collaborate on scripts for the telesales folks, work to solve conversion rate problems and try to optimize the number and cost of those sales-cycle starts.
But I Still Like Looking at Leads
Of course, leads are a good thing. But there's one more problem with them: Despite what you think, they don't really connect with the revenue pipeline. Here's why:
- When a Lead matures, it doesn't become an Opportunity (deal). It becomes a Contact in your CRM system.
- When a Contact matures and starts a sales cycle, it doesn't become an Opportunity either. The Contact might be connected to an Opportunity, but in real world CRM systems this happens less than 40 percent of the time (in B2B, it may happen less than 10 percent of the time).
- So when you look at your revenue pipeline, most of the deals won't refer back to leads. This type of analysis will make your lead gen look less important than it really is. This goes double if you use the Named Account model of selling.
Even though leads are part of the revenue business process, in most real-world CRM systems, you can't connect Lead analysis to Pipeline analysis.
The bottom line: By focusing on sales-cycle starts (Opportunity-creates) rather than Leads (visibility events), you'll be able to measure something that's meaningful and provide a solid basis for collaboration among marketing, pre-sales and sales teams. And isn't that the whole point of CRM.
This article was originally published on November 30, 2010
