Why Smart Marketers Think Like Manufacturers

Lead generation has a lot more to do with manufacturing than you might suspect. After all, marketers are “manufacturing” a conversation with customers and prospects. Some of that conversation is mass-customized through communication like personalized email and landing pages. Other parts of the conversation occur in sales or the teleprospecting operation.

Thanks to more sophisticated marketing automation tools, content strategies, and better data, marketing is making it possible for less of the conversation to take place with the least scalable resource: great sales people.

To harness the vast potential of this manufacturing metaphor, marketers should leverage these five economic principles as a first step to improving the economic efficiency of their marketing operation:

Unit Cost

This is the one principle that every marketer uses. Its use and abuse also illustrate the need to put this economic tool into the proper perspective. Unit costs come in lots of familiar flavors. There’s the cost per impression, mailer, name, teleprospecting hour, and so on. There are also unit costs expressed as more useful outcomes, like cost per clickthrough, cost per attendee, cost per appointment, an, Why Smart Marketers Think Like Manufacturersd cost per lead.

While these common units of measurement are very helpful, they can also be misleading, as many marketers quickly learn. That is, while the unit cost for a list, teleprospecting hour or lead might be lower from one source than another, the value of the more costly option may be higher. And that brings us to the second principle.

Conversion

Conversion provides a necessary context to unit costs. At the top of the B2B funnel, this principle is obvious. Marketers can test a more costly list source, for example, and see whether the response rates are higher. In fact, when marketers measure discrete funnel stages, their analysis is more precise, making funnel optimization much easier.

It’s the latter half of the funnel, once marketing passes leads to sales, where conversion breaks down. Unfortunately, without accurate and comprehensive conversion measurements from sales, most marketing organizations understandably “optimize” lead production by lowering the unit cost of leads. However, low-cost leads are the bain of sales organizations. That’s because there is often (though not always) a strong correlation between low-cost leads and low conversion rates into sales.

Unit Revenue

Even if a B2B company successfully tracks every lead to its final outcome, marketers cannot optimize the funnel with unit cost and conversion metrics. While funnel optimization would be greatly enhanced, there is still a chance for faulty analysis. For example, let’s say sales converts two lead sources into deals ten percent of the time. One of the lead sources costs $500 per lead and the other costs $1,000 per lead. It would seem reasonable that the $500 leads were a better value than the $1,000 leads. But what if the average sale on the $500 leads was $5,000, and the average sale on the $1,000 lead was $1,000,000? Then the “low-cost” leads are consuming all of the profit and even all of the revenue, and the “high-cost” lead source would yield a $100 for every dollar of investment.

Organic Analysis

The great challenge with B2B lead generation is complexity. Understanding cause and effect is very difficult because of all the moving parts. For example, the quality of leads that a teleprosepecting operation follows up on can affect production levels by 50 percent or more. In fact, even list sources can reduce lead costs by 300 percent, as Brandon Stamschror pointed out in this recent webinar. (Go to timestamp 10:03 for the details.) Lead quality can also significantly affect sales production. For that reason, B2B companies must look at the unit costs of sales follow up and the impact on sales production.

Consider this example. There are two lead sources that convert into sales at the same rate. However, one takes a lot more sales calls — and therefore sales capacity — than the other. Does marketing (or sales) have any way to measure this kind of issue today?

Scalability

Part of the value of the Internet is its scalability. Websites can handle enormous volumes of traffic and even spikes in traffic, if properly configured. Webinars are far more scalable than seminars, generally. Teleprospecting is more scalable than field sales people. Understanding the scalability of each tool in the marketing toolbox needs to be top of mind. Unless marketing can scale a pilot project, its effect on overall financial performance will be negligible, however promising the results.

Using these five economic principles together can help marketers manufacture efficient B2B dialogue in their lead-generation factory. Tell me: are using them and, if so, how? If not, tell me what’s stopping you. I’d be delighted to get your feedback.

J. David Green
 

J. David Green is the CEO of PipeAlign, a company that helps B2B companies tell a winning story, scale that story across sales and marketing, and measure and improve what matters most. Among other accomplishments, Dave generated a billion dollar sales pipeline in 20 months for Avaya, increased SMB revenue for Symantec from $2MM a year to $25M a year in twelve months, wrote a book on scalable lead generation, and has spoken at the DMA, MarketingSherpa, the BMA, the AMA, and many other events.