Lead generation metrics should emphasize opportunities not just leads
I was asked to write a response to this question, “In what ways have metrics evolved with the increase in digital B2B marketing? Suggest one ROI metric that you have found to be very effective.”
Read ClickInsights: What ROI metric should B2B marketers use in this digital marketing era?
Here’s my response:
The use of the Internet, mobile, and other interactive channels has certainly increased the number of leads marketers receive today. Many organizations spend thousands of dollars each month on search marketing to take advantage of this increase.
This increase, however, causes many marketers to focus on the wrong metrics. In order to generate leads marketers have to know how to use the analytics. Many marketers focus on conversion rates of specific phrases or banners and are ignoring other valuable information. While conversion rate is one way to measure the effectiveness of a search phrase, for instance, it can be extremely misleading.
If marketers are spending a lot on search marketing and not capturing visiting organizations (both those that convert and the much more that don’t), they are making decisions based only on half-truths. And they are probably routing dollars toward phrases and ad creative that appear to perform better but in reality are really just clogging the marketing database and sales pipeline.
The metrics of digital marketing is starting to slowly evolve. Marketers are starting to realize that salespeople care very little about the cost of the leads we generate. What they really care about is how many of those leads will actually become viable sales opportunities in their sales pipeline.
For this reason, I think cost-per-opportunity measurements are the most effective metrics. The most common metric, cost per lead, is irrelevant unless we can answer other fundamental questions first, “What is our rate of lead acceptance (a.k.a. sales pursuit) into the sales pipeline” and then “What is the cost per opportunity?” Cost-per-opportunity is the one metric that can help you understand how well your sales team accepts and pursues leads. Ultimately, it shows if your leads are actually helping our sales team sell and if marketers are positively contributing to their pipeline.
Cost-per-lead models drive down the cost of each lead by generating more leads, which is good if the quality does not suffer. However, this is rarely the case since there are a finite number of high-quality sales-ready leads in your target market at any given time.
The real question is, “Are these leads helping our sales team sell more and will these leads become profitable customers?”
These are real-world metrics that every marketer should track in their lead generation program:
- The number of inquiries? (people who raised their hands)
- The number of leads? (qualified as “sales-ready”)
- The number of opportunities? (leads that move to pipeline)
- The number of closed sales? (generated from marketing leads)
If marketers know those metrics they can start to track the following key performance indicators:
- Inquiry to lead ratio (cost-per-lead) – this isn’t a enough
- Lead to opportunity ratio (cost-per-opportunity)
- Lead to pipeline revenue ratio (cost-per-pipeline revenue)
- Lead to sale (win) ratio (cost-per-closed sale)
A value driven mindset requires leaders and marketers to plan and budget for the long term and to take a more holistic view that goes beyond cost-per-lead budgets.
What other metrics have your found are important to track for tracking your lead generation results?