Dear CEO: Fix these three things and increase revenue

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Companies with optimized sales and marketing organization achieve results by doing three things well. Not 50 things. Just three:

  1. Agree on your market, media and message
  2. Measure what matters
  3. Deliver fewer, but better, leads to sales

The more senior you are in your organization the more likely it is that you think these actions should be (whether or not they can be) handled by others in your organization.

The reality is that not only are they not being managed by others, they’re likely being mismanaged. It’s not that your people are incompetent, they just haven’t been given the right direction. They are herded into a direction of ineffectiveness by the actions or inactions of others in your company. Here is what you must do to fix it:

  1. Agree on market, lead definition, message

Walk out of your office and ask the first three marketers and the first three sales executives you see these three questions:

  1. How do you define our market?
  2. What constitutes a good lead?
  3. What is it that we sell?

I suspect that you will get different answers to these strategic questions.

Here’s a story that drives home the point: Some years ago, I worked with a client that had $100 million in venture capital and an experienced management team. Within three years the client, which had superior products, had blown the money and was absorbed in a fire sale by their largest competitor.

So, what happened? Marketing marketed point solutions to mid-sized companies while sales was only interested in enterprise deals at larger companies. The elephant-hunting sales team was put through an extensive boot camp (at the cost of $15,000 a head) and $250,000 was spent on a logo and tagline by marketing.

The final curtain on this company was a $40,000 plus dinner for 12 (complete with 100-year-old brandy and expensive cigars). Today almost no one knows this company ever existed. This is all because the company did not agree internally on its market, the definition of a lead or what they sold. While this may seem like an extreme example, it is not so extreme that you should ignore it.

  • Generally speaking companies define their market too broadly, resulting in wasted time and effort applied to too many prospects. Are we marketing to IT decision makers in the Fortune 100? Or are we looking for IT security heads at enterprise-level healthcare organizations? Knowing the difference lets us engage the “real” leads in a meaningful and far more efficient way.
  • By the same token, the definition of a lead is not shared by marketing and sales (or even within marketing or sales). If there is not agreement on what a good lead is, there will continue to be infighting between organizations, and waste. Is a good lead only one where a decision will be made in the next quarter? Or do you recognize the value of a longer-term lead and the opportunity there for developing a relationship? Is a good lead only one where a c-level executive is involved? Or do we prioritize influencers in a larger-size deal? This kind of detailed definition, based on testing and analysis, is key to efficiency and effectiveness and staying on course.
  • While most companies say they sell a solution, not a product or service, the message around what that offering (made up of a product, price and delivery mechanism) is more likely than not described differently by marketing and sales executives in the organization. Do we provide staffing, or are we a HR services firm? Are we a niche vendor, consultants, or service aggregator? All involved need to agree and articulate who we are, what we do, and why we’re better and different consistently and concisely.

Political Consultant Roger J. Stone has a great expression: “No one ever built a statue to a committee.” YOU—the one ultimately in charge—need to gather input and then decide. You can’t expect a committee of marketing and sales executives to come to conclusions that will stick. Once you make decisions (about market, lead definition and messaging), stick with them. It’s also your responsibility to enforce the decisions. As you inspect activity you will find non-compliance. End it. The next action provides some specifics having to do with what to inspect.

  1. Measure what matters

In average companies, sales reps close about one out of five leads they qualify. Note that on average, sales reps only qualify about one third of the leads they are provided—so close rates measured against delivered leads are often less than 10%.

Companies where the CEOs pay closer attention close just a little less than one third of the leads they qualify—and they qualify roughly half of the leads they are provided. Close rates for these companies are close to 150% of those in average companies.

How can you do better than average companies? It’s simple—measure what matters.

Here’s a real-life case that illustrates why this point is important: Over the past year marketing has generated thousands of “leads” from many sources with the most preferred source called Downloads from Content Syndicator—see table Lead Source Analysis.

The marketing team was thrilled with their results. Sales executives, however, were not thrilled. During the year, marketing spent a lot of money driving thousands of so-called leads—while sales reported that they got absolutely nothing of value from marketing.

A deeper dive pointed to the fact that the relatively low cost per lead was offset by the relatively poor quality of the leads as indicated both by the percent of qualified leads generated, 1.28% as a percent of raw leads, and the overall percent of qualified companies.

While marketing was touting these leads, proactive outbound prospecting, in fact, was producing the most cost-effective yet highly qualified sales opportunities. Other sources, like the syndicator, actually cost cost substantially more—as much as two to nine times more—when you consider the very small number that can be closed.

Following are actual statistics though the source names have been changed to protect the guilty:

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What to do? In a white paper called How Much Should a Lead Cost (available for the asking), I ask and answer the question as follows: “So, how much should a lead cost? More than you probably think, but probably a lot less than you are paying.”

In addition to analyzing the actual cost of a qualified lead (not just the cost to generate a raw lead), you should also carefully measure the progression of leads through the sales process. You are probably saying to yourself right now: “We do that” or “That is what I pay sales managers to do.” But I guarantee you that it is not happening.

Here is why: In the average company the close rate on sales-qualified leads is about 20%. That means the average sales rep loses four out of five times. What sales rep wants to sign up for that? So, what happens is that sales reps provide visibility into the status of leads only when they are sure they are going to be closed (and won). That is why when you ask the average sales rep what percent of leads they close they will tell you 60% to 80% if they are qualified. But that is baloney. They likely close 60% to 80% of what they were sure they were going to close. But not 60% to 80% of the leads provided to them.

In truth, you may partially be responsible for why this is happening in your company. A new rep might provide more visibility than an experienced rep … until they find out that they spend more time reporting on each potential deal than they do selling because everyone wants to know the status of every deal—practically real time.

Relatively small improvements in the demand waterfall from marketing-qualified lead to sales-accepted lead to sales-qualified lead can make a huge difference on the top and bottom lines. If you have defined your market, media and message and if you are inspecting outcomes and conducting in-depth analysis at every step, you can substantially improve results.

  1. Deliver your sales force fewer, but better, leads

In the whitepaper Why Your Sales Force Needs Fewer Leads (just ask me for it) I open with: “Contrary to popular belief, sales reps don’t need more leads. They need fewer leads—or more accurately fewer raw, unfiltered, unqualified leads.”

Sales reps need leads that have been carefully qualified, properly and consistently nurtured and appropriately developed, increasing the likelihood of a completed sale. The problem is that there is so much confusion (and snake oil) out in the marketplace today that:

  1. Marketing is paid, in fact rewarded for, lead quantity and not quality.
  2. Technology solutions push more, poor quality, leads to sales faster and more efficiently than ever.
  3. Almost 47% of sales reps miss quota.

Why?

Here is a report from marketing: “We’re on track for a great quarter in lead generation. This month we generated 1278 leads from all sources—that’s a 30% gain over last year. And despite higher PPC costs, we continue to keep our leads under $100.”

When sales executives receive these so-called leads from marketing, here is how they respond:

  • Not a senior enough executive? Out!
  • Budget undefined? Goodbye.
  • Next-year decision? No way.

Here is what marketing should be reporting: “This month, marketing added 14 new prospects to the pipeline. A total of 41 sales opportunities are currently under development by marketing. Last month, sales received 10 fully nurtured sales opportunities representing $3.5 million in potential revenue. Attached are the details.”

SiriusDecisions historically characterizes the relationship between marketing and sales as follows: “It’s a bizarre, often co-dependent relationship; working at arm’s length, sales has the latitude to dismiss the leads marketing creates as not qualified or nurtured enough, while marketing can claim that they are holding up their end of the bargain when you consider things purely from a volume standpoint.”

Here’s a real-life example: We once provided services to a large software company and I got a call from our day-to-day contact one morning about our lead cost—he said we were too expensive. I asked him how much our leads cost and he said $650. I asked him how much the other vendor’s leads cost and he said $350.

I asked him what percentage of leads delivered by PointClear were considered high quality and he said 100%. I asked him what percentage of the other company’s leads were high quality and he said about 50%. Then he said, “I know where you are going with this, but can’t you just find some way to reduce the cost per lead—$350 is all we can spend.”

Following that conversation, I telephoned 10 of that software company’s largest partners and asked them about lead quality from the other vendor. They said the quality sucked. I asked them why they didn’t do something about it and they said because they were afraid that the big software company would stop sending them leads. That conversation was about eight years ago and we still do business with the big software company (when they are looking for high quality leads).

However, most of the spend is going through the equivalent of “sweat shops” and they literally waste millions of dollars on low quality, poorly qualified, so-called leads that are never followed up. They have even come up with a way of justifying the spend. They calculate how much the average deal is, assume a 20% close rate and calculate ROMI (return on marketing investment) based on these estimates. Forget that the actual return is in fact almost zero. What is missing in most companies, from an execution standpoint, is the following:

  1. A process to measure the quality and cost per REAL lead.
  2. A judicial branch (that is, the c-level executive) that provides the checks and balances needed to keep the other branches (sales and marketing) honest by evaluating opportunities that are not worked by sales to see if there is a quality or an effectiveness problem.
  3. A group to nurture leads until they are sales-ready; and to take opportunities back if sales cannot gain traction for one reason or another. Right now, these opportunities are disappearing into a black hole.

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