Top-Funnel Demand Gen Inefficiencies: How Much Do They Cost Your Sales Pipeline?

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A version of this post was originally published on CMSWire.

B2B marketing teams are increasingly being evaluated on their contributions to the sales pipeline or even revenue. Understandably, demand-generation marketers have as a result focused more on optimizing down-funnel efforts rather than first fixing more problematic top-funnel inefficiencies.

Shifting focus to down-funnel efforts is based on false logic. The failure to scale marketing-influenced pipeline is rarely just a consequence of bottom-funnel roadblocks. In fact, assessment of numerous marketing teams has shown top-funnel inefficiencies are more likely the cause of pipeline scale challenges, which trigger significant impacts all the way down the marketing funnel.

In this article, we’ll look at several ways top-funnel inefficiencies may be leaving a lot of money on the table by:

  • Hindering the volume of marketable leads that can convert to opportunities.
  • Burning demand-generation budget on unmarketable leads (and hurting marketing’s credibility in the process).
  • Wasting the time and effort of marketers and business development reps (BDR) and restricting funnel conversion rates.

Common Top-Funnel Inefficiencies

B2B marketing teams generate leads from a wide variety of channels using an even wider combination of targeting criteria, marketing methods, media partners and content assets. Managing each of these top-of-funnel demand-generation programs typically requires a disproportionate amount of time-consuming manual effort (compared to mid-funnel activities, such as lead nurturing and scoring, which most teams have largely automated at this point).

From one-off communications with numerous media partners to lead aggregation, standardization and uploads, to trying to measure the impact of each source, asset and targeting tactics, B2B marketers are strapped for time. Consequently, marketing teams lack sufficient resources to fix several critical problems that hinder pipeline and revenue scalability.

Poor Quality Leads Contaminate Funnel and Diminish Pipeline Value

B2B marketing teams simply don’t have the time and resources necessary to ensure the quality of all the leads they pump into their marketing databases. In fact, a recent Integrate report  found that, on average, 35 to 45 percent of top-funnel leads generated by demand gen programs are unmarketable. So, what impact does this have on sales pipeline value?

Obviously, all marketing teams are different, but we can paint a pretty clear picture of the impact of low-quality leads using a mix of CEB and SiriusDecisions funnel-conversion-rate benchmarks and the following example assumptions:

  • 25,000 annual top-funnel leads.
  • $60,000 average contract volume (ACV).

 top funnel leadsWithout any change to down-funnel conversion rates, and using the more conservative 35 percent rate of unmarketable leads, the funnel on the left translates to 86 fewer opportunities and 21 fewer closed/won deals than the more efficient funnel on the right. At a $60,000 ACV, this has a substantial impact on pipeline value and revenue.

 

Top-Funnel Leads

Marketable Leads

Opportunities

Pipeline Value

Closed/Won Deals

Revenue

Inefficient

25,000

16,250

162

9,720,000

41

2,460,000

Efficient

25,000

25,000

248

14,880,000

62

3,720,000

Difference

+8,750

+86

5,160,000

21

1,260,000

(Note: If you find the example lead-volume and conversion-rate figures widely different from your organization’s figures, I recommend doing a similar calculation using your business’s specific ACV, annual lead volume and funnel conversion rates. I’ll bet you’ll still find the impact quite striking.)

Bad Leads Waste Demand Gen Budget and Hurt Marketing’s Credibility

Not only do top-funnel inefficiencies constrict pipeline and revenue by blocking good leads from getting into the funnel, they also waste a large portion of money budgeted for demand generation. Let’s assume that 30 percent of the top-funnel leads generated come from paid third-party media sources (such as from content syndication, list buys, etc.), and you’re paying the industry average $50 CPL. Not having the resources to catch and return the 35 percent of these paid leads (the bad ones) to the lead-generating sources to be replaced for marketable leads would result in $131,250 of wasted demand-gen budget:

8,750 (unmarketable leads) x 0.30 (30 percent from paid sources) = 2,625 (replaceable leads) x $50 = $131,250

Beyond just wasting money, poor-quality leads also damage marketing’s credibility and alignment with sales, which further exacerbates all the problems discussed above. As Ashley Shailer, a senior associate at marketing consultancy Inverta, states:

“Losing credibility is the biggest consequence of poor lead quality. Sales loses faith in marketing — and then they stop following up with the leads they get, undermining future marketing efforts. This reflects poorly in front of the executive team, which then results in underinvestment in the marketing function as a whole. It’s very difficult to dig out of this vicious cycle.”

Top-Funnel Inefficiencies Steal Resources From Mid-Funnel Initiatives

It’s easy to see how inefficiencies at the top of the funnel restrict the flow of good, marketable leads into the funnel (where they can be nurtured into pipeline opportunities), while also wasting money. What’s less easily seen, however, is how such inefficiencies drain marketing teams of the resources they need to optimize conversion rates to marketing-qualified leads (MQL), sales-qualified leads (SQL) and even opportunities. To be clear, they do.

Take, for example, this quote from Jennifer Pockell Dimas, chief marketing officer at software maker Egnyte, discussing her experiences at a previous organization:

“We were spending a good percentage of our marketing dollars on third-party lead gen, but we were doing it via manually managed relations with each individual vendor. That effort was very taxing and a costly chore. Not only were we paying another firm to manage those relations — which was a cost in itself — but additionally, we were having to deal with a complex coordination of assigning the right assets to the right segments, gathering all the lead lists, reallocating budget, etc. for each campaign with each lead vendor. It was a really difficult choreography.”

time spent per month

If your team increases top-funnel efficiency — by streamlining or even automating the processes Dimas outlined — it’s in a better position to reallocate marketing time and resources to optimize mid-funnel initiatives. For example, instead of managing 35 lead sources via one-off communications (setting up campaign targeting criteria, sending assets, checking landing pages, returning leads, etc.), your team can create more effective lead nurturing tracks. Or, rather than spending 40 hours per month aggregating, scrubbing, standardizing and uploading leads, you can update demand-gen content or revise your target-account lists based on program learnings. All of these efforts have big impact on mid-funnel conversion rates, and thus pipeline and revenue.

Let’s assume that such reallocation of efforts results in a conservative two-percentage-point increase in MQL, SQL and opportunity conversion rates. (Note: I say “conservative” because I’ve worked directly with companies that have boosted their mid-funnel conversion rates by more than 10 percentage points by automating top-funnel efforts). What’s the impact on pipeline and revenue?

increase conversion ratesThe impact on pipeline and revenue is nearly triple those seen earlier:

 

Top-Funnel Leads

Marketable Leads

Opportunities

Pipeline Value

Closed/Won Deals

Revenue

Inefficient

25,000

16,250

162

9,720,000

41

2,460,000

Efficient

25,000

25,000

402

24,120,000

101

6,060,000

Difference

+8,750

+240

14,400,000

60

3,600,000

Unfortunately, most teams don’t have the time they need to execute these initiatives, so sales pipeline and revenue growth stagnate. This must change if marketers and sales teams intend to achieve their goals.

Marketing organizations that maintain the inefficient status quo are like baseball teams that consistently load the bases but fail to drive in runs. Spending all your time and resources just trying to generate top-funnel leads won’t lead to game-winning performance.

It’s now critical for marketing teams to find ways to increase the efficiency of their above- and top-funnel initiatives so they can ensure their efforts pay off all the way through the funnel and result in greater pipeline value, more customers and increasing revenue.

If you’d like to learn how your team can overcome its top-funnel B2B marketing inefficiencies, get Integrate’s “Guide to Demand Orchestration Software.” 

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