If you’re a B2B marketer, describing the major attributes of your lead-to-revenue funnel and measuring the dynamics of your funnel are critical to understanding how well your demand generation system is performing. Funnel metrics will help provide the answers to three basic questions:
- Volume – Are our marketing programs generating a sufficient number of raw leads (sometimes called responses or inquiries) to produce the revenues that marketing is responsible for?
- Conversion – What percentage of leads are “converting” from each lead stage to the next across the entire lead-to-revenue cycle?
- Velocity – How long is the overall revenue cycle? In other words, now much time does it take, on average, for an initial response or inquiry to result in a closed sale?
Many B2B companies use the Demand Waterfall model developed by SiriusDecisions to describe and measure the lead-to-revenue funnel. The graphic below shows the major stages in the Demand Waterfall and the conversion rates achieved by average B2B companies, according to SiriusDecisions. (Note: SiriusDecisions recently revised the Demand Waterfall to add several lead stages, but the framework shown below is still widely used by B2B companies.)
Now for the inconvenient truth. Research strongly suggests that the demand generation system in many B2B companies is horribly inefficient. Based on the conversion rates identified by SiriusDecisions, the average B2B company needs to generate 351 inquires to acquire one new customer. That equates to an overall lead-to-revenue conversion rate of only 0.3% (4.4% x 66% x 49% x 20%).?
As this table shows, Best Practice companies must generate only about 70 inquiries to acquire one new customer, while average firms need five times as many. Best Practice companies also achieve an overall lead-to-revenue conversion rate of 1.4%, which is about five times higher that the rate achieved by average firms.
The performance of your lead-to-revenue funnel will tell you a great deal about the effectiveness of your marketing and sales efforts. So, if you aren’t currently using funnel metrics, now would be a good time to start.?
