I’ve written consistently and have spoken on the benefits of b2b lead nurturing and marketing automation with regard to ROI. Since this is a blog post rather than a white paper, you can read my blog archives as well as the NuSpark Marketing website on the power of marketing automation. This post will go into my views on how to measure the ROI of lead nurturing. There are a number of thought leadership blogs that discuss ROI, but below is an attempt to show the ROI with a realistic case study for an SMB. As a reminder, lead nurturing is the process of communication to non sales-ready prospects through content or social media until that prospect’s engagement with your website and content reaches a threshold (typical a high lead score) that deems them sales-ready. Based on the length of a typical buying cycle, content engagement can take up to 2 years. Without lead nurturing via content, b2b buyers will engage with competitors who have mastered lead nurturing process.
According to Aberdeen research, 84% of qualified leads are not ready to buy; 16% close. If salespeople reject those 84% of leads without nurturing, well, you get the idea…they move on to other solutions. Lead nurturing build relationships. Click here for an introduction on marketing automation.
For my calculations below, we’ll make some assumptions. Certainly actual data from your firm can replace the assumptions, but let’s go through this exercise. Here are those statistical assumptions based on research, and a sample scenario based on a real-world situation:
General close and per-customer revenue data
- 16% of your marketing inquiries are ready for sales
- 10% of your sales-accepted leads close
- Your average value per sale is $5,000
- After your initial sale, customers buy an additional $1,000 in services in their lifetime
- Lifetime value per customer, then, is $6,000
- Your margin per customer is 20%
- Net profit per customer is $4,800
Lead Nurturing Statistics
- Marketing converts 15% of qualified leads into sales-accepted leads over a one year period.
- Of that 15%, sales closes 30% (conversion rates of nurtured leads show between 1x-3x increase)
- Revenue per deal increases 40% (Aberdeen research) Note: seems high to me; for this scenario I’ll be conservative and use 10% increase.
Outside Lead Nurturing Costs (ballpark for this exercise-$65,000 total)
- Annual marketing automation platform: $12,000 (moderately priced solution)
- Annual Consultant costs- planning, process, content mapping, landing page, database, email creation, CRM implementation: $12,000
- Downloadable Content costs (3 white papers, 3 case studies, 3 downloadable checklists): $26,000
- 3 Webinars: Presentation design and platform: $9,000
- Blog Content Consultation: Idea generation, editorial calendar, research, writing: $6,000 (Blog posts are useful for nurturing content)
Current marketing and social media budget ($300,000): “older school advertiser”
- Traditional advertising: $100,000
- Digital advertising: $60,000
- Public relations/Trade shows: $40,000
- Direct Marketing: $60,000
- Social Media: $5,000
- Outside media vendor/consultant costs: $35,000
Reallocated budget based on increased emphasis on digital marketing to generate website leads ($300,000)
- Traditional advertising: $60,000
- Digital advertising: $100,000
- Public relations/Trade shows: $20,000
- Direct Marketing: $25,000
- Social Media: $15,000
- Outside media vendor/consultant costs: $15,000
- Marketing Automation/Lead Nurturing costs: $65,000 (Again, this includes platform, management, content)
Ok gang, this is a simple exercise remember, but certainly based on a potential reality. Let’s look at the before-after scenario.
Before Marketing Automation
- Annual quality leads marketing sends to sales: 1,200
- Sales based on 16% conversion rate (Aberdeen study per above): 192
- Lifetime revenue per deal: $4,800
- Lifetime revenue generated: $921,600
- Marketing costs: $300,000
- Marketing Net profit: $621,000
- Marketing Cost-per-sale $1,562
- Marketing ROI: 107%
After Marketing Automation
- Annual quality leads marketing sends to sales: 1,200 (In reality, this scenario will likely achieve more leads due to increased emphasis on digital marketing, but let’s stick with 1,200. These are leads that were generated by landing pages and webforms.
- Leads sent to sales that were closed (16%-Aberdeen study): 192
- Lifetime Revenue generated: $921,600
- Leads NOT ready immediately: 1,008
- 20% of leads not marketing qualified (Sirius Decisions research): 202
- Remainder of leads in nurturing: 806
- 15% of those leads sales-ready in a year: 120
- 30% conversion rate estimate- sales accepted leads to closes: 36
- Lifetime revenue per deal (+10%): $5,280
- Nurturing revenue generated: $190,080
- Marketing costs: $300,000 (includes marketing automation and content)
- Total revenue generated-sales-ready closes plus nurtured sales: $1,111,680
- Marketing net profit: 811,680
- Marketing Cost-per-sale: $1,315
- Marketing ROI: 170%
Summary
By not spending more on marketing, but rather reallocation to increased digital presence, content, and lead nurturing/marketing automation, increased revenue is generated, increased profit, lower cost-per-lead, and increased marketing ROI.
The point here is, but putting funds, effort, and resources to a viable lead nurturing program, you’ll receive quality leads and higher close rates. That’s according to the metrics as detailed above. If you can go through this exercise with your own numbers, you’re likely to see the benefits of lead nurturing as well.
If you’d like to discuss the formulas within the above scenario, or your own business situation, feel free to contact me. Ready to get started?
