Measurement and analysis of Lead Capture effectiveness leads to insights that can improve sales and marketing efficiencies. Therefore, it is typically important to measure the following:

1.       Lead flow – how many leads are being generated

2.       Lead quality – are the captured leads in your target “sweet spot”

3.       Lead cost – what is your cost per lead (CPL)

The first step in measurement is to create a Lead Capture forecast. In other words, predict how many leads the sales force will need to meet its quotas, and how big a Lead Capture budget you need to generate the demand. Doing so gives you goals against which to measure progress.

Forecasting Lead Capture Requirements

The forecasted lead count is usually expressed as a monthly, quarterly and/or annual goal, and it is calculated based on a few inputs from sales and also on some reasonable assumptions about (or historic measurements of) the rate at which leads are converted to paying customers. It’s a simple spreadsheet exercise:

Metric	Example	Explanation
Annual New Customer Sales Forecast	$5,000,000	Get this from sales
Average Selling Price	$100,000	Get this from sales
# New customer deals required to meet annual sales goal:	50	Sales forecast divided by ASP
Closure Rate: (% of qualified sales leads that convert to closed deals)	25%	It is typical to assume 25% of deals in the sales pipeline will close and become customers
# Qualified sales leads required:	200 (=50/25%)	#Target New Customers divided by Closure Rate
Sales Qualification Rate: (% of Raw marketing leads that convert to qualified sales leads)	10%	It is reasonable to assume 10% of raw marketing leads will end up in the sales pipeline as qualified opportunities
# new raw marketing leads required to meet new customer sales goal:	2,000 (=200/10%)	# of Qualified sales leads divided by Qualification Rate

Note that the sales forecast above is for NEW sales opportunities; it excludes recurring revenue you expect to collect from existing customers (such as annual maintenance or subscription fees) because marketing doesn’t need to generate leads to drive that revenue.

The calculations above can be done on a quarterly basis or on a per-sales rep basis if sales revenue goals are set at that level (and usually are within B2B companies).

There can be some variation on the calculation depending on the length of your sales cycle. If it usually takes 3 months to close a new customer, then you’ll need to capture leads in the current quarter to drive revenue in the next quarter. If you have a 6 month sales cycle, then you’ll need to capture leads in the current quarter to drive revenue 2 quarters from now, and so on.

As soon as you can (often after the first few months of Lead Capture), you should replace your assumed Qualification and Closure rates with actual, measured rates and adjust your lead forecast accordingly.

Best Practices – Measuring Performance

Create a Lead Capture dashboard – Marketing should prepare a simple dashboard report or spreadsheet that shows the following:

• Total number of raw leads captured
• Number of “in-profile” leads—the total number of leads, MINUS unsellable leads (from non-target geographies or industries, for example).
• Raw-to-In-Profile Lead conversion rate – what percentage of raw leads are “in profile?” (i.e., is marketing collecting quality leads within your target market. It’s typical for this ratio to be 35% to 55%).
• Total qualified sales leads – these are leads that the sales team has added to their forecast opportunities.
• In-Profile-Leads to Total qualified sales leads conversion rate  – what percentage of in-profile leads has sales qualified into their sales forecast. This percentage is usually around 10%

The chart below shows a simple way of communicating Lead Capture results.

Analysis of this data can reveal actionable insight. For example, the plot of the in-profile leads and qualified sales leads says a lot about Lead Capture & follow up. QSLs are typically a steady percentage of in-profile leads (~10%). But here, QSLs are flat even though in-profile lead flow is dropping steadily and then spiking. You’d expect the QSL curve to have a similar shape to the in-profile lead curve. The discrepancy tells us that a) there aren’t enough sales people to follow up on leads (or they aren’t follow up effectively) and b) marketing is wasting money generating leads that sales doesn’t have time to process. So, this company should reduce Lead Capture spending or hire new sales people to keep up with demand (which the company from which this data came did in July, resulting in an uptick in QSLs in Aug-Oct).

Report Lead Capture performance to senior management regularly – Marketing should be analyzing Lead Capture data very frequently. The more you do so, the sooner you might find ways to improve Lead Capture processes. Regularly sharing Lead Capture data with senior execs is motivating—no one likes to report bad news (e.g., a weekly or monthly drop in lead count) – so this helps ensure you’ll take corrective measures in between reports to make sure the news is good.

Smaller companies, especially startups with more erratic lead flows, should review Lead Capture results on a weekly basis. Larger companies with steadier lead flows can discuss monthly.

Tags: Lead Capture Best Practices

This entry was posted on Thursday, April 21st, 2011 at 3:58 pm and is filed under Lead Capture, Thought Leadership. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.