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February 2007, Issue 36 |
A New Model for Lead Generation
Using ROI Modeling to Establish Goals About Cost per Lead
By Justin Burrows, Product Manager, Bulldog Solutions
Repeat the following aloud:
The reason I spend money on marketing is because it makes me money.
The reason I spend money on marketing is because it makes me money.
The reason I spend money on marketing is because it makes me money.
The reason I spend money on marketing is because it makes me money.
The reason I spend money on marketing is because it makes me money.
Did you cringe a little when you repeated this mantra? Did you feel a little, say, vulnerable? Could you imagine repeating that statement in a company-wide meeting and being able to count the eye rolls, ironic coughs, even outright snorts?
Why do most marketers feel squeamish about stating what is—or should be—a given? It's not that the statement is untrue (or is it?). Could it be that the root of the marketer's discomfort is that this article of faith is usually based on just that—faith—and not much else?
At Bulldog Solutions, we believe that a successful lead-generation model accomplishes the following six goals:
- Extend the brand to new areas or new markets
- Qualify more leads and shorten the sales cycle
- Measure the effectiveness of communications
- Implement analysis and market intelligence
- Use ROI modeling to establish goals about cost per lead
- Align sales and marketing departments
Become a Skeptic; Make Believers
Let us begin, dear Marketer, by recusing our blind faith in marketing profitability. Indeed, if the key defense of our faith involves whiteboard diagrams and broad aerial hand gestures, it's not worth defending. Let us instead become doggedly pragmatic. The power of information technology has allowed the B2B marketer to evolve from being an alchemist of arcane and mystical arts to being a metrics-driven, quantitative scientist. This is a good thing, as when tough times hit, everyone knows that the alchemists are the first to go.
Metrics Starting Point: Follow the Money
To start building useful ROI models, the marketer must first understand the typical flow of leads through the sales process. How much of sales leads originate in marketing? What's the average close rate for marketing leads? How about the average deal size? How much time does the sales team spend on leads originating from marketing as opposed to leads generated from cold calls or networking? (More on this last topic in the next issue.)
Manageable Modeling: Meet in the Middle
The simple fact is that most companies can't trace a lead from start to sale. If this is the case, you can still build a useful ROI model by identifying useful thresholds somewhere in the middle, where the outcome is relatively predictable. One useful threshold might be the proof of concept stage, proposal or demo, depending on the way your company's sales process works. Basically, find a point in the sales cycle where the close rate is relatively stable and readily measurable. By this point, the leads should already be accepted as qualified by the salesperson and the sales dialogue established.
Do the Math
Using the identified threshold, do the simple math to establish the expected value of that lead. If Sales makes an average sale of $50K to 50% of leads at a certain threshold, then the expected value of that lead is $25K. This expected value of leads, even if the value is crude, is the key to being able to stand up (with poise and aplomb) and speak authoritatively about marketing ROI. Even if these figures are sketchy, they should provide at least a gut feeling of the expected value (and beat a labored whiteboard diagram any day of the week).
Set a Goal
Now that you have established the expected value of a lead, you can break down how many threshold leads are generated by the different modes of your lead-generation program (Webinars, white papers, podcasts, etc.) and the expected value of the revenue generated by those different modes. Use this information as a benchmark for moving forward and set a periodic goal.
Do It Again!
The simple practice of establishing basic ROI measurements and performance goals automatically starts new, more sophisticated, strategically effective conversations. New tactics and strategies will automatically be viewed in the context of ROI-based performance goals. With periodic ROI goal-setting in place, marketers will be able to present a credible and compelling case for their marketing lead-generation program, as well as show real progress by keeping track of ROI and cost-per-lead goals over time.
Justin Burrows is product manager at Bulldog Solutions, the lead-generation optimization and management company. Visit www.bulldogsolutions.com to learn more.
Know a colleague who would be interested in this topic? Send this newsletter to a friend.
Marketing Watchdog Journal is a monthly newsletter from Bulldog Solutions, a lead optimization and lead management company dedicated to helping our clients generate more, better leads and turn them into revenue. You may have noticed this newsletter has a new look and a new focus. We welcome your feedback on the revamped content and design, and encourage you to share your ideas for topics you would like us to cover in future issues. Please send your comments to Amy Bills, director of corporate marketing communications.
For more information on Bulldog Solutions, please contact Russell Griffin, sales director.
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About Bulldog Solutions, LLC. © 2007 Bulldog Solutions. All rights reserved. |