The True Cost of Leads in B2B Complex Sales

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1 The True Cost of Leads in B2B Complex Sales A Winn Technology Group White Paper Winn Technology Group winntech.net

2 64% of marketers indicated they pay less than $100 per lead. - Marketing Sherpa 15% of MQL s should be turned over to sales but in reality up to 70% of MQL s are turned over to sales. - SiriusDecisions There has been much discussion in marketing and sales blogs about what is the optimum cost per lead which should be read as what is the minimum cost per lead a marketer should pay? In today s marketing pressure cooker, many consider a lead to be a name on a purchased list, an open or click on an , a website visit, a white paper download, or an event registration. Marketers are under tremendous pressure to generate a large number of these kinds of leads at the lowest possible cost. According to MarketingSherpa s 2012 Lead Generation Benchmark Report in a survey of 1,915 companies, 64% of marketers indicated they pay less than $100 per lead. As Marketing Automation solutions blossomed, marketers have opted (and are incented) for the quantity of leads over the quality of leads to keep their sales pipelines filled. This is the principal cause of the misalignment of marketing and sales. In the SiriusDecisions Rearchitected Demand Waterfall, these types of leads are referred to as either AQL s (Automation Qualified Leads) or MQL s (Marketing Qualified Leads). These leads usually consist of a prospect s name and contact information from a web form, landing page, or business card. According to SiriusDecisions, only 15% of MQL s should be turned over to sales but in reality up to 70% of MQL s are turned over to sales without going through any qualification process. That begs the question, what does it cost incrementally to bring that lead down the sales funnel to close as compared to a higher cost per lead that is actually ready to begin the sales process. Whose responsibility is it within sales to further qualify these MQL s and what will it cost? Taking this a step further, is this how you want your sales team to spend their time, qualifying MQL s and limiting the time they actually spend closing sales? In a presentation at SiriusDecisions Summit entitled, 50 Hours: The Aligned Way to Improve Sales Productivity, time is the most valuable resource a sales person has and it should be primarily focusedon revenue generating activities. 1

3 Let s run some numbers to determine the actual cost of an MQL, starting with the average cost of the US-based sales person for B2B complex sales as described on salary.com. Account Representative, Sr. - Technology Sales - Maintains relationships and favorable contacts with current and potential accounts in the high-tech sector. Resolves customer issues/problems. Requires a bachelor's degree and at least 4 years of experience in the field or in a related area. Familiar with a variety of the field's concepts, practices, and procedures. Relies on experience and judgment to plan and accomplish goals. Performs a variety of complicated tasks. May direct and lead the work of others. Typically reports to a manager or head of a unit/department. A wide degree of creativity and latitude is expected. Table 1: Avergage Cost of US-Based Sales Rep for B2B Complex Sales Base Salary Bonus Management (10% of Base) Annual Salary $85,115 $7,490 $8,511 $101,116 Scenario 1 The sales person in question has been given 10 leads that cost $ each for a total of $1, and in the course of six months of prospecting, 2 of the leads close. Let s assume that each sale is worth $20,000. So, 2 deals have been closed totaling $40,000. Factoring in the cost of the sales rep for 6 months based on the above table, the cost for the sales persons time and effort is $50,558 plus $1,000 for the 10 leads or $51,558 for $40,000 in revenue. Not a bargain! 2

4 If a lead is generated at a low cost, but never contributes to the sales pipeline, it is a wasted expense. - Brian Carroll, MECLABS Scenario 2 A marketer purchases 10 highly qualified leads from a different source at $1,000 each for $10,000. A highly qualified lead is defined as an appointment with a decision-maker or key influencer who has a need for your solution and wants to speak with you about how you can help. Winn s definition of a qualified lead also includes critical business intelligence related to specific business pains, technology currently in use by the prospect, and knowledge of the decision-making process (decision-makers and key influencers). Two of the leads close within 3 months and 3 more close within 6 months yielding $100,000 in revenue. The cost is $60,558 (sales rep and lead costs) but the revenue exceeds costs by almost 40%. In the first instance, the marketer spent $1.30 for every $1.00 in revenue. In the second case, the marketer spent $.61 for every $1.00 in revenue. If a lead is not qualified, its true cost is much higher than the original unit cost of the lead. According to MarketingSherpa, 80% of these types of MQL s are ignored or discarded by Sales because they are not ready to speak with a sales person. If 80% of those leads are ignored or discarded, were they worth the initial cost and sales expense no matter how cheap? The answer: No. Some technology companies develop an in-house lead qualification team to deal with the issues related to MQL s separate from sales. The success of these kinds of efforts vary widely and are often much more expensive and time-consuming than anticipated. 3

5 Some of the pitfalls include: Recruitment, education and training costs of the qualification team Cost and time of management oversight Cost and management of telephony infrastucture Resource utilization between up-time and slow time Traditional growth focuses on warm/hot leads to get bonused cold/warm calling gets shoved to the back burner Tendency for internal teams to get pulled off to assist with other company projects Developing an in-house team is an option for many organizations but the recruiting, infrastructure, and management skills, time, and costs required usually outweigh the benefits and increase the cost of a qualified lead. Now, let s take examples discussed above a step further and show the cost per sales opportunity if both of these scenarios were outsourced to an experienced marketing agency, relieving sales of the qualification efforts and letting them focus on closing sales. Example 1 10 non-qualified $100 each = $1,000 Lead qualification campaign to qualify and nurture leads over a 6-month period using multiple marketing channels (tele-prospecting, , inbound marketing, social media, etc.) Campaign cost is $2,500 plus the cost of the leads ($3,500) Deliverables are sales-ready leads (minimum of 5), business intelligence, nurturing leads (minimum of 5), updated database for ongoing use Cost per opportunity is a maximum of $700 for sales-ready leads without factoring in the value of the nurturing leads. 4

6 Example 2 10 highly-qualified $1,000 each = $10,000 Lead qualification campaign to qualify and nurture leads over a 6-month period using multiple marketing channels (tele-prospecting, , inbound marketing, social media, etc.) Campaign cost is $2,500 plus cost of leads ($12,500) Deliverables are sales-ready leads (minimum of 25), business intelligence, nurturing leads (minimum of 20), updated database for ongoing use Cost per opportunity is a maximum of $500 per sales-ready lead without factoring in the value of the nurturing leads. Let your sales team do what they do best close sales. Outsourced teleprospecting efforts determine which leads are ready for sales and which leads should be put in a nurturing bucket for long term cultivation, maximizing the productivity of the sales person s time and energy and reducing the cost per qualified opportunity. About Winn Technology Group Winn communicates daily with IT, line of business, and executive level contacts responsible for making technology purchasing decisions. Founded in 1990, Winn Technology Group provides end-to-end, global, multi-channel marketing solutions for both direct and channel sales, Winn supports demand creation, account-based marketing, channel management, teleprospecting, lead nurturing, event marketing, database services, and inbound marketing. All campaigns conducted by Winn and its global partners are managed in Winn s proprietary, web-based platform, the Winn Demand Center. The Winn Demand Center is a closed-loop portal for campaign execution and reporting. For more information, visit our website at or contact us at [email protected] or call us at