There is always pressure to generate more demand for sales. But what does more really mean? Does it mean more leads or does it mean better leads? Or does it more both?
The big question always is – do we have enough!
At its core the reason companies spend money on marketing is to create a pipeline for sales. Everything from branding, advertising and public relations to campaigns and websites is designed to create awareness for a company and its products, and turn that awareness into consideration and then turning that consideration to a decision. There may be thousands of moving parts in a marketing organization, but success comes from ensuring that everything is carefully aligned to move prospective purchasers to become (and stay as) customers.
A key element of this process is ensuring that the sales teams process is understood. When marketing passes a qualified lead to sales, what does sales need to do with that lead?
In the world of business to business (B2B) it can take months or years to progress a prospect to the point of being a qualified lead that sales can accept as one they will expend effort on working to a decision. But how long will it take sales to work each opportunity,
both in terms of time and actual effort. This dictates how many opportunities each sales person can effectively manage. And the most critical factor is this;
On average how many opportunities does a salesperson need to work to get one across the line as a closed won deal?
In the world of B2B enterprise sales, it’s usual for the opportunity win rate to range between “1 in 2” and “1 in 20” or more. The likelihood of winning is greatly improved if the process of getting a qualified lead to sales provides the names of the people in an account who are involved in the decision, when the prospect is planning to decide, and the process they have for budget approval.
There is little to no point giving sales a weak lead. Someone’s name, address, email and phone number is not a qualified lead.
A great lead will look something like this:
- Company X needs a solution to problem Y
- Frank is the decision maker in department A
- Bob in Finance owns the budget process
- Nancy in IT will be in charge of implementation
- Sandy is the group’s overall manager who will have to approve the purchase
- They plan to make a final decision by July 15th
- Here is what their current process looks like
- They like us for these reasons
- Frank and Nancy have downloaded these papers from us, and attended these webcasts
- Nancy has said she will take a call from our sales team and will include Frank
Now that’s a lead that marketing can feel proud to deliver to sales.
Obviously that is a lot of information and takes a lot of energy to build. Most leads are not that well qualified, and so a lot more sales effort is required to build the business case and negotiate the deal. Marketing and sales should always expect better quality leads, whatever you think is great today, can always be made better. But lead quality, lead volume and the frequency of leads passed to sales are all critical factors that are always in conflict. Only sales and marketing leadership working openly together as a team can decide on right lead process.
Knowing how many deals sales can manage in any given period of time, and how often they will win a deal, will allow you to build (with sales) a pipeline forecast. And you can quickly see what gap you have today and for the future.
Of course it takes time for marketing to build a pipeline, and this can be calculated as can the likelihood of customers moving through your defined buyer’s journey.
I’ve found that it’s worth pulling together a simple pipeline forecast formula with your sales team to confirm that everyone is thinking about this the same way. These kinds of formulas don’t have to be perfect or particularly accurate. What they do is get everyone thinking the same way.
You can create a simple formula to be able to decide on the right required demand for your specific sales organization.
Here are a sample of some of the criteria to consider:
Q = Sales Quota
n = Number of sales people
W = Expected win rate
a = average won deal size
And here is a sample of how you can create meaningful ways of considering the lead demand:
Q / (n x W) gives you a simple way of thinking about how much $ value of highly qualified opportunities needs to be in the pipeline.
Q/a tells you how many deals need to close
Q/(n x W x a) = is the number of high quality opportunities each sales person must have to work on to achieve quota for any given period.
These formulas help you build a perspective as to what sales and marketing need to achieve. You can even go back into your CRM data and apply historical pipeline values and quotas to the formulas to test your assumptions.
These types of exercises really help tune your thinking and ensure that sales and marketing have a common way of thinking about what the whole team needs to achieve.
I should warn you, if you are in any way a math geek, these types of forecasting analysis’ can become very addictive. But what you will build is “perspective”, and one that truly aligns the goals of sales and marketing.