Marketing Analytics Move Closer To Revenue As Focus Shifts From Leads To Opportunities

“Instead of focusing on cost per lead, we are looking at Marketing Qualified Actions and what kind of investment is required to get prospects to take different actions,” says Jason Hekl, VP of Marketing at Coupa Software, a leading on-demand provider of e-procurement solutions for small to midsized businesses. Since Hekl’s lead analysis has shown that actions like free trials correlate to revenue much more often than white paper downloads, Hekl is spending more time analyzing the costs of what it takes to get a qualified prospect through the trial process and eventually to a closed opportunity.

THE COST OF CONVERSION
Tonya McKinney, author and President of Marketing 2 Revenue, an Atlanta area marketing consultancy, stresses to all of her clients to use revenue-focused metrics. “I never use a lead as a metric. I prefer revenue and buying cycle metrics such as Cost Per Response,” McKinney says. “If I’m managing qualification, then I’ll rely on response rate with Cost Per Opportunity. Cost Per Opportunity is a critical metric. Some programs generate many low-cost responses, but they don’t turn to opportunities at the same rate.”

McKinney points out that Cost Per Opportunity metrics can be impacted by several variables, including:

•    market
•    audience
•    product
•    price

She suggests marketers develop baselines and benchmarks to gauge their success rates. “You need to baseline your current performance, and benchmark your peer companies. So much depends on the size, scale, stage of the company and market--you can’t just operate on generic measures,” she says. “Cheap leads can often be costly to convert to opportunities if you have a taxed telemarketing team that has to sift through unqualified responses.”

The increased focus on the mid and later stages of the funnel is also being driven by a slight dip in response rates at the top of the funnel, while conversion rates remain strong among qualified prospects. “I've noticed my clients are much less focused on Cost Per Lead, and are looking more at lead quality rates these days,” says Lindsey Walsh, a BtoB Search Engine Marketing Optimization Analyst at SearchEnginePPC.com. “There is a lot of pressure on BtoB marketers to close deals and prove the effectiveness of their marketing budgets. Providing higher quality, sales-ready leads to the sales team is the way to do that.”

Walsh points out that while Cost Per Lead measurements are usually focused on all raw inquiries, she says more sophisticated marketers are using Cost Per Opportunity stats “because they continue to follow leads as they’re qualified and closed.”

TRACKING THE BUYING CYCLE
Dan McDade, President of PointClear, a leading prospect development company, says BtoB marketers are finally realizing the value of multi-touch marketing after putting too much emphasis on Cost Per Lead metrics for the past several years. “The use of multi-touch, multi-media and multi-cycle campaigns reduces the cost per sales-ready lead by up to 30%, because these processes more efficiently cover the market and yield more than traditional ‘one and done’ approaches,” McDade argues.

While industry benchmarks call for about 1/3 of leads to convert to sales opportunities, McDade suggests even these rates leave a lot of inefficiency in the pipeline. “It amazes me that companies are willing to accept 30% to 40% of marketing qualified leads becoming sales qualified. Using sales to qualify a lead is tremendously expensive and incredibly inefficient. If marketing is dictated to provide leads at a pre-set Cost Per Lead, that by definition means that the leads are not qualified.”

Jeff Holmes, CEO of 3Marketeers in Silicon Valley, which develops demand generation programs for large players such as Cisco Systems, adds that Cost Per Lead metric should really only be considered if it continues through to  Cost Per Opportunity and Cost Per Sale analysis. “Each measurement provides visibility into a different step in the buying cycle,” Holmes says.

He adds that companies who focus too much on CPL tend to short-change the sales process by focusing too much on cost at front end of the demand generation cycle, and fail to measure the impact on the generation of real opportunities and closed deals. “The cost of both leads and opportunities help make up the total cost of a sale. Closed loop approaches where marketers focus on optimal spending at each stage of the sales cycle minimize the cost of a win and avoid imbalances that cost time, dollars and ultimately sales,” Holmes says.