The smoke and mirrors crowd of “Digital marketing made easy” will tell you that Cost Per Lead (CPL) is a key measure. This is half right, but the half that gets missed most of the time is the half that really counts.
First, how do you define a lead?
Is it a webform download, attendee at a webinar or seminar, business cards collected at a tradeshow or network breakfast, someone who calls up ,looking for information, or just a random conversation about the product you sell with someone at the tennis club in a weekend.
It can be all of these, and none.
All so called leads are not created equally, and until there is some sort of qualification that there is a problem to be solved or some circumstances that can be leveraged, it is not a lead, it is just a name you happen to have.
The task is to qualify the name in some way that indicates its potential to result in a transaction, and therefore attract the resources necessary to convert.
Most businesses have some sort of prioritisation process in place, even an ad hoc one, that recognises the difference in value between a business card from that exhibition, a referral from a trusted contact, to a request from existing customer for advice on a problem they face.
It is not however an easy process, nor is it one that is aided by the simple metrics found in most CRM and marketing automation packages.
The most expensive resource an organisation has is often its salesforce.
It is not the absolute cost of them that counts, but the business that their face to face time delivers.
Lets assume that your total cost of employment of a sales rep is 100k.
They work 42 weeks, 8 hours per day, so the nominal cost per hour is $260.
Let’s further assume that they have a lot of internal meetings, order follow up, report writing and emails that takes 2 hours per day (a conservative estimate in my experience) travel time of another 2 hours/day to get to 3 meetings with customers taking 30 minutes each.
All that means that the face to face selling time, the key to revenue generation in most B2B businesses is just 1.5 hours a day, so the real cost of the sales representatives time, doing the real work of selling is $1,387/hour.
Puts a different light on the common task of sales reps of following up the business cards collected at that sales conference, or cold calling door to door in the local industrial park, doesn’t it?
The only real way to measure the CPL is to have a process in place that is sufficiently complete, and agile enough to recognise differences in the nature of the so called leads. This really requires the knowledge of people to be applied. Leaving it to the algorithms in the CRM is no way to go, although at the rate of development of machine learning, that will be possible in the very near future.
Scary thought that for sales and marketing people.
However, currently a robust process looks something like:
- A strategy for creating and leveraging demand
- Articulation of the value proposition of the business
- Identification of the ideal customer on the basis to whom the value proposition will be of most value
- Detailed customer journey analysis
- Automated systems to do the ‘grunt’ work
- Face to face sales time & conversion rates
- KPI’s and dashboards to collect and monitor key sales pipeline data
- Continuous improvement of all the above.
When all that is done, measure the CPL in a way that is meaningful to your business.