Every organization with a sales force should monitor the leads it generates and know how successful it is at selling to those leads. The usual metrics kept are the number of leads generated and how many of these the sales team converts into customers.
What many managers fail to understand is that the two are actually separate functions and require different sets of skills and resources. Lead-generation is a marketing function; the task of converting leads to customers is a sales function.
The link between the two functions is lead management. Its fundamental aims are to lower the costs of lead acquisition and increase the rate of conversions from leads to customers.
Today even small businesses are managing their leads with software programs of varying complexity. An Australian small business advisory service, Business Roadmap Pty. Ltd. offers this advice: “There are many lead management software applications on the market and as you’d expect, some are better than others.
“Some are suited to smaller businesses and others cater to the needs of larger firms. We’ll just say that having a lead management system that incorporates one of these applications is always a good idea.” (‘Sales leads only have value if they’re managed,’ bluemts.com.au, accessed 16 June 2010)
Quality is the Key to Good Prospect Lists
For marketers who purchase prospect data the content and quality are far more important than the cost. The best lists are regularly updated, their information is accurate, and it’s possible to nominate prospects by geographical area, by age, by occupation, or by any other discriminators that enable the sales effort to be directed at qualified and appropriate targets.
Smaller companies or those restricted in their geographical coverage benefit most from having the kind of carefully-targeted prospects that are available on a cost-per-lead basis. For example, it’s possible to rent or buy lists of people in a specified geographic area who have previously purchased the same kinds of products from other sources.
To get a quick idea of the quality of purchased leads, monitor the relationship of leads to sales by dividing the number of leads purchased by the number of conversions obtained from those leads. It’s a simple calculation and the closer this result is to ‘1’ the better is the quality of the leads the company’s paid for.
A business can also create its own leads by having existing customers provide it with referrals or word-of-mouth advertising that creates new prospects for the sales team to sell to. It sounds logical, but there are many companies that don’t do it.
Referral selling has a high success rate, according to online magazine Directory Journal: “Successful salespeople know the value of a prospect who has been referred by an existing client who is satisfied with your product or services.
“This prospect is easier to sell than a new lead that knows very little about your organisation. Qualifying this prospect should be much easier than a lead obtained from a cold call.” (‘How to Qualify Sales Leads & Prospects,’ 3 August 2007, dirjournal.com, accessed 16 June 2010)
Convert More Prospects to Customers
High-quality leads make it possible for the sales team to achieve better rates of conversion from leads to customers. This effectively lowers selling costs and will go a long way towards offsetting any additional costs incurred to ensure that lead quality is consistently high.
There are some simple steps a business can take to improve the conversion rates its sales force generates:
- Assign a relative value to each lead when it is first contacted.
- ‘Strong’ leads are those who are definitely looking to buy, ‘Warm’ leads are those who might buy and ‘Weak’ leads are probably not interested in buying.
- Concentrate selling efforts on the ‘Strong’ leads. Give them priority and only after all the ‘Strong’ leads have been processed should the sales team turn its attention to the ‘Warm’ ones.
- Only after ‘Strong’ and ‘Warm’ leads have been approached should the ‘Weak’ ones be contacted, and if the first contact indicates they're unlikely to ever become customers, forget them.
Competition for a sale to any acquired lead will usually decrease over time. Most businesses will lose interest in a lead if it doesn’t turn into a customer fairly quickly. Those who persist the longest will often be those that succeed.
Be Tenacious When Managing Sales Leads
Sales trainer Kevin Pritchett explains why tenacity helps when selling: “Seventy percent of all sales (of any kind) are made the 5th contact or later. What that means is that people don't buy the first time they see you or your product or service. They buy only after repeated contacts with you and your marketing message.
“That means that for you to make a sale, you've got to have repeated contact with your prospects.” (‘Do you know how to convert leads to sales?” startupnation.com, accessed 16 June 2010)
Patience and ongoing communication will eventually maximize all the conversions a sales team is going to get, but this might not happen until several months have passed.
To be optimally effective, a lead management system must accommodate the need to stay in touch with leads over a fairly long period of time. Maintain contact with leads – perhaps by telephone, email or a newsletter – until they either convert to become customers or just until they are reclassified as ‘Weak’.
Any prospect, even the ones that reject a company’s initial approaches, will become someone’s customer eventually. Staying in touch long enough is the only way to have a chance at becoming their new source of supply.
Each member of the sales team will have their own conversion rate that shows how successful they are at converting leads to sales.
This metric can be used in conjunction with total dollar volumes when comparing the results of individual members of the sales team and quickly identify which salespeople are the businesses’ top performers.
Philip Keeffe - Phil Keeffe is an Australian journalist originally from California who has lived in Sydney since 1968. His communications background ...
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