by Jim Lenskold

Demonstrate and Deliver Lead Nurturing ROI

Educating and engaging prospects is a significant part of lead generation marketing. Online channels have made it easier and less expensive to distribute content in an environment where potential buyers are seeking information and open to interaction. Marketing tactics to educate and engage prospects are useful in the early stages of the customer purchase funnel to build awareness and interest and in the middle of the funnel to generate leads. These tactics are also valuable in nurturing stalled leads, which was top ranked in recent research study as the area of marketing that is most underfunded relative to the potential value it can provide (2010 Lenskold Group / emedia Lead Generation Marketing Study.

Lead nurturing has high potential value when your acquisition programs have generated responses from interested prospects, but they are not yet ready to buy. Stalled leads within the sales organization will typically get the periodic call with the “are you ready to buy yet” message. In the absence of a lead nurturing program, the marketing organization may toss the leads back into the prospect pool and let future acquisition marketing bring them back into the lead/sales process. It’s easy to see why marketers believe there is high profit potential here – with low cost marketing contacts to the right target of leads that are not fully qualified or stalled in the sales pipeline, educating and engaging these prospects can increase conversion rates, increase the value per customer, and shorten the sales cycle.

Research shows that lead nurturing has high potential. The 2010 Lenskold Group / emedia Lead Generation Marketing ROI Study revealed that six in 10 lead generation marketers (58%) indicate that nurturing stalled leads is under-funded relative to the potential value.

In addition, marketing tactics that work well to nurture leads by educating and engaging customers were ranked highest in effectiveness relative to more sales-oriented tactics. The following chart shows the portion of B2B lead generation marketers that rate their effectiveness as high or very high (4 or 5 on a 5-point rating scale).

Marketers see the value of engaging and educating prospects, as well as establishing lead nurturing programs to enhance their lead generation effectiveness, but the approach is much more challenging to prove out relative to the simplicity of acquisition marketing.

Nurturing Objectives & Strategy

In order to develop a profitable lead nurturing program, you must align the strategies and objectives to the business outcomes it is likely to influence. When evaluating a nurturing program against ongoing acquisition marketing without nurturing, there are three primary financial outcomes that nurturing can increase, in addition to an opportunity to decrease costs.

Maintain Awareness & Interest for Increased Lead Volume

The frequent touchpoints from nurturing marketing, combined with the educational content and engagement opportunities, keep awareness and interest high so that your solution is top of mind as needs change. When a program to nurture stalled leads is integrated into acquisition marketing, the lead volume should increase as more prospects contact the sales organization or accept a contact from sales. Greater volume of qualified leads should result in incremental sales.

Condition Leads for Higher Customer Value

Without a nurturing program in place, another acquisition program may eventually capture a stalled lead who eventually becomes ready to buy. Tactics such as newsletter articles, blog postings, white papers, ebooks, and Webinars provide quality contacts that go well beyond maintaining awareness. These marketing initiatives are providing value to the prospect that is relevant to their needs, providing how-to’s, case studies, deeper insights into potential uses of your products, and expert opinions on your solution. Prospects that re-enter the sales cycle after a period of nurturing should have increased customer value from a higher propensity to purchase higher levels solutions, higher purchase volumes, and longer tenure as a customer.

Increasing Conversion Rates with Shorter Sales Cycles

The educational benefits referenced above should increase conversion rates in addition to customer value. Part of the direct sales relationship is educating prospects on their options. Better educated prospects should therefore move through the sales cycle faster with improved close rates. Shorter sales cycles have benefits beyond financial contribution, such as higher close rates and improved management of monthly or quarterly goals.

Targeting to Nurture High Potential Segments

Many online-based nurturing programs have a low “variable” cost, meaning that once you establish a newsletter, Webinar, or white paper, the cost of adding both high potential and low potential prospects is so minimal , it makes you wonder why targeting is important. But, low potential prospects are expected to eventually generate leads to hand off to the sales organization. Leads likely to have low value or low potential to convert will start consuming more valuable resources in the sales cycle without providing much payback. This is not to suggest that you chase low potential prospects out of these marketing initiatives but that you are selective in the leads fed into the nurturing program.

Targeting and screening should be managed as follows:

Marketing-Generated / Sales-Rejected Leads

The sales organization will accept a portion of these leads. The balance of the leads that are disqualified by sales should be split into groups that are either qualified for nurturing or not qualified contacts for future marketing and sales activity.

Stalled Leads

Once leads enter the sales pipeline, they will be either won (closed sale), lost (no sale), or stalled (no decision or not ready to buy). Stalled leads can become too costly for sales contacts without the benefit off nurturing initiatives that move the contact forward in the purchase funnel. Once again, targeting criteria is necessary to filter out low value and low potential leads that do not belong in the nurturing program.

New leads from acquisition marketing are typically qualified and screened prior to the hand-off to sales. This same screening process will work for re-activated leads from nurturing programs to ensure that only high potential prospects continue into the sales pipeline.

Measuring Lift and ROI

One of the more significant challenges to winning support for lead nurturing programs is the increased complexity in measurements. These programs tend to be longer-term and involve a series of marketing investments that may not have an immediate response or lift. A change in the measurement approach can help.

When making your case for an existing or new lead nurturing program, it makes sense to compare this to the business practices for acquisition marketing and sales management without a nurturing program. The business outcomes of increased leads and sales, higher customer value, and higher conversion rates must be measured over time for the complete nurturing program to which the collective marketing tactics contribute. Measurements can also assess the contribution of specific marketing initiatives within a nurturing program to ensure that education or engagement is truly contributing impact and value.

Many of the short-term metrics marketers use to evaluate educational tactics, such as downloads or event attendance, can work very well as indicator measures. The indicators can determine where tactics may be weak or strong, but be careful not to let these metrics become the goals. You may have tactics that generate low participation rates but have very strong impact on sales conversion or customer value. Examples of both contribution and indicator metrics and measures are shown below.

Metrics & Measurements

Program performance contribution measures

  • Incremental sales conversion rate (tracking/analysis of nurtured vs. non-nurtured prospects)
  • Incremental customer value (tracking/analysis of nurtured vs. non-nurtured prospects)
  • Incremental sales-qualified leads re-activated following stall/drop/disqualification (tracking/analysis of nurtured vs. non-nurtured)
  • Sales cycle time from active lead to conversion (tracking/analysis of nurtured vs. non-nurtured)

Tactic performance indicator measures (short-term)

  • Purchase intention ratings (post-tactic survey)
  • Brand preference ratings (post-tactic survey)
  • Perceived value ratings (post-tactic survey)
  • Engagement rates such as white paper downloads, newsletter click-throughs, Webinar attendance (tracking)
  • Progress on sales qualification metrics such as purchase timing, budget, and need (post-tactic surveys and/or sales qualification contacts)

The performance of specific tactics within a lead nurturing program can be isolated and measured using market testing with control groups to assess the incremental contribution, or modeling to identify which tactics are driving improved conversion rates and customer value.

Demonstrating ROI Lift

A basic version of an ROI analysis can show how these key metrics can make the case for lead nurturing as shown in the example below. In more advanced versions of this analysis, the assessment could also include more detail on marketing contacts and responses throughout the nurturing period, the sales funnel that leads to the net conversion rate, and drivers of the sales staff cost.

The chart below compares the total cost and impact of a nurturing program supporting ongoing acquisition marketing to the stalled or disqualified leads against the acquisition marketing alone. The difference between the two, shown in the third column, represents the incremental impact generated from the lead nurturing program.

 

Not all nurturing programs will have influence on all of the profit drivers shown in this example, including reduced sales cost, additional leads, increased conversion rates, and increased customer value. The step of running a basic ROI analysis will show how much lift is necessary to deliver a profitable nurturing program, which helps to focus strategies and objectives, refine targeting, and establish key metrics for measurement. Preliminary assumptions can be used to build the initial budget request to launch or trial a nurturing program.

Lead nurturing requires a sound strategy that can influence the right profit drivers. Marketers must show that nurturing those leads that have the potential to convert into high value customers is worth the extra effort and expense over ongoing acquisition marketing. Marketing tactics must align to the business outcomes so that educational marketing is contributing to higher customer value and conversion rates. With an ROI analysis and quality measurements in place, marketers can develop and deliver highly effective and efficient lead nurturing programs.