By Denny Head, eDemand Leads Consulting
Evaluating the ROI Potential of External Lead Sources
Over a two-year period while I was working at Avaya, we had developed very effective lead metrics that allowed us to track the various lead sources from direct mail, email, webinars, newsletters, and other marketing tactics. We were able to compare the conversion rate of each source into a qualified enterprise lead through our telequalification process. This conversion rate scorecard was reviewed weekly to determine the volume of various lead sources and the percentage of conversions. The Avaya lead qualification criteria was very high as our team worked to align with how sales defined a high quality lead. We consistently delivered leads that converted from Marketing Qualified Leads (MQL) to Sales Qualified Leads (SQL) in the 70 to 80% range.
The challenge in generating very high quality leads is finding sufficient warm lead inquiries to meet your MQL volumes. We were seeking alternative lead sources that could generate a high lead conversion rate at an acceptable cost. As we discovered new lead sources, our process was to do pilot evaluations to measure how these purchased leads converted into qualified leads. We found two sources that had significantly higher lead conversion rates at a substantially lower cost per lead.
As we analyzed our marketing investments, it was clear that some of the traditional lead sources that made up a significant portion of our lead budget were not performing as well as they had in the past. Our biggest decline was in the area of direct mail campaigns; we found that the response and registration rates had dropped significantly from a historical perspective. We also found that of those responders, we were not hitting the targeted enterprise segment but rather a large percentage from the SMB market. The net result was our cost per qualified enterprise lead from these sources had doubled over the previous years.
As part of the ROI analysis, we determined the average cost per lead inquiry, including the campaign expense as well as the telequalification costs. Added together, it gave us a dramatic view of the wide cost range to generate qualified enterprise leads. The costs ranged from hundreds to thousands of dollars depending on the source.
Based on this, we were seeking alternative lead sources that could hit the following objectives:
- Reach the target enterprise market segment (100+ employees per site)
- Deliver a higher lead conversion rate from lead inquiry into a marketing qualified lead (MQL)
- Reduce the total cost per lead, including the combined lead source purchase and the telequalification costs.
We discovered that purchasing targeted and pure-qualified leads from two external sources significantly improved our performance in the above three areas.
The first source was from our primary database vendor that provided site and contact information for our sales force and our marketing campaigns. As part of their process to insure their information is current they call and survey their entire base every six months. They allow us to include an additional survey question to be asked and buy the results from that question. Being in the telecommunications industry, our question was “Are you going to be making a decision to change out your phone system in the next 12 months?” We purchased the names of those who responded “yes” and also fit our criteria for enterprise customers. The cost per lead inquiry was under $100 each. Depending on the technology or services sought, this approach can work for other B2B marketers.
The results from those leads were very favorable:
- A conversion rate from 20% to 30% into qualified leads (MQL) – nearly double the average for all other lead sources
- The ability to pay only for leads that met our enterprise market segment size (Employees = 100+)
- The low cost of the purchased lead inquiry coupled with the cost of the telequalification resulted in an overall cost per qualified lead that was roughly half the cost of our traditional lead sources
The second source of highly qualified leads was from a business media company that publishes Internet based content across a range of vertical markets. They provide content, including product reviews and market analyses, and follow up on customer downloads with guidance calls from their analyst who qualify the leads. From these downloads and follow-up calls, their clients receive lead inquiries called a HQLs (Highly Qualified Leads).
- These leads were more expensive (in the $200 to $300 range) but the conversion rates were in the 35% to 45% range, which was two to three times higher than our average lead source
- We were able to purchase only those leads that met our market segmentation criteria for the enterprise market
- The total cost per qualified lead including the lead source and the telequalification was about 60% of the traditional lead source
Lead sources such as these can help enhance your lead program. These sources are not exclusive to you; your competitors may be buying the same leads as well. They are not highly scalable as the volumes are limited and will not replace all of your traditional sources. But they can make up a significant percentage of your total qualified leads.
The first step is to test before you buy. The process we used was to test and pilot before we committed to a vendor. All leads were telequalified, which provided us with the key metric of the percentage conversion rate to a marketing qualified lead which we compared to the conversion rates for our traditional sources. The process involved requesting from the vendor a number of free lead inquires (generally 20 to 100) to test. Our telequalification vendor would call this list, and within 30 days we had a good benchmark if the inquires were of high quality or not. If the conversion rate was high we would then compare the cost of the inquiry. If both the conversion and the cost were competitive we would purchase additional inquiries and evaluate the source for a 60 to 90 day period before committing to a longer term contract.
It is important to have these elements in place:
- You need to have a process to accurately measure your conversion rates and compare these to your traditional sources. (Recommended sources include your telequalification vendor or, if you have good closed loop reporting, your CRM or sales automation metrics)
- During the pilot, you should set clear expectations with your vendor and communicate the results to establish a win / win for both parties.
- Continually monitor your conversion rates from all of your lead sources to identify how they are performing. This enables proactive corrections if performance declines and helps to direct your marketing dollar to the best ROI investments.
A key success factor is your criteria of lead quality and the dollar size of the opportunity. This approach worked for larger enterprise leads that have longer-term sales cycles and average sales price exceeding $50,000. For smaller SMB where the value of the sale is much less, the same process can work if the cost of the lead inquiry is also much lower.
Take a look at alternative lead sources particularly from new Internet content aggregators. This is where your customers are increasingly going to find independent analysis of today’s technology. Although the initial cost of the lead inquiry may give you “sticker shock,” when you consider the high percentage of the leads that convert into qualified leads and compare the real cost of your traditional lead sources, you may find that these sources offer real value.
Dennis Head, from eDemand Leads Consulting, is nationally recognized as an expert in lead generation, closed loop lead management and improving the ROI from your marketing investment. He built and managed the Avaya B2B Lead Refinery process that generated over $1.6 Billion in sales qualified leads. You can reach Denny at email@example.com.