by Jim Lenskold
This is the third article in the four-part series on Maximizing Lead Generation Marketing ROI. The other articles in this series include:
How do you know if your lead generation program is working and delivering a good ROI for the company? You may be doing some lead tracking to understand conversion rates and customer profitability, which is great. But the sales team will inevitably let marketing know that 1) marketing was just a small step in closing the sale so they deserve the credit, 2) they would have found and closed those leads anyway so there is no incremental value, or 3) the leads are fine but there is just never enough. We need reliable measurements to both prove and improve our marketing effectiveness.
The first two parts of this article series have outlined what is necessary to improve lead quality (covered in Part 1) and how to improve sales alignment for better lead transition, tracking, and sales support that increases the close rates of those leads (covered in Part 2). We’ll now look at the measurements challenges for lead generation as we provide insight into the most common questions lead generation marketers raise with respect to measurements.
Measurements around lead generation are made easier by the fact that once a contact is generated, their interactions and outcomes can be tracked (systems and operational issues aside). But there are also a number of challenges unique to lead generation, which require a closer look at what it takes to get reliable measurements.
Let’s address the most common measurement questions, starting with the basic and moving to more advanced. As you look through these, keep in mind that there are four primary categories of marketing measurement that we can have to assess the incremental impact of marketing: pre-post tracking or trending, market testing, modeling, and surveys.
This match-back challenge can occur when the basic measurement technique is to track from the marketing tactic generating the lead to closed sale. In some companies the sales system does not contain enough detail to link the marketing contact, who may be a recommender or decision-maker, with the buyer, who may be from procurement or another person on the purchasing “committee.” You have a contact that is engaged with your marketing and passed into the sales organization as a lead but your only tracking option is to go to a purchase database and try to make a match.
If you choose to match by contact name, you will under-state your marketing impact since you know many of the buyers listed in the financial system do not represent the full set of decision-makers and recommenders you influenced. But if you match by just company name (as I have seen companies do), you will over-state your marketing impact, especially if you have a reasonable number of large clients with multiple buying groups.
A good compromise for those companies limited to some form of match-back is to match by company name and location. It is still subject to error but gets closer than either extreme. An alternative is to use periodic surveys of your marketing contacts to determine the sales close rate. The survey can also be used as a checkpoint or calibration of your match-back process.
Prospects are typically touched by multiple marketing contacts prior to qualifying as a lead that is put into the sales cycle. In most lead measurements, the last marketing contact gets credited for generating the lead. When most of your marketing efforts are response-oriented, this approach can work fine. Every marketing contact is generating a level of interest and it took that last marketing contact to get a certain set of prospects to become leads. This tracking approach will under-value marketing initiatives that are better at generating interest and boosting the response for other marketing initiatives and it can also over-value marketing touchpoints that pick up leads that would have otherwise come in through other contacts.
The solution is not to allocate credit to multiple contacts but to set up measurements that isolate the incremental impact of specific marketing initiatives. This can be done through market tests when assessing specific tactics, or through modeling when assessing multiple tactics and their interaction effects. Modeling can establish correlations to identify which touchpoints are most influential in generating leads or closed sales.
Note: For a more detailed explanation of options and issues see our archived article “Measuring the Impact of Multi-Touch Marketing.”
The best measure to show the true incremental impact of marketing is market testing using test and control groups. I am generally not an advocate of complete “no-contact” control groups which require eliminating marketing contacts for the purpose of demonstrating the incremental value of marketing because we are typically not trying to prove that no marketing is a viable alternative. While there are some instances where these complete no-contact control groups make sense, more often we will set up control groups that have “business as usual” marketing and sales contacts with the exception of a select marketing initiative(s) that are withheld. Market testing is also very effective to build the case for adding new marketing initiatives.
For lead generation marketing, there are a number of market test measurements that are particularly worthwhile to address your more critical marketing decisions.
For direct marketing, your approach is to withhold specific direct mail or e-mail communications from a random sample control group to determine the incremental lift in generating leads. If the control group nets the same proportion of qualified leads as the test group, it is likely that your other lead generation activities are capturing the opportunities out there. Any lift in the test group over the control group is attributed to your marketing.
Mass marketing tests require a geographic split of comparable markets or regions, matched through careful sales trend analysis. The test markets receive the incremental marketing to determine the incremental lift in quality leads.
The same testing approach outlined above can be used to assess the impact on closed sales rates or average customer value (in addition to lift in leads). This comparison is very appropriate when the sales organization is trying to make the case that marketing is not adding value to the sales process or that the leads generated would have been identified through the sales organization anyway. The analysis should determine if the test group receiving marketing contacts experiences more leads, a higher net close rate, and/or higher average customer value per sale than those receiving no or less marketing contacts. This may require withholding marketing for the select accounts for a long period of time and it is justified when there is an established belief that less marketing is needed. If you set up your tracking to monitor performance changes during the test, you may be able to detect a decline in performance early, at which time marketing can be resumed instead of allowing the control group to hurt sales results.
Keep in mind that measurement success is dependent on having statistically significant sample sizes to minimize the normal variance that might occur if you created the two groups and treated both the same. There are analytic processes that can help set up the experimental design. Also be sure to eliminate possible biases – for example you are better off comparing a portion of each sales rep’s accounts than splitting the sample by account rep when the rep performance may vary.
The addition of new marketing initiatives can easily fit into a market test structure. If the marketing initiative is planned to launch nationally and there is the flexibility to do so, a measure of the initial impact can be obtained through a phased-in launch that occurs regionally. Control groups are set up within the regions launching last. The primary objective of the measurement should be on improving the new marketing initiatives (as opposed to continuing vs. canceling). So the analysis should look deeper than bottom line results for insights such as identifying that the marketing is working with specific target segments or where in the customer funnel the performance is stronger or weaker.
As we addressed in the first two articles of this series, there are often opportunities to improve lead generation effectiveness not by increasing lead quantities, but by either increasing the conversion rates within the sales pipeline or by nurturing leads that were generated but not yet qualified. The ROI analysis can be used to show the profit potential of these initiatives. Market testing is used to develop effective programs on a small scale with minimal budget and then build the case for additional funding.
When marketing organizations are passing leads to external channel partners, there is often a huge gap in tracking that ultimately leads to the challenge identified in our first question above on accurately matching contacts to buyers. There are several measurement approaches specifically for third party relationships which are worth consideration.
1. Set requirements for channel partners to report lead outcomes on a regular basis. Some companies are very successful with this approach, typically because they have good quality leads that the channel partner is willing to work for. In other cases, the channel partner views the customer relationship as their own and will not such disclose details. The goal is to find the win-win that improves marketing effectiveness which is beneficial to both parties.
2. Set up a joint market test. This works well when testing new initiatives. If the channel partner understands that your company needs to demonstrate the value of the specific lead generation investment to benefit both organizations, they may provide enough quality feedback for an assessment (maybe excluding customer details).
3. Use survey research. Survey your leads periodically to measure their final purchase decision. Surveys are also a good opportunity to get detailed information on their funnel progression, leakage reasons, and insight into competitive considerations.
Here is a brief re-cap of how different methodologies can be applied to assess lead generation marketing effectiveness:
In the next and final article of this series on lead generation ROI, we’ll cover lead generation metrics and how these are used to manage your overall performance.