Saturday, January 27, 2007

Grading Leads

When Marketing is chartered to bring in leads at a very low dollar amount per lead; more is not always a good thing. There is pressure to bring in only low cost leads, which tend to have a lower value to sales. By assigning multiple attributes to sales leads, such as developing a point system and targeting an average lead quality along with a target acquisition cost, sales groups will see better sales results.

Not all businesses and sales teams are driven by leads and converting those leads to sales. If your business is based on lead generation and the conversation of leads to sales you might find the following of interest. I have worked in both types of sales environments, those focused on leads and those focused on the enterprise. One sales organization I worked for, sold to the 35 largest telecoms in the world. It is a relatively easy task to find out who the largest telecoms are, and once the list is developed it is straight forward to determine the individual or individuals who are the decision makers in those organizations. There is not a large need to use marketing resources for lead generation in this type of sales organization.

Yet in other organizations I have worked in, leads were the life blood of the organization. Fresh leads flowed into the top of the sales funnel and executed sales deals flowed out of the bottom of the funnel. What happens to the leads while they are inside of the funnel is in many organizations a bit of a mystery. The mystery surrounding the processes that are associated with leads needs to be pealed back to really maximize sales impact. If leads are your life blood, then you had better have a good fix on how to maximize their value to your sales organization.

To see how one comes to terms with this process I am going to jump ahead a bit and then come back to the beginning. Depending on a number of factors (sales infrastructure, experience of reps, complexity of sale) businesses who require sales leads to keep their business going find out quickly that there is an optimum number of leads that one sales person can deal with in a day. It is important to know what that number is. Too few and your sales people are sitting on their hands; too many and the process becomes very inefficient. Sales reps need to wade through a heap of leads to find the hot sales opportunities.

Let’s say for example that one sales representative can make 50 quality contacts in one week, but you have 200 leads for each sales representative every week. That means that 150 of the leads are not being properly followed up on. Now if we had the ability to gaze into a crystal ball and judge the quality of each of those leads, we might see that 40 of the leads are hot, 80 are cold, and 80 are marginal. Which leads do you want your sales team to follow-up on? The 40 hot leads should be the number one priority of the organization. Once the leads are not graded, there is only a 20% chance on any random call that your sales team is following up on an optimal lead. Why not move the hot leads to the head of the call queue and then message the 80 marginal leads with a campaign that addresses customer value and has a clear call to action. When the prospect responds, they come back into the system as a hot lead.

Usually most organizations will send some type of communication to all 200, just to keep them warm. After this general communication let’s look at the numbers. As an example let’s say that after the campaign 7 of the leads that were previously marginal come back as hot; and out of 80 cold leads, 3 come back as hot. With the original 40 leads classified as hot, this gives us 50 hot leads for one sales representative to follow-up on that week. The amount of time a sales rep would have spent chasing bad leads has been cut dramatically.

Second level qualification or a “Closed Loop Marketing” system is imperative to making a lead driven sales team more efficient. Sales should pursue prospects that represent the best opportunity and there should be a process in place to bubble up these high-value prospects. All leads must be graded by some agreed criteria to maximize the efficiency of a sales department, if there is not an effective grading system in place then sales resources are being wasted, the team is not motivated to work at their peak, and the entire sales process slows down to a crawl. When I am focused on lead grading criteria, I like to grade very aggressively. I would prefer exceptional leads and have some sales capacity left over, instead of overrunning my sales team with poor leads.

Everyone needs to establish their own grading system that works for them and gets the sales machine rolling. Criteria for leads grading can be accomplished in a number of different ways. You can ask the customer if they would like to be called (yes) (no). If someone is asking to be called they must be considered as having good potential. Other ways to categorize a lead are asking for a purchase time frame, number of units, company name, all of these and additional criteria can be used to determine grading leads. I recommend you develop your grading system and then divide the leads into their buckets. Do you now have enough or not enough to work with? You then adjust the criteria based on the amount of leads you need to put into the top of the sales funnel on a daily, weekly or monthly time period.

By grading leads you will see an increase in employee morale, achieve higher close rates and see increases in revenue per employee. All of these are good things.

Whatever decisions you make, make sure you identify what your objectives are prior to designing the sales process, establish your goals, and measure the effect of the sales process. If you do not see a measurable improvement in sales closures that means your sales people need further training, or the criteria you use to grade the leads is wrong. Adjust based on measured feedback, try again and compare results. It has been my experience that 5 salespeople with good sales leads will outperform 5 salespeople with bad leads any day of the week.

In baseball the batting the coach instructs players to not swing at bad pitches. Sales is much the same, don’t chase bad leads, not all leads have the same value to your sales organization, figure out how to establish a grading system, measure the effect of lead grading and see improvements in your sales.

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