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Why Cost Per Lead is Irrelevant

pipelineGuest blogger, Matt Heinz, shares three sales metrics that will keep your pipeline full of qualified leads.

Generating qualified leads is the job of sales. When a qualified lead becomes a qualified opportunity, we’re really ahead of the sales game. And when our sales and marketing teams work together effectively, that’s an unbeatable combination.

Matt Heinz is a rare marketer who understands how marketing can really accelerate the sales effort.  In this month’s guest blog, he turns the tables on popular marketing strategies and explains what’s important, what’s relevant, and which metrics really matter:

“Cost per lead is not only the wrong metric to watch, but it could lead you to deprioritize or turn off lead sources that are helping you make more money.

Clearly, sales leads are important. But not all leads are created equal. You may have lead sources that generate low volume at high costs, but with high conversion.

The closer you get to the sale, the more important the metric. Cost per lead isn’t all that interesting. Cost per qualified opportunity? Now we’re getting somewhere.

Of course, cost per sale is what you ultimately want to measure and manage. But too many marketing organizations aren’t looking that far ahead. They’re focused mostly, if not exclusively, on their campaigns and what they deliver to sales teams.

Their month-end reports might look good, with higher lead volumes at lower per-lead costs. But if those leads aren’t converting into opportunities or sales, it’s a highly-inefficient spend.

Cost per lead is irrelevant. Cost per qualified opportunity is a much better metric to stand behind. But if you really want to be an effective modern marketer, you’re watching leads all the way through to the sale and optimizing your campaigns accordingly. This may seem rudimentary, but most marketing organizations aren’t yet operating this way.

So how do you measure that success? Which metrics do sales and marketing leaders watch on a weekly (if not daily) basis to determine the health of their combine efforts?

Although each respective team must watch and manage to a broader set of metrics, these three metrics should guide where they focus their attention:

1. Current selling period pipeline health
Whether you sell based on a monthly or quarterly sales cycle, how healthy is the current pipeline (qualified opportunities expected to close this period)? And based on that pipeline, how confident are you that you’ll hit or exceed your sales goal?

Most marketers claim there’s very little they can do to impact current-month or current-quarter sales. And in a world where marketing’s role is primarily about lead production, that might be true. But if sales and marketing are working closely together, there’s plenty marketing can do to help close more deals.

For example, if you look at the current pipeline, what could possibly keep those deals from coming through? Are there decision makers who need more information, assurance, context-building, or urgency to get the deal done? What messaging or validation tools can marketing provide to support the sales team?

2. Qualified pipeline for the next two selling periods
Most sales organizations focus entirely on the current selling period and don’t start looking at the next period until it begins. But if you wait that long, you’ll always be playing catch-up. If you sell on a monthly sales cycle, keep a watchful eye on the growth of opportunities 60 and 90 days out.

This might be one of the most important metrics for sales and marketing alignment. It not only combines short-term, outcome-oriented measures. It also provides very tangible, actionable next steps for each group based on what the numbers are telling you.

3. New opportunities created
This measure is independent of specific closing dates but is absolutely tied to your definition of what a qualified new opportunity looks like. It’s unlikely you’re setting up new qualified opportunities for nine months from now if you’re on a monthly sales cycle, but those opportunities will likely be spread out across one to four months in the actual sales pipeline.

This measure is more about ensuring that sales and marketing are working together to generate enough regular opportunities to keep the pipeline full. You can look simultaneously at how these new opportunities actually spread across close-date months, but your model should indicate how many new opportunities are required each month. Where should that production be month-to-date or quarter-to-date, and where are you currently?”

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Which metrics are your sales reps focused on? Which do you find to be the most important indicators of sales success—both in the short and long term?


matt-heinz photoPresident of Seattle-based Heinz Marketing, Matt Heinz has more than 15 years of marketing, business-development, and sales experience from a variety of organizations, vertical industries, and company sizes. His career has focused on delivering measurable results for his employers and clients in the way of greater sales, revenue growth, product success, and customer loyalty. Matt has held various positions at companies such as Microsoft, Weber Shandwick, Boeing, The Seattle Mariners, Market Leader, and Verdiem. In 2007, Matt began Heinz Marketing to help clients focus their businesses on market and customer opportunities, then execute a plan to scale revenue and customer growth. You can read more from Matt on his blog, Matt on Marketingfollow him on Twitter, or check out his books on Amazon.com.

5 Responses to Why Cost Per Lead is Irrelevant

  1. Hello, Matt. Thank you for an informative article. Your insights provide, what I call, “beyond normal selling.” It really makes you think outside the box. However, my problem is getting people to buy off my website. Even in the “Longaberger At Home” online store, people won’t buy $2.00 – $10.00 items. I often hear how expensive the product is, but that’s a cop out because they’re not buying the discounted items either. So last three years I don’t sell to people until I get to know them and find out what their needs are. I also focus on helping people with their office and closet organization by using containers to keep organized on a long-term basis. I also sell well at trade shows and doing fundraisers. I believe in community collaboration; if nothing else, that keeps my name out there. So I have fun along the way. But, I’m still bothered that people won’t buy from the website. Right now I don’t have control over how my website looks. The parent company in Ohio does. They give us a free website. I have to pay out a lot more if I want to have control over how the home page looks and put my own verbiage and photos in there. I don’t want to do that until I have proof that people are willing to buy from it. I think my website looks fine as is. Either they want to buy or they don’t. Oh, I just remembered, another way of back-door selling I have found works this past year is going to other home-based owners’ parties. Of course, I only go to those that I like the product. That is the most fun. I get permission to leave by business cards near the food, after the sales pitch is over and while people are getting food. This year two of the owners have agreed to have Longaberger parties with me. They are excited to learn more about Longaberger and what I do. There was very little effort on my part to get those parties. All I did was go to their parties over and over again. And, get to know them a little along the way. Oh, that’s right, a customer of theirs has approached me also because they see me at several parties, and I’ve gotten to know them also. Yes, it takes a lot of patience, but if you’re having fun it doesn’t feel like you’re waiting for anything. I also have left my business cards and monthly flyers at various restaurants in town over the years. That has never generated any sales. I found that to be a waste of time and waste of money on the monthly flyers. People take but have not called, not even for a question or inquiry. So I stopped that. The same for advertisements in other newsletters and local magazines. Not a call, stopped that too. I also have learned not to get too crazy when people say they will buy lots in the future and use to with someone else, but their previous consultant has moved away. It’s just talk. That has never generated anything. Anymore I just say thank you lets get together to talk. They generally don’t. I’ve learned to ignore those emotional black holes and focus on those who like to do things with me and eventually talk. Another area that is popular with others but has never worked for me is referrals. I am a referral source but that has never generated referrals for me. But I have fun talking to others and learning what’s out there and getting to know people. That does help to keep my name out there. It’s another form of networking. I have been invited to things that I never would have known about otherwise, so that’s a big plus. Sometimes that does feel like a lot of work on my part, but other times it just feels like fun. From that type of networking, this year alone I have already given two speeches as a guest speaker. I have gotten a few leads from those two arrangements. So that’s why I do believe in being a referral source. So there are ways to get some sales and name recognition, you just have to think outside of the box. Thank you for your time in reading this long comment and giving me the opportunity to say things that have been on my mind for a while. Keep up the good work. You are making a difference in the world. Take care. Happy Spring from Alaska! Rosella Young, AA-1 Designs, 2012 BPW/NTTF Entrepreneur of the Year Award, Invest in your shelf!

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