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Your sales pipeline metrics are more important than you think

Written by

Lewis Clayton

Hands up who has a business goal to grow their revenue?

Hands up who has the tactic of ‘generating more leads’ as a means of achieving it?

Every business I’ve worked for has had this same goal.

This is how it usually plays out.

  • Marketing does anything to find new leads but as the company’s market share increases there are less leads to find so the entry requirements (lead scoring) gets lowered to hit that quota.
  • Also, forget marketing helping out with content for people currently in the pipeline as they do not bring in new leads.
  • The sales team gets swamped with leads so cherry picks the best looking leads and leaves the others to rot.
  • Because the sales teams cannot deliver a decent service to all of the leads the conversion rates take a hit.
  • The sales team blames marketing for the poor quality of leads.
  • Marketing blame sales for their poor follow up to their leads.

This can be an endless yearly cycle.

To get out of this the obvious question is:

Can we increase our revenue without generating more leads??

Let’s take a look at the pipeline

Your pipeline is a visual representation of where your sales leads are in your sales funnel.

This article will be based off this common example:

It is often represented as a funnel because more goes in at the top then comes out of the bottom.

Perhaps we’ve gotten so used to the fact that leads are going to fall out, even ‘supposed’ to fall out, that we become complacent because there is not much we can do about it, right?

When you operate with the mindset of growth coming from more leads, business planning tends to happen like this:

  1. How much revenue do we need this year?
  2. OK, so how many leads do we need to hit that revenue?

Simple analogy time: This for me is like planning how much water you need for your homegrown tomatoes.

You take your water funnel and you ignore the holes that have appeared after wear and tear and just ask how much water do you need to water the plants. But, faced with this task at home what would you really do?:

  1. Just double the amount of water you put into it.
  2. Fix the holes so you can put the same amount of water in as the last time you water them.

OK, to be honest, I’d probably buy a new one, but my point is you wouldn’t just allow it to be broken, you’d try to fix any issues which in this case are the holes caused by wear and tear.

So, my suggestion is fixing our pipeline conversion rates could achieve the same results as creating more leads.

In other words, let’s make our pipeline less leaky.

Is it worth it?

Before crunching some numbers it’s worth acknowledging something:

Every sales pipeline is different.

Your pipeline is a reflection of your customers buying journey so it will vary from business to business.

However, for illustration purposes let’s take the pipeline above and apply a 50% conversion rate at each stage.

Like this:

We will call this business ‘Company A’.

The first stage after generating the lead is to qualify the lead to see if it is a good fit for your service. If it is a good fit, you pass it on to your sales team as a sales opportunity. This is called ‘Lead Qualification’.

Let’s take another business that has improved their ‘Lead Qualification’ conversion rate to 70%, from 50%, and compare the two.

For a fair comparison, we will keep everything else the same and give both companies 1,000 leads, to begin with.

Company A

If Company A started with 1,000 leads you can see below they would end up with 125 sales:

Company B

If Company B started with 1,000 leads you can see below they would end up with 175 sales:

The difference between the two companies’ sales performance is 50 sales. Company B is making 40% more sales than Company A.

A very nice increase.

To highlight this performance against generating more leads let’s ask:

How many leads would Company A have to generate to make 175 sales (the same as Company B), given their current conversion rates?

Company A would have to produce an additional 400 leads to make the same amount of sales as Company B.

Compelling stuff.

Some pipeline fundamentals

As you can see there is more than one effective way of increasing our revenue but that doesn’t mean it is obvious where you and your business should concentrate your efforts to increase your revenue number, as every business and its pipeline is different.

Before we begin evaluating whether we focus on generating more leads or improving conversions rates in lead qualification, or both, it’s worth highlighting an interesting fact about your pipeline and the way that conversion metrics work:

  • If you make an X% increase at any stage of your pipeline it will result in the same X% increase in your revenue.

Yes, that is right. If you increase the number of leads you generate by 40%, you will increase your revenue by 40%, if everything else stayed the same. <- This one is the obvious one.

  • In the example, Company A needed to increase their leads by 40% (from 1,000 to 1,400) to increase their revenue by 40%.

Likewise, if you increase the number of leads you qualify and pass on to your sales team by 40% you will increase revenue by 40%!

  • In the example, Company B needs to increase their conversion metric by 40% (from 50% to 70%) to increase their revenue by 40%.

What’s even crazier and where you start to realise that maths is very unintuitive:

  • if you did both, you increased the number of leads by 40% and increased the lead qualification conversion by 40%? You would increase your revenue by 96%!!

So let’s do both right?

In an ideal world, we would have the time, expertise and resources to increase multiple stages of the pipe by 40% every year.

Let’s assume we do not so where would we decide to put our efforts?

If a 1% increase in the number of leads is worth EXACTLY the same as a 1% increase in lead qualification conversion rates to the revenue (not profit) of the business so we should evaluate the activities needed to achieve both, side by side, and ask ourselves these questions:

  • What is realistically achievable with the resources available?
  • What are the costs involved with each activity and our confidence they will work?
  • Do any of the activities harm the quality of the leads generated?

Decide where you are going to make the changes

Here are some ideas:

To increase the number of leads

  • Go to more events
  • Increase ad spend
  • Lower lead criteria

To improve lead qualification to the sales team

I’ve gone with some common ideas but this is an exercise you and your team should do. I’d recommend collecting all of the ideas first and then whittling out ones that your business cannot achieve for whatever reason, for example, you could already be going to every industry event or resource doesn’t allow it.

With my examples you can see the activities to increase the number of leads will be costly in both money and resource. Putting more pressure on the marketing and business development team can also cause quality to decrease as it becomes about hitting lead quotas, rather than getting leads that will generate revenue, as discussed at the beginning of the article.

On the other hand, there are often a few small changes that can be made in the management of our leads that can be very impactful to results.

There is extensive research that surrounds lead response management.

One such research piece carried out by Dr James Oldroyd that used over 100,000 data points found:

  • The odds of calling to contact a lead decrease by over 10 times in the 1st hour.
  • The odds of calling to qualify a lead decrease by over 6 times in the 1st hour.
  • After 20 hours every additional dial your salespeople make actually hurts your ability to make contact to qualify a lead.
  • The odds of contacting a lead if called in 5 minutes are 100 times higher versus 30 minutes.
  • The odds of qualifying a lead if called in 5 minutes are 21 times higher versus 30 minutes.

That is some eye-opening research. Let’s have a look at why these results occur.

Taken from the same research:

  1. When we call back immediately we know where they are. We called it “presence detection.” If they just typed in an inquiry on a website, they are probably still by their computer and by their phone.
  2. When we call back immediately we are still on their minds. This is “top-of-mind-awareness.” The average call back time is 46 hours and 53 minutes. Do you remember any of the sites you were surfing on nearly two days ago?
  3. The “Wow Effect.” We came back from presenting our research and built and patented technology that enables immediate lead callback within 8-9 seconds. We were concerned it would freak people out (like big brother was watching.) Do you remember the first time you called someone with Caller ID and they answered and called you by name? Didn’t it send a shiver up your spine? But on the contrary, it seemed to impress people by the speed or “hustle” that we exhibited. In surveying them, their most common word was “Wow!” And they exhibited an emotional response that built trust, a feeling like, “that is probably the way they are going to service my account.” We called it the Wow factor.

What stops us from implementing these

On the surface, it seems really simple to:

  • Get back to a lead within 5 minutes
  • Follow up with 7 touch points if no response
  • Get back to every lead (not just 27%)

But, it is often impossible to achieve.

Some reasons being:

We have so many data points and we generate so many leads that often we forget that leads are people and it’s the simple touches that make them feel important. Following up 4 hours later isn’t one of them.

Conclusions

There is clearly a business case for investing in your pipeline and growing your leads.

An X% increase in the number of leads you generate is equal to an X% increase in your lead qualification conversion rate.

Your business may find it much more efficient and economical to look at the increase in lead qualification conversion rate as it’s next step in increasing revenue and profits.

If you’re convinced that improving your lead qualification stage of your pipeline is right for your business but you don’t see how you can with the resource you have we believe Twigdoo can help you.

Twigdoo is a lead qualification platform that integrates with your current sales pipeline. We know how difficult it is to maintain the simple things that make a huge difference in lead management such as rapid response time.

If you’d like to chat about how Twigdoo could take out the pain of lead qualification in your business and begin to delight your leads just leave your details and we get back to you in a flash :)

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