Getting leads is important but expensive, either in time or money.
The real measure of success though is new customers, not leads, though they are related. Number of leads is a vanity metric until you understand the conversion rate.
Let’s be clear because leads mean different things to different people. A qualified lead means you have or about to quote a price. When I talk about conversion, I’m talking about, of those you quote, how many do you win. All other conversions are meaningless until you get this one sorted.
When asked about conversion rates most business owners look up as they try to calculate what it’s likely to be across the last few deals. The point is they don’t know because it’s not measured. Even though leads are expensive, they’re not tracking how much time or money their wasting.
Faced with insufficient sales, small business owners often declare that they need more leads. At that point they are likely to spend $20k or more on a program that is unlikely to work if conversion is the real issue. If they’re not converting the leads they have, they are wasting money on buying new ones. Fixing the conversion issue may well have provided all the sales growth they needed at a fraction of the cost.
What is a healthy conversion rate?
The chart below shows how many leads needed to get for each conversion rate. It shows clearly that there is a ‘Goldilocks’ zone between 40 and 60 %. This is logical when you consider these scenarios:
You’re quoting and winning nearly everything, that’s an issue because some leads should be finding your price challenging. If no one is finding your price challenging then you should explore raising your price. You will likely get better customers from it too.
You’re quoting and winning nearly everything because the only leads you get wouldn’t buy anywhere else. Customer referrals are great, but your lead source needs to be more diverse, if you want to grow.
You’re quoting a lot and only winning a few customers, that’s a problem. You will likely struggle to stay in business as so much effort is being wasted. There could be issues with your product, service, price or simply your ability to sell.
You have quoted 10 leads and about half of them decided they could solve the problem in a different way for the money. The other half are happy to pay the extra to get rid of the problem.
Know the conversion rate and be able to address the revenue growth issues?
Fixing conversion rate issues
Deals that die at the quote phase, don’t die because it’s too expensive. They die because the sales process was not aligned to the leads buying process. They did not receive the information that they required to buy. I’m not talking features and benefits, I’m talking value, examples, follow ups, how it solves their precise problem and ROI.
Conversion issues are solved by looking at the gaps between what the lead was looking for and what you delivered. If they asked for a price then they have a clear need, your job is to work out exactly what the real need is and guide them through the decision-making process.
- Are they qualified properly? Are they a good fit?
- Is their problem big enough and how well will your solution solve that problem?
- What’s the real cost of the lead not buying from you?
- Was the quote a shock, or a surprise?
- Do they still have unanswered objections? Did you not answer the unspoken objections?
- Did you leave it to chance after quoting? ‘They’ll buy if they want to’ is true but only after they have all the information they need. The quote is not the end.
Below the Goldilocks line.
Below the Goldilocks line can have a few common causes including:
- Too many leads without the capacity to deal with each properly
- Automation Frankenstein where leads are frankly not well treated
- Poorly qualified leads, that are not a good fit
- Confused leads who don’t understand the value
Sales is a volume game, but it only works at the volume you can handle. If conversion is below the Goldilocks zone you are likely wasting time and money on the leads.