Does this conversation sound familiar?
Sales Rep: “I’m not hitting my sales quota because marketing is not sending me enough leads!”
Marketing Manager: “Marketing has generated 30-40% of your lead flow, perhaps there are issues in closing those leads?”
Sales Manager: “The leads you are sending sales are not qualified leads to close!”
In most organizations there will come a time when sales and marketing do not see eye to eye on issues pertaining to lead flow and lead quality. How do organizations bridge the gap between these two departments so that both teams can work towards the same end goal of generating revenue for the company?
Getting on the Same Page
Both teams require a clear understanding of their respective objectives in addition to a cohesive strategy that both sales and marketing can measure their performance against. However, before determining expectations about the lead flow, the first step for marketing is to implement technology solutions to efficiently and accurately track the effectiveness of their campaigns, marketing spend and lead quality.
For example, at CAKE we have leveraged a combination of our own SaaS tracking platform in addition to Marketo’s marketing automation platform and Salesforce’s CRM. This suite of tools provides granular insights into the customer journey from first click to conversion and every touch point along the way.
Once the lead tracking software is in place, the marketing and sales groups need to share goals with the other team. If marketing is committed to driving 30% of all qualified leads, this is critical information to share with the sales team. Conversely, the sales team needs to share with marketing their overall strategy including revenue expectations, marketing collateral needed to be successful and most importantly information regarding their target customers.
The Leads Equation
Let’s take a moment to focus back on the numbers and how to calculate the lead count sales needs. Instead of approaching marketing and demanding “10,000 leads per month,” the head of sales or sales operations manager should take a data-driven approach to determine a realistic lead commitment figure from marketing. Here is how you figure this out:
Step 1: Look at your previous year’s numbers and determine the Average Contract Value (ACV) of each closed-won deal originally generated from marketing. A marketing generated lead can consist of leads created from various channels including webinars, web page content downloads, demo requests, trade shows, etc.
Step 2: Determine your Conversion Rate % for marketing generated leads from that same year (% of marketing leads that converted into a sales opportunity) and Win Rate % (% of opportunities generated from marketing leads that closed-won).
Step 3: Now that you have this data, you can calculate this year’s numbers. As mentioned, both marketing and sales should know your company’s 2016 sales goal. Determine what % of this goal should be generated by marketing. Sales Benchmark Index states this should be 25-30% for most companies. So for this example, let’s use the following numbers:
2016 Sales Goal: $10M
2016 Marketing Quota: $2.5M (25%)
2015 Marketing Generated Closed-Won ACV: $50,000
2015 Marketing Generated Win Rate %: 33%
2015 Conversion Rate % from Marketing Leads: 20%
Step 4: From here, you will work backwards to determine how many leads are needed from marketing per month in order for your sales team to generate $2.5M (marketing quota).
Based on a $50K ACV and $2.5M marketing goal, marketing will need to contribute 50 closed-won deals per year or 4.17 closed-won deals per month.
Based on a Win Rate % of 33%, marketing will need to provide sales with 150 opportunities per year, or 12.5 opportunities per month.
Based on a conversion rate of 20%, marketing will need to provide sales with 750 leads per year, or 62.5 leads per month.
Once the numbers are all set, you can then take this process a step further and implement a lead scoring system to help determine lead quality and ensure that sales reps are focusing on the right quality leads.
In the end, this exercise not only helps to align sales and marketing, but also gives the marketing team more credibility by measuring the impact on revenue, plus it allows both teams to better track which channels perform better than others.