Use What You Already Have –Increase Your Marketing ROI by Not Wasting “Latent” Sales Leads

qualified-salesI wrote the following post a few months ago for a marketing services firm.  Thought I’d re-post it here….

The slow economic recovery has caused many executives to tighten belts and slash budgets. Anyone with budget management experience knows that when budgets need to be reduced, marketing is often the first area to be cut. Yet, marketers are expected to produce, sometimes at the same level, and sometimes at increased levels. It just doesn’t seem fair.

Before despair sets in, however, perhaps it makes sense to look at the marketing budget picture from a different perspective. Often, marketing budgets increase because marketers have plans for “new initiatives” that require additional funds. But what if marketers were to analyze their current state of affairs with the objective of making what they already have in place work better? Applying this concept to the area of Demand Generation could yield significant results.

Consider the following example…

The ABC Widget company currently obtains 500 new leads per month through marketing’s efforts. All leads are forwarded to sales for follow-up. Sales qualifies the leads, pursues the good ones, and “discards” the rest. Out of those 500 leads, 10% (50) are qualified, and 20% of those qualified leads (10) turn into sales. The average sale is $20,000. So, marketing is contributing $200,000 per month in sales revenue. With a monthly demand generation budget of $40,000, the ROI ratio is 5:1.

So how could this company do better with what it already has? Well, for one, they could begin by taking better care of leads that have “latent” demand. These are leads that fit the target profile, but are not ready for sales to contact them. On average, 70% of leads that come into a company are of this type. Also, they could implement a content marketing strategy and lead nurturing process that would move those “latent” leads through the buying cycle. 45% of leads end up buying the product or service provided by the company about which they inquire.

So taking those numbers, the ABC Widget company could look like this…

  • Total number of leads: 500
  • Number of qualified leads (10%): 50
  • Number of leads with latent demand (70%): 350
  • Number of qualified leads that convert to sales (20%): 10
  • Number of “latent” leads that convert to sales: (20%) 35
  • Total number of sales: 45
  • Total sales revenue: $900,000
  • Marketing expense, including additional dollars for “latent” leads: $60,000
  • Marketing ROI ratio: 15:1

Without making significant changes to the lead generation strategy, the ABC Widget company increased its ROI by 300% by simply adding processes to address the leads they already had coming in.

So, if budget reduction has you concerned, take a look at what you already have. You may be able to make “more bricks with less straw.”