The Cost-Per-Lead Fallacy in Measuring B2B Lead Generation Investments (Pt 2 of 3)

In the first blog on the fallacy of using the cost-per-lead metric to measure the success of B2B lead generation investments, we looked at the nature of the problem and associated costs to the organization.

In this post, we’ll review three critical elements that impact B2B lead generation costs in the complex sale.

1. B2B sale complexity impacts cost-per-lead

The B2B prospect’s buying path, the provider’s offer and other complex sale variables impact cost-per-lead. Lower-cost sales leads can be expected—and are even necessary—when the sales process is straightforward, the sales cycle is short and the investment is low. For example, it would be possible to generate a qualified lead for a $10,000 piece of hardware for a couple hundred dollars. Technical specifications are to the point, the buying process may involve working directly with a single contact in a purchasing group, or the sale may be transacted via an ecommerce application.

But higher lead costs are expected and outcome-based marketing KPIs are needed when the sales process is complex, the sales cycle is long and the solution investment is higher. A $250,000 software solution may require connecting with a CEO, a chief line-of-business officer, and a number of influencers. A business case may need to be built over time to drive funding.

The reality is B2B lead generation for the complex sale of a $250K software solution is going to be substantially more expensive than generating a qualified lead for a $10K hardware solution. And the right marketing KPIs are very different from cost-per-lead metrics.

2. Lead definition and sales funnel stage impact cost-per-lead

Lead definition and corresponding links to sales funnel stages impact cost-per-lead. Visitors to a website who submit forms to download content are not qualified leads. Rather they should be viewed as “prospects” who have taken some type of action and who require contact to determine whether they should be treated as qualified sales leads. If they are in an early exploratory sales funnel stage, they may also require ongoing contact via a proven lead nurturing process.

Let’s look at lead definition criteria that are aligned with funnel stages in an example based on a provider offering a $250K cloud-based, enterprise solution. While actual lead criteria could include ten to fifteen qualifying elements or more, we’ll oversimplify and reduce the number of criteria. The sales funnel stages and lead qualification criteria might look like the following:

Marketing Qualified Lead
Sales Accepted Lead
Sales Qualified Lead
Industry & Firmographic Criteria
Correct Industry X X X
Correct Size X X X
Additional criteria met X X X
Decision Makers & Influencers
People & roles confirmed X X X
Authority confirmed X X X
Agree to engage X X X
Additional people identified X X
All right contacts engaged X X
Business Issues, Compelling Event & Sense of Urgency
Actionable pain identified X X X
Agree there is pain X X X
Agree to take action X X X
Agree to generic solution X X
Short list set X X
Agree to custom solution X
Decision Process & Timeframe
Uncovered & documented X X
Likely close in one cycle X
Deal size explored X X
Budget discussed X X
Budget process identified X X
Deal specs finalized X
Budget finalized X

The takeaway here is pretty straightforward: all leads are not created equal. While all are “leads,” an SQL has greater value and will cost more than an SAL, and an SAL will deliver greater value and cost more than an MQL.

It’s also important to note that a series of MQLs can appear to be attained at lower cost compared to another series of MQLs. But if the less expensive ones do not convert to SAL/SQL status or eventually close, then more expensive MQLs that do convert turn out to be of higher value and generate higher marketing ROI because of more positive outcomes deeper in the sales funnel.

3. Lead qualification and lead nurturing processes impact cost-per-lead

Contrasted with a lower-value, more transactional product, complex sale lead generation requires greater levels of personal engagement to do the following:

  • Identify and navigate the decision maker/influencer network
  • Qualify prospects around required criteria
  • Begin to build trusted relationships
  • Fully understand the prospect’s vision, challenges and specifications
  • Confirm willingness to take action
  • Nurture the prospect toward the next lead status in the funnel

These action steps require personal engagement by skilled professionals who are part of a dedicated internal or outsourced lead qualification and lead nurturing group. This group specializes in proactive outbound B2B lead generation and applies a proven multi-touch, multi-media strategy across a number of sales cycles.

We are seeing some marketing and sales groups over rely on marketing automation to conduct lead qualification and lead nurturing, and they are reporting that results tend to come from lower-level decision makers and at lower deal sizes. In a previous blog on the power of the human voice in lead qualification and lead nurturing, I looked at eight characteristics that differentiate one-to-one personal contact from inbound marketing media. This personal contact is essential in complex sale lead generation, and the higher-touch personal involvement will impact costs that are justified based on outcomes.

In the third and concluding post in this series, we’ll look at desired characteristics of marketing KPIs for the complex sale. We’ll also identify the right metrics that successfully address these characteristics, drive greater return on current B2B lead generation investments, and help predict what investments to make in future complex sale initiatives.

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2 Responses to The Cost-Per-Lead Fallacy in Measuring B2B Lead Generation Investments (Pt 2 of 3)

  1. Business Development Coaching January 7, 2013 at 10:27 pm #

    i merely need inquire What exactly business design and also how can this alter from a small business strategy. and also I am looking for some info on How can you sign-up some sort of identify for the modest home business enterprise? Will it be essential? any kind of suggestions.

  2. September 22, 2013 at 8:00 pm #

    Just as a doctor does not diagnose an illness based on one assessment, neither should a business. A variety of metrics may be required to be employed. However to ignore cost per sales lead is also a folly.