High Quality Leads close faster, at a higher rate, and at a larger average deal size than do leads of lower quality. That much is obvious.
What is not obvious is the dramatic change in sales and profit growth that can result from relatively small improvements in each of these metrics. What makes High Quality Leads even more powerful is that they positively affect all three metrics at the same time, resulting in a “multiplier effect,” as we shall see below.
High Quality Leads are highly motivated buyers who have identified a compelling need to change and understand that the cost of not changing significantly exceeds the cost of changing. That is why they want to change (they close at a higher rate), and why they want to change now (they close faster), and why they are willing to pay more for the solution (the average deal size is higher).
The Problem with B2B Marketing
It takes significant research and analysis to deeply understand the challenges that any group of B2B buyers face and show them the compelling reason why they must make a change, as well as the high ROI in making the change now. Unfortunately, most B2B marketing teams are not well equipped to perform this research and analysis, or produce compelling content that engages their target. It is far easier to opt for producing as many leads as possible—as measured by emails open and click rates—and deliver these to Sales. Quantity is usually easier to produce than quality. Ironically, quantity also tends to cost more than quality.
There is an assumption that more “marketing” results in more sales, without any real analysis to support this premise. It is possible to grow sales by spending a lot on marketing efforts, hiring more sales reps, and giving deep discounts. However, in many instances, the growth in cost due to these increases is greater than the growth in sales, often eating all possible profits from the incremental increase in sales.
What we want is to grow both revenues and profits at the same time. And that is possible only with High Quality Leads. The real metrics for Marketing should be by how much closing ratios, sales cycles, and average deal sizes were positively impacted by the marketing spend.
The Financial Impact of High Quality Leads
Let’s quickly compare the financial impact of High Quality Leads (HQLs) against Low Quality Leads (LQLs). We will assume that HQLs will impact all three metrics—closing ratios, sales cycles, and average deal sizes—equally by the same percentage point. In reality, it is possible they may impact one metric more than the other.
Also, in reality, High Quality Leads positively impact your worst sales people far more than your best performers, who are already focused on HQLs. It is your average and mediocre sales performers that need to move to HQLs, and focusing them on these will significantly improve your overall sales and profits. After all, most companies have far more average performers than star performers—changing this will change the average numbers for your company.
Assumptions used
For this exercise, we will look at three scenarios—a 10%, 15%, and 20% improvement on closing ratios, sales cycles, and average deal sizes—to see how they impact sales and profit growths.
The rest of the assumptions are kept constant across all three scenarios: Sales commission – 10%; Sales payroll – $2million/year; Marketing payroll – $250,000 per year; Tools and systems – $150,000 per year; and Outsource Marketing – $180,000 per year.
We held all spending constant except for adding a $180,000 a year budget for outsourced marketing that would enable us to improve the quality of leads by 10%, 15%, or 20%. The results are dramatic as summarized below:
Next Steps
The above analysis is not theoretical. Our clients have reported 60-67% increase in engagement levels at the business development level and 30-40% increase in conversions from SQL to Sales Funnel. Please contact us to learn more on how we can help you fill your sales pipeline with High Quality Leads.