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Flushing $600K a Year on Lead Generation

Pop quiz: If a software company spent $150,000 to generate 9,000 leads per quarter, did they get a good deal?

Most marketing folks would take a look at those numbers and figure out that the cost per lead is about $16.67. That seems pretty low for a B2B marketing campaign, so most practitioners would probably conclude that the software company did indeed get a good deal.

But if you visit DemandBrew on a regular basis, you probably know that we’re going to say that the original question didn’t provide enough information to determine if the lead generation effort was a good deal or not. That’s because leads on their own are worthless unless they are generating revenue for the company.

Let’s say that again because it’s important: Leads are only valuable if they eventually result in sales for the company.

This particular story is actually about a real company that worked with Dan McDade, the CEO of PointClear and the author of The Truth About Leads. In a recent interview, Dan shared that in this case, the sales department wasn’t following up on any of the leads generated by marketing.

That’s right—the company was spending $600,000 per year to generate $0 in revenue.

Ironically, the marketing department at this firm was receiving a bonus for their “good work” because they had met their lead generation and cost-per-lead goals.

When Dan met with the senior vice president of sales for the organization, he was asked to figure out why the sales department wasn’t following up on these leads. He did some investigation and discovered that only 1.8 percent of the leads were actually qualified. In other words, of the 9,000 names generated by the marketing department’s content syndication program, only 162 of them were people who might have any interest in the company’s product.

This illustration highlights two common problems with modern B2B marketing. First, many firms are tracking the wrong key performance indicators (KPIs). Of course, the number of leads generated and the cost-per-lead are important, but it’s much more valuable for the company to see the cost per qualified lead, the conversion rate for qualified leads that turn into sales, the total cost per sale and the overall ROI for various marketing initiatives.

If those aren’t the KPIs tracked at your firm, it might be time to have some conversations with management about making your marketing metrics more meaningful. You don’t want to end up generating a lot of worthless leads like this software company did.

The second big problem highlighted by this story is that many B2B firms have become over-reliant on marketing automation. In the interview, Dan talks about one marketing team that didn’t understand that there was any way to do marketing other than by using automation software. Dan does a great job pointing out the errors of this kind of thinking in “Getting Beyond the Hype of Marketing Automation Tools.” Listen to the complete interview for more stories from the trenches and tips on the right way to use marketing automation.

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