James Obermayer, Executive Director and CEO of the Sales Lead Management Association and President of Sales Leakage Consulting is a regular guest blogger with ViewPoint.
Last month we tackled the issue of How many inquiries does it take to make quota? We started with a sales figure of $7,500,000 that our example company needed to make quota. Then we took into account the sales that were expected from the existing pipeline ($2.5 MM), and projected the inquiries needed to make a quota of $5 MM, assuming 100% follow-up of the inquiries. As it turns out, 2,840 inquiries were needed for $5,000,000 in sales on a product that sells for $12,225, with a 32% closing rate (45% of all the inquirers are buyersi).
But most marketers who create demand usually want to predict the sales results from a projected number of inquiries. This is easy.
Let’s start with a campaign that brings in 2,840 inquiries from a single source on a single product within a sixty-day timeframe (we’re keeping the variables down to a minimum here). What will the sales results be?
If the product sells for $12,225, with a 32% closing rate, the answer will be about $5,000,000.
Here is the formula:
- 2,840 inquiries x 45% (percentage of buyers in a given group of inquirers who buy within a year)
- x 32% (closing rate)
- x $12,225 (product average sales price)
- x 100% follow-up = Total sales of this campaign: $4,999,536
If you only have a 50% follow-up rate on sales leads, cut the sales results to $2,499,768.
If your follow-up rate averages 25%, sales results will be $1,249,884.
If your follow-up rate drops to 10% (a common figure), sales results will be $499,953.
The Formula Points Out the Failure and the Risk
Without 100% follow-up, marketing return on investment is cut dramatically. Let’s say the campaign cost is $50 a lead (very low), and the campaign cost is $142,000.
- With 100% follow-up, marketing will cost 2.8% of sales.
- With 50% follow-up, the marketing cost will be 5.6% of sales.
- With 25% follow-up, the marketing cost will be 11.36% of sales.
- With 10% follow-up, the marketing cost will be 28% of sales.
Let’s see … Would you rather be the marketing manager reporting a 28% cost of marketing for the program you ran, or the manager who reports a 2.8% cost of marketing? And the only variable is follow-up. If you’re smart you can solve this problem. Right?
iObermayer, James, Managing Sales Leads, Turn Cold Prospects into Hot Customers, Thomson South-Western, 2007, pages 9, 10-14, 26
Topics: B2B Marketing, Marketing ROI, Guest Blogs