3 common mistakes in calculating ROI on Lead Source

Demand Creation ‌• October 4, 2010

Given that we are in the business of generating and nurturing B2B leads for our clients, we get the opportunity to discuss the value of a lead quite frequently.  The scrutiny of marketing spend ever increasing, I thought I would share three common mistakes that marketers (and their bosses) often make in evaluating the ROI of their lead generation tactics.

1. The credit for a sale gets attached to the last known lead tactic/source. How often have you (or your company) ever spontaneously purchased something of significant value after being prompted by a single marketing tactic?  I can’t remember it ever happening frankly.  The truth is that most B2B buyers have downloaded white papers, they’ve attended webinars, they probably have even gone to a trade show or two, and may have seen a print/tv ad or two.  All contributed to their eventual decision to buy from their vendor or choice – hopefully you.

Hand off more fresh leads that are sales ready

2. The CRM system has duplicate account records and there is no rhyme or reason to how each of the lead-gen tactics is attached to separate account records. This happens all the time because of misspelled account names, different account addresses, and a long list of other reasons that are exacerbated by “web-to-lead” processes.   When all is said and done, the assigned Salesperson might have been alerted about a new qualified lead via email and did a simple global search in their CRM system for the Account  and chose the “first” account record they thought matched.  The net result is that the sales person is in fact working on a qualified lead but the account record that will eventually represent a “WIN” doesn’t have all the right lead source or touches attached to it.  The net result is an inaccurate view of lead tactics that “are driving sales.”

3. Over simplified accounting in calculating cost/lead. So your boss tells you to stop spending marketing on any tactic that has a cost/lead greater than $X.  Your immediate response is to do what the boss asks and in doing so you do the simple math of dividing the cost for each lead source by the number of leads it generated.  Seems logical, but it is flawed – very flawed.  As an example, you might have a pay-per-click strategy that is generating an enormous volume of opt-in leads, but when you sort through all of these, the reality is that a bulk of them are with contacts who will never be able to buy your product or they are so early in the process that they won’t be buying your product anytime soon.  In the latter case, it will take a whole set of additional “touches” to nurture and progress the lead to a point where it becomes a qualified sales ready opportunity.  That is not to say that this lead tactic is bad, only to say that making the determination about whether it is good solely on the basis of cost/lead will give you a real false-positive.

Megan Heuer over at Sirius Decisions has some additional insights on this topic.

In the end, the only way to address the challenge of determining ROI on lead generation tactics is to implement an integrated Lead Management system.  To learn more about Lead Management best practices, click on this link.

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