The lead generation waterfall / funnel is a powerful way to understand how leads are flowing through your sales cycle, (if you don’t know what I’m talking about, read Marketo’s excellent guides). However, talking to other marketers it seems that while many use the waterfall model to retrospectively evaluate last quarter’s performance, very few actually use the metrics during planning cycles to determine the volume of leads required to meet a financial target.
Understanding your conversion rates at different stages of the sales process is hugely beneficial when planning and budgeting for marketing programs. That’s because many organizations find themselves blindly wasting marketing dollars to fill the funnel (with leads from paid search, display ads, events etc) to make up for a shortfall in won opportunities; when actually the problem might be in the conversion of an MQL to an SAL, or an SAL to SQL, etc. Without fixing this you could just be throwing good money after bad.
To help you better understand the impact your funnel metrics have on the volume of leads required to meet a target, here’s my own Lead Generation Forecasting Calculator for you to try.
Play with the conversion rates and see what a difference small, incremental improvements can make.
Open it up and follow this fictional example.
- Your marketing team has a quarterly target from inbound leads of $125,000. Based on your historical conversion rates, in order to meet the target you need 2604 leads at the top of the funnel.
- However, improve the MQL to SAL by 5 percentage points and that drops to 2083 leads – a 20% reduction.
- Pull some more levers. Perhaps you think you can up your ACV from $10k to $11k. Now you only need 1894 leads at the top of the funnel.
- Maybe some sales training could haul-up your closed-won rate by five percentage points? Now it’s just 1623 leads – almost a 40% reduction from where you started in the number of leads you need to source. Just think what that does to your budget!
The point is, fuelling a demand generation engine is not just about stuffing the top of your funnel with as many leads as possible. Small incremental changes (sales training, pricing strategy etc) can dramatically reduce your lead burden.
Use the calculator. Download it, use it in your next planning cycle and make it your own!