In the B2B world one thing is for sure: the Sales team expects the Marketing team to generate qualified leads that will ideally convert quickly to sales. Assuming that the teams agree on what constitutes a qualified lead, the factors that go into scoring a qualified lead, and that there is a valid scoring model, your organization is well situated to establish metrics for measuring Marketing’s contribution to the pipeline.  Even so, we’re often asked to recommend leading indicator metrics and measures in addition to conversion and win/loss rates to understand the influence and impact of Marketing on the pipeline.

One metric that is worth considering is the Qualified Leads to Sales Ratio. We cover this topic in more depth than fits into this blog, in our Pipeline Engineering for Marketing and Sales Alignment Workshop 

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How the Qualified Leads to Sales Ratio Serves as a Leading Indicator

Let’s begin with the math. Take the total number of Qualified Leads (in units – since Marketing does not typically control the final price of the closed deal) divided by the Actual Closed Sales (in units) in a given time-period.  

Next define your performance targets and parameters. Based on historical conversion rates and the win/loss rate, and a closed deal target of 50 in a specific time-period, five is considered the optimum ratio. In this instance, there will need to be 250 qualified opportunities added to the pipeline in the same period. 

How can you use this ratio as a leading indicator of business health? Here are three examples: 

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1.The Ratio is on Target: Over a particular time-period, 250 qualified opportunities (based on the scoring model) are added to the pipeline and 50 sales are closed, achieving the target ratio of five. Awesome. Both the lead gen machine and the salesperson performance are within optimal parameters based on the company’s targets. For this company, the pipeline and business are healthy, and the direction of the company is positive. No action is required.  

2.The Ratio is Higher than the Target: In this scenario, over a particular time-period, 250 qualified opportunities (based on the scoring model) are added to the pipeline and 40 sales are closed. That’s a ratio of 6.25. Wow, that might seem great. Maybe not. Let’s assume all the opportunities are valid. This means that the qualified opportunities are mounting, which over time could create a log jam. In the near term, the number suggests there’s a bottleneck in the close end of the equation. It could be temporary. Or it could be a sign that something is amiss, such as: 

    1. the opportunities are for offers the salespeople aren’t as good at closing
    2. there are too many opportunities for the number of salespeople 
    3. the sales cycle itself is lengthening or  
    4. there is increasing competitive pressure 

When the ratio is this much higher than the target, it’s time to start digging deeper to understand what’s occurring internally and externally.  

marketing, sales, demandgen, leadgen, lead generation, lead qualification, selling, marketing and sales alignment, customer-centric marketing, metrics, measurement, measures, marketing measurement3.The Ratio is Lower than the Target: In this instance, over a particular time-period, 150 qualified opportunities (based onthe scoring model) are added to the pipeline and 50 sales are closed. The ratio is three. The salespeople are making their close ratio but clearly clouds are forming on the horizon. What might it mean? Here are four possibilities: 

  1. Something may have changed in the market–customers have a different pain or opportunity that is taking precedence over the problem your solution solves.  
  2. Prospects may have changed the kind of solution they are evaluating due to a new player or technology in the market.  
  3. The company may have tapped all the opportunities in that particular segment for the solution it offers and it’s time to explore a new market or invest in developing new offers 
  4. The segment is right, there are still opportunities, but the types of people that need to buy are different. Time to check the data to see if there are different roles and personas that need to be addressed. 

One or more of these may be occurring. If so, it’s very likely that Marketing needs to revisit its strategy, programs, and tactics. 

Does your organization use ratios to measure Marketing’s contribution to the pipeline? If not, let us know how we can help you establish these metrics to determine the health of your business. For 20+ years we’ve been helping business establish and track metrics that matter.  

 

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