Calculating the number of leads needed for a B2B marketing campaign seems simple. You can do it on the back of an envelope: firstly, work out the real target – consider your revenue target, reduce this by any annuity revenue to get your “sales target”.
Then reduce this by the weighted probability of opportunities you can already see, and you have your revenue gap. Divide this revenue gap by your average sale value, and you have the number of sales required. Easy right? Well, not so fast.
Why quick calculations aren’t enough to forecast leads
Quick calculations like the above tend to ignore the reality of time: buyers take time to progress. Trying to calculate the number of leads is a valid pursuit, but it’s also a trap.
Consider two scenarios:
The sales numbers for Company A are low, and it’s late in the year. The business asks the marketing department to run a campaign to address the shortfall. Clearly with a short window, you have to look for buyers already well-progressed along their buyer’s journey. The buyers the marketing people are looking for in this campaign are probably already at the bottom of someone else’s funnel. To get them to leak from the competitor’s funnel and jump into theirs, Company A uses a clear price-driven offer.
Company B has a more enlightened management. Knowing that good b2b marketing campaigns take time to plan and execute, the marketing department is asked in September to run a campaign to contribute to revenue as they run towards a June close. With lots of time up their sleeves, Marketing spends September to November canvassing inputs, conducting research, and planning the campaign ready for a December launch.
Although Company B’s situation sounds more ideal than that of Company A, both have a problem.
The problem with the first panicky campaign is obvious: discounting is the last refuge of a desperate marketer (or salesperson). Certainly in mature markets you need to meet the market price, but discounts that stand out are below market price and they tend to drag the market price down permanently. So even in mature markets this sort of discounting is problematic. In early markets, the situation is worse: discounting not only costs you money, but tends to have little effect because buyers are motivated by factors other than price.
Given that the marketers in Company B have much more time, it may surprise you to know that it’s actually time that lies at the heart of the problem with the second campaign.
Consider the following related (but separate) factors:
Your average sales cycle will often be much longer than the 5 months this fictitious campaign allowed
Impressions take a long time to form or change
Business buyers may need to receive your message many times before they really understand it
All buyers may need to hear your message from more than one source before they believe it
If you invite your buyer to take some action (pick up the phone, attend an event) and they don’t act, it does not mean they won’t act next time.
Tie these factors together, and it’s clear that the second campaign will have only limited effect. Certainly the slower campaign can appeal to motivators other than price, but you still have too little time to make a real difference.
The better way to determine the right amount of leads
Build your B2B marketing campaigns with two factors in mind:
Buyers need time to progress
Your tactics need to be repeated several times to have effect – one-hit-wonders rarely do the job.
The normal lag for buyers to progress through the sales funnel means that even in September when the campaign was mooted, it was already too late to contribute much to the June revenue. So as June looms, Marketing will be asked to run a short campaign to help close the quarter, and the cycle begins all over again.
Here’s what Marketing needs to do to break the cycle of futility, contribute strongly to sales revenue, and properly determine its contribution in numbers of leads:
Build a simple model (below) that shows how buyers progress through each stage in their journey, recognising that you will always lose some, and it takes time for those you don’t lose to progress through each stage.
Add all the “leaked” buyers back into the funnel (below). To start with, the 300 that leaked before Q1 re-enter the model at Q2:
Complete the recycling picture. Broadly, it shows that the buyers who leak from any stage are re-inserted into the top of the funnel two quarters after they leak.
Decide how much of the revenue (and therefore how many sales) Marketing is to contribute. Around 25 per cent is a common goal for Marketing’s contribution to complex sales revenue.
Adjust your top-of-funnel number (“untroubled and unaware”) until the “customer” numbers deliver Marketing’s contribution to your revenue goals. If you need to, you may add in more to the top than just the recycled leaked buyers.
Decide which point in this journey you consider to be a “marketing qualified lead” for the purposes of campaign design.
This model will provide you with two key pieces of data for your campaign design:
How many leads you need
How many names you need from lists.
While this might look complicated, it is in fact a more accurate, mathematical look at the reality of the sales and marketing process. You can trust these numbers more than a “bodgy” overly optimistic target devised by a short-term approach to what is a more complex, long-term problem.
Before you try to over-deliver, you need to move into reality. Back-of-the-envelope calculations might look easy, but they usually get lost in the mail.