Wednesday, June 29, 2011

Why Marketing Should Take the Lead in Lead Generation

In my last post, I argued that companies should not rely primarily on salespeople to generate sales leads, but instead should use marketing programs to produce most new leads.  Here's why.

The new customer acquisition process for a B2B company includes three distinct components - lead acquisition, lead management, and sales opportunity management.

Lead acquisition includes all of the activities that a company uses to persuade a potential buyer to engage with the company.  The initial engagement can take several forms including meeting with a salesperson, responding to a lead generation campaign, and downloading a content resource (an article or a white paper, for example) from your website.

Lead management refers to the activities that a company performs to qualify leads and nurture those leads until they become legitimate sales opportunities.

Sales opportunity management includes the activities that we typically associate with selling - performing needs analysis, giving demos and/or presentations, preparing proposals and ROI estimates, and closing sales.

When most people use the term lead generation, they are referring to both lead acquisition and lead management.

Two economic factors explain why marketing programs (as opposed to traditional sales prospecting) should be the primary tool for generating leads.  First, lead generation (particularly lead acquisition) is an inherently inefficient process.  It has a high input (work required) to output (success) ratio.  Lead generation is like hitting in baseball.  If a major league player finishes a season with a .400 average, he is likely to win the batting title.  But, a .400 average means the player "failed" 60% of the time.

Because lead generation is inherently inefficient, it's important to perform the process using low cost resources.  Salespeople are expensive resources, and their prospecting activities don't "scale" because they are labor intensive and mostly manual.  Marketing programs, on the other hand, scale very easily, and many marketing activities can be automated on a cost-effective basis.  The bottom line is that leads generated by effective marketing programs are usually less expensive on a cost-per-lead basis than leads generated by salesperson prospecting.

The second economic factor relates to sale productivity.  Reducing the amount of time that a salesperson must spend generating leads means that he or she will have the ability to manage a larger number of legitimate sales opportunities.  This allows the salesperson to close more deals and generate higher revenues for the company.

I am not suggesting that salespeople should not be involved at all in lead generation.  I am suggesting that salespeople should focus on what I call opportunistic lead generation.  For example, they should be asking for referrals, and they should be actively networking with potential buyers.  Salespeople also need to be involved in lead qualification because thorough lead qualification requires human interaction and human judgement.

Marketing programs are not free, but when effective marketing programs are used for lead generation, the payoff can be higher revenues and/or lower marketing and sales expenses (as a percentage of revenues).

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