- Volume - Are our marketing programs generating a sufficient number of raw leads (sometimes called responses or inquiries) to produce the revenues that marketing is responsible for?
- Conversion - What percentage of leads are "converting" from each lead stage to the next across the entire lead-to-revenue cycle?
- Velocity - How long is the overall revenue cycle? In other words, now much time does it take, on average, for an initial response or inquiry to result in a closed sale?
Now for the inconvenient truth. Research strongly suggests that the demand generation system in many B2B companies is horribly inefficient. Based on the conversion rates identified by SiriusDecisions, the average B2B company needs to generate 351 inquires to acquire one new customer. That equates to an overall lead-to-revenue conversion rate of only 0.3% (4.4% x 66% x 49% x 20%).
Forrester Research has found similar levels of demand generation performance. According to Forrester, the average overall lead-to-revenue conversion rate is 0.75%. What makes this issue important is that your overall lead-to-revenue conversion rate has a big impact on your company's overall cost of sales, which obviously affects company profitability.
The good news is that companies can significantly improve the performance of their lead-to-revenue funnel. In addition to identifying the lead conversion rates achieved by the average B2B company, SiriusDecisions has also studied the conversion rates achieved by Best Practice companies, and their research shows that Best Practice companies perform substantially better across the board. The table below shows how the higher conversion rates achieved by Best Practice companies impact lead-to-revenue funnel performance.
As this table shows, Best Practice companies must generate only about 70 inquiries to acquire one new customer, while average firms need five times as many. Best Practice companies also achieve an overall lead-to-revenue conversion rate of 1.4%, which is about five times higher that the rate achieved by average firms.
The performance of your lead-to-revenue funnel will tell you a great deal about the effectiveness of your marketing and sales efforts. So, if you aren't currently using funnel metrics, now would be a good time to start.