What Happens to Marketing's ROI When Leads Go Cold

January 31, 2017

whole brain marketing blog author


Posted by Jamie Cartwright

 

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When predicting the ROI of a marketing plan, most experts will tell you to start at the bottom of the funnel: a freshly won, new customer. New customer acquisition is the fundamental goal of any effective inbound marketing and sales effort, and ultimately, it’s the connection between your spend on marketing and the revenue it’s supposed to return.

Revenue-Eruption-CLV-Sales-Funnel.pngWhen you start with the planned number of new customers, you can predict the size and scale of the marketing efforts you’ll need by benchmarking the success rate it’ll take to get to that new customer goal. If you’re looking for 10 new customers this year, and you expect your sales team to close 25% of all new deals, then you know you need at least 40 pending deals.

And, if you’re planning to send 40 qualified leads to Sales, then that means you need even more marketing-qualified leads, still more non-qualified leads, and of course, an even greater amount of website traffic—all of which comes from a well-endowed marketing budget.

But when we predict marketing ROI this way, we often forget that each stage of the funnel isn’t quite as stable as we’d like to think. Like a deal that isn't quite closed, leads don’t last forever. If our underlying criteria for sales-qualified leads is that they are ready and interested in talking, then as marketers, we only have so long to peek their interest and drive their urgency.

In this article, I’ll demonstrate how poor lead management and stalled nurturing processes actually degrade your predicted ROI and make marketing efforts more expensive. If you do everything right to generate inbound leads but don’t learn to make them ready for sales, then the impact of your inbound marketing efforts will quickly decline. Now, Let’s explore why this happens and how to prevent it in your inbound marketing program.

Leads Have a Time Limit: Accounting for Lead Impermanence

Marketers and salespeople tend to forget that a lead’s lifecycle stage or position in the funnel is anything but stable. Sure, a contact may submit a form on your website and become a lead, but if 3 months later they leave their company, then you’ve effectively lost the lead—he/she doesn’t really hold any specific value (whether or not the email address is still in your database).

And that’s just the most obvious example. More problematic are those leads who’ve learned who you are and have shown some level of interest but aren’t actively being worked. Their loss of value can be drastic! If you calculate that, on average, a customer’s worth is $100,000 and you need 40 SQLs to close 10 new customers, then each SQL is worth $25,000. But consider what defines an SQL: their interest, urgency, and willingness to talk. If all that behavior goes away, then they’ve lost their status as an SQL, and you’ve lost some of that value.

It’s important to remember that because SQLs are based on current behavior, they have a definite time limit. In the B2B industrial space, it’s as short as a month. In many consumer sectors, it’s as short as a day or even an afternoon. Knowing how long your SQLs remain SQLs is critical to maintaining their value in your funnel.

Loss of SQL Value = Degradation of ROI

If your funnel requires 40 SQLs to close 10 new customers, and you lose 5 SQLs due to neglect, then you can really only count on closing 8 customers by the end of the year (with maybe an additional closed won, if you’re lucky).

8 customers mean $800,000—not the total $1,000,000. However, you still spent the same amount to get those 8 customers, which means you’ve cut your potential ROI by $200,000.

Of course, those leads aren’t completely gone. Hopefully they’re still sitting in your MQL column, and you can regenerate their activity with marketing outreach. However, in general, it takes more activity to get an old lead moving down the funnel again, compared to a new, faster-moving lead.

In the case of neglected SQLs, often, if they go silent, it's because they moved on to a competitor, so in order to move them through your funnel again, it can literally take years.

Why Do Companies Let SQLs Go Cold?

When looking at the math, it seems like a no-brainer. No company should let good, ready-to-talk SQLs go cold. And, yet, there are plenty of companies that are losing SQLs today because of internal dysfunction within sales and marketing.

When marketing and sales aren’t aligned, marketing ROI often decreases, and SQLs losing their value is one major cause. If Marketing can’t deliver SQLs in a way that Sales can close them, then there’s probably misalignment at play.

Effective marketing and sales alignment are about generating leads with the right qualification and nurturing to turn them into real sales opportunities, while at the same time, creating a closed-loop process with sales, to enable smooth and effective lead handoff.

Preventing SQL Loss with Complete Sales and Marketing Alignment

The best way of making sure SQLs aren’t neglected is to make sure both sales and marketing have a stake in lead generation, nurturing, and closing.

Service level agreements (SLAs) between marketing and sales offer a formula for success in facilitating greater alignment. Specifically, with an SLA in place, Marketing and Sales will establish procedures and protocols for:

  • A Shared Goal
  • SQL handoff
  • Lead nurturing
  • Sales prospecting
  • Sharing of information and data

Even without an SLA, marketing and sales teams can greatly reduce the risk of neglecting SQLs, simply by making shared decisions about (1) which leads count as SQLs, (2) how their information should be shared from marketing to sales, and (3) how they should be engaged in the sales process.

Conclusion: Marketing ROI Relies on Sales to Make it a Reality

Marketers spend a lot of time defending their expenditures and use of resources. However, they can’t make the ROI a reality if they don’t work with Sales to close SQLs in a timely, efficient manner.

As I’ve outlined in this piece, a failure to align marketing and sales isn’t simply a matter of internal politics; the dysfunction can mean serious consequences for marketing ROI and overall business development. SQLs aren’t just sitting around waiting to be closed; they do expire, and when they turn cold, potential revenue is lost.

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