What is the value of a lead?

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Every firm needs customers, and every customer begins as a lead. So leads are fundamental to business success. But too many executives don’t understand what leads are, or how to value them well enough to make smart investment decisions.

Leads are blocks of information connecting seller and prospect. Unless your business makes all its sales during a first inbound contact, you are going to have leads. But how you handle them—that’s where the profit lies.

Leads are valuable. Firms invest a lot of money generating or buying them. But what should you pay for a lead? What is the price at which are you equally willing to purchase the lead or let it go to a competitor? Sales and marketing managers must understand a lead’s value to avoid over-paying or under-buying sales leads.

Several approaches to lead value calculation are available, based on your firm’s primary sales objective. Are you going for growth, market share, or profit? Your answer to this question will influence not only how you pursue sales, but also how to evaluate your sales leads.

Companies Going for Growth

Growth firms typically set their growth strategies by planning to generate a fixed number of sales. For example, a 1,000-customer firm targeting 30% growth wants 1,300 customers. Adding a few hundred to account for lost sales or cancellations, this firm may determine that it should try to acquire 500 new customers in the period.
To back your way into the number of leads required, divide the number of new customers by your close rate. If this hypothetical 500 new customer firm has a close rate of 10%, they need 5,000 leads. The marketing department’s mission is to acquire them at the lowest possible cost. The value of a lead to this firm is the next highest price from any alternate lead source until the 5,000 lead target is met, and then zero once the full 5,000 leads are purchased. In short, the value of a lead for a growth firm is a step function: The lead value is very high until the growth target is reached, and zero thereafter.

When Your Objective is Market Share

Market share oriented firms are looking for their slice of the industry; it’s not a fixed number of new customers. They will approach leads similarly to a growth-guided firm, but the target number will shift periodically as the market size shifts. Thus, the market share firm’s goal will differ month to month.

The calculation is similar to the growth firm scenario, but it requires some fancy footwork to apply. Lead value will still be a step function, but the step size moves very quickly. You will still divide the number of new customers desired by the close ratio, but you’ll be working with a very short term lead target. Because this target moves, the marketing department needs considerable flexibility to keep adjusting the lead requirements.

Firms That Strike a Balance

Most firms seek the highest number of profitable customers, irrespective of whether they are going for growth or share. These firms purchase leads to the point at which customer acquisition cost equals customer lifetime value. When these two goals reach equilibrium, the firm stops buying leads.

In such situations, you can compute the value of a lead by knowing your salesperson costs, your close rate, and the value of an account, and applying the following formula.

Lead Value = (Account Value – Salesperson Cost) * Close Rate

This is the lead pricing formula. With this in hand, plus an understanding of your primary sales goal, you will be well on your way to an accurate assessment of how much to pay for a lead.

Source: Jeff Feuer

Complete Media Inc is a Sioux Falls marketing, advertising, website design and web hosting company specializing in web design, maintenance and hosting services.

We help small businesses make more money. Learn more.

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Improve Your Closing Ratios with Marketing

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On average, it takes 75 cold calls to make one sale to a net new customer.

Recently I was speaking at an event and a sales rep selling training services noted that in her industry the number is closer to 1 in 125. Either way, the numbers are high!

On average, clients see a closing ratio of 1:2 for referred leads and 1:5 for call-ins. Knowing that, wouldn’t it be better for everyone to change your sales strategy to focus on increasing referred leads and calls-ins?

How can you get more referrals? As a quick tip: ask for them every day. Most sales people I coach don’t have a habit of asking for referrals regularly, nor do they have a referral strategy that is consistently executed. Therefore, most sales reps don’t have a consistent flow of referred leads into their business.

How can you increase call-ins? Write. Take some time to write a few quick tip articles that are relevant to your client base and can help them grow their business. If you have convention space at a hotel, write about the “Top 10 Things to Consider When Booking Your Next Convention;” if you sell lawn tractor equipment, try “The Best 5 Ways to Ensure a Healthy Lawn This Summer.” The options are endless, and the trade magazines that serve your customer base are hungry for content.

I have found that writing and publishing articles are the best ways to get customers to call you. Why? Because the articles you write define you as an expert in your field and position you as a valuable partner, not just a sales person. The more often your articles appear online or in print, the more relevant you become to your clients and prospects, and the more they will want to do business with you.

Don’t wait for your marketing department to write for you. Do it you yourself. Start with a five-tip article that focuses in your area. Write out the five points first, and then add a paragraph or two of detail below each. You will end up with a 250-500 word article perfect for publishing. Be sure to send to all the relevant trade publications (online and off) with your contact information and website!

Source: Colleen Francis

Complete Media Inc is a Sioux Falls marketing, advertising, website design and web hosting company specializing in web design, maintenance and hosting services.

We help small businesses make more money. Learn more.

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How Does Target Market Media Consumption Affect Strategy?

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Knowing the media-consumption habits of a target audience can help a business owner create an effective marketing campaign. For example, if target consumers favor a particular media channel – such as a television station, radio station, magazine or newspaper – you can use that information to deliver your marketing messages directly to them.

Consumption

Your target customers may enjoy a particular aspect or offering of the media channel. For example, they might watch a specific television program, listen to a particular radio show or flip directly to the sports section of the newspaper. Understanding media consumption habits in this respect helps you place your advertisement effectively within the media channel.

Context

It also helps to know what consumers are doing while they are using a media channel. Suppose a car dealership decides to reach its audience by advertising on a radio station in the morning. Knowing that most people are driving to work at this time of the day, the dealership might design an advertisement that speaks directly to commuters by explaining how a comfortable car can ease the pain of sitting in traffic jams. Similarly, if the dealership knows target consumers tune in to the radio station while they are busy working or making dinner, its advertisement might use loud jingles and sound effects to catch the listener’s attention.

Market Research

Business owners can hire a market research firm to help determine strategies for reaching a particular segment of the population. Market researchers draw on a large variety of techniques to study consumer behavior to create behavioral profiles and help advertisers tailor marketing campaigns to the consumption habits of their target audience. Researchers might use surveys, focus groups and questionnaires to generate a database of media consumption habits. They then use statistical methods to identify consumption patterns, providing valuable insights that help advertisers identify the most cost-effective strategies for reaching an audience.

Media Planners and Buyers

Media planners and buyers help businesses implement marketing campaigns. These experts can orchestrate complex strategies, such as airing television commercials in short bursts during periods when the target customers are likely to be watching. The alternative approach – airing commercials during every available period – would drain an advertising budget unnecessarily. While hiring all these marketing experts might seem expensive, the investment pays off if you can avoid wasting money on ineffective strategies.

Source: Stan Mack

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5 Tips to Help You Easily Create a Great E-Newsletter

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This month’s podcast discuss our top 5 ideas for taking the stress out of writing a great e-newsletter.  We discuss easy ways for generating solid content, how to implement them in to your campaign, and how to keep readers wanting more.

If you have questions or comments, please feel free to contact us.  If you’re ready to start your campaign, click here for more info.

E-Newsletter Marketing

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This month’s podcast is on E-Newsletter marketing.  Listen as hosts Matt and Micah discuss the top benefits of using this powerful web tool.  Learn how to increase your reputation, enhance the quality of leads and save money with an E-Newsletter campaign!

If you have questions or comments, e-mail us here.  If you’re ready to start your campaign, click here for more info.