Today we're going to talk all about converting leads: how to convert more leads.
The first place to start with all of this: let’s make sure that we’re on the same page and iron out some of the poor conventional wisdom, old wives’ tales, and inconsistencies with how converting leads is talked about by sales professionals and marketing professionals. There are a lot of inconsistencies.
Let's go to some of the authorities on how conversion shakes out -- what conversion exactly is in a marketing, sales, business, e-commerce, or revenue generation kind of context.
Wikipedia’s Definition of Conversion Marketing
So Wikipedia has a couple of thoughts on conversion marketing:
“Conversion marketing in electronic commerce is the act of marketing with the intention of increasing conversions -- that is website visitors who are paying customers. However different websites may consider a ‘conversion’ to be some sort of result other than a sale.”
I think Wikipedia nailed it. I love how it mentions that different websites look at conversions different ways -- and it may be something other than a sale. Wikipedia is spot-on. So the context, in their mind -- within the collective wisdom of Wikipedia, is that your business model, sales funnel, and distinct steps make a big difference. And that's a lot of what we’re going to talk about in today's episode.
How Google AdWords Defines Conversion
Another interesting authority on the subject of conversions -- converting leads -- from a sales and marketing perspective -- is Google.
Google AdWords has a resource center that defines how Google sees a conversion, in the context of their pay per click (PPC) advertising program.
Google AdWords see a conversion as “an action that is counted when someone interacts with your ad -- for example that clicks on a text ad or views a video ad -- and then takes an action that you have defined as valuable for your business, such as an online purchase or a phone call to your business from a mobile phone.”
Not only does Wikipedia get the different websites, different businesses, have different ways of measuring conversions. Google AdWords gets it too: you define a conversion as valuable to your business. It’s all in the eye of the beholder.
Converting Leads Varies By Business Model and Average Purchase Amount
So conversions and converting leads are not subjective, but they vary by business model.
If your company operates as business to business (B2B), business to government (B2G), or even business to consumer (B2C) if there’s a long sales cycle on a high-ticket item, and it has a considered sales process, a lot of this is very similar.
If, on the other hand, what you sell is a relatively inexpensive commodity, where there's not a lot of thought that goes into the purchase and not a lot of research that comes into the decision-making process -- If most of the time it's an impulse purchase, kind of like when you're at the supermarket checkout line and you see chewing gum, chocolate candy, and tabloid magazines -- those are impulse purchases.
You don't need to research which chewing gum, chocolate candy, or magazine you're going to buy. With purchases of anywhere from less than a dollar to a few dollars, those are impulse purchases.
And just like somebody might do with an e-commerce store, grocery stores are notorious for putting those upsells there to get your average sale up. Like fast food restaurants asking, “Would you like fries with that?”
So, let's go back to where this matters even more when it comes to converting leads.
Understand the Series or Sequence of Conversions in Complex B2B, B2G, and B2C Sales
I want to focus for a few minutes on business to business, where you have a long sales cycle -- anywhere from weeks, months, maybe even years. And in that context, we're talking about a series of conversions. It's not just one conversion. It's a number of different conversions, like for example:
- 1st Conversion: Lead -- We may have our first conversion that's just simply a lead.
- 2nd Conversion: Lead advances to MQL -- If we can get that lead to come back to our website and convert for a second time on an offer that asks for a little bit more information, provides a little bit more value, that lead may advance to a marketing qualified lead (MQL).
- 3rd Conversion: MQL advances to SQL -- If that marketing qualified lead exhibits some kind of action or behavior, or has some kind of conversation that shows that your sales team would be totally cool with talking with this person, and is accepting of this person, that marketing qualified lead advances to a sales qualified lead (SQL), also sometimes called a sales accepted lead (SAL).
- 4th Conversion: SQL advances to opportunity -- Your fourth conversion, in this much longer sales process is maybe when your sales team determines that your sales qualified lead, or sales accepted lead, advances to being an actual sales opportunity -- where there's a deal on the table that's concretely being discussed. You've identified who the influencers are, who the decision makers are, determined your value proposition, and you have an idea of urgency and timing.
- Series of micro conversions / Deal stages -- During this phase, in business to business, business to government, and high-value business to consumer sales, once you get to the opportunity stage there's often a series of micro conversions -- which are often tracked in your customer relationship management (CRM) system as deal stages. Once you’ve identified this deal stage, you can prepare a pipeline forecast or sales forecasting report to give your sales manager, sales director, or CEO to provider better visibility for what is coming, for how much, and by when.
- 5th Conversion: Opportunity advances to client -- This is where a sales opportunity is hanging out and about to become a client.
- 6th Conversion: Client advances to repeat/recurring client (retention) -- We're not done when they become a client. For any kind of business that relies on repeat sales or recurring revenue, or that relies on positive word of mouth, the ultimate conversion is when that client becomes the repeat client, the recurring client, and we've totally nailed retention. And if we really have totally nailed retention, we also more than likely have picked up a positive brand ambassador, evangelist, and promoter -- someone that will shout from the rooftops about how much they love your products and services.
So that's six different conversions we're talking about in high-ticket, highly-considered purchase cycles for B2B, B2G, and B2C.
The Best Way to Convert Leads Depends Greatly on Business-Specific Variables
When it comes to converting leads, there are a lot of moving parts.
Coming up four, five, or six different conversions is appropriate when your average sales size is in the tens of thousands -- maybe $50,000, or $250,000, or several million dollars.
In those cases, you can certainly afford to put a lot of resources into your sales process.
But it's a very different scenario when it’s a $50, $10, or $5 purchase on your website. In those situations, you’re operating more in the realm of e-commerce where your model does not allow for building an outside salesforce, perhaps not even an inside salesforce. Maybe it's just a call center if at all. Perhaps your pre-sales support is just live chat.
Think about how difficult, OK near impossible it would be to call a sales rep at Amazon to talk about a purchase from Amazon.com. It's pretty much non-existent. Amazon’s entire model s built around self-service.
So when you think about that opposite scenario -- compared to where you'd have four to six different conversions -- where at the opportunity stage you’re tracking your deal stage, the $50 e-commerce sale is the complete opposite of that.
At that point, we only care about one conversion: the customer conversion, when that person pulls out their credit card and buys. Or maybe there could be one or two conversion opportunities, in the same context, at roughly the same time.
For example, somebody visits the website where your $50 widget is being sold. On their first visit, that person is given the opportunity to join your newsletter mailing list in return for getting $5 off their widget order or 10% off their widget order or whatever it is if they join with their email address. So that’s certainly a conversion where you can measure the number of first-time visitors, relative to the number of people that join your list to get notified about updates, sales, special offers, tips, hints, and of course the promised discount.
Also, there's another kind of conversion to look at with the $50 e-commerce sale: abandoned shopping cart recovery attempts. In other words, somebody started to make the $50 purchase but bailed out somewhere along the way. Maybe their credit card declined. Maybe the address verification on the credit card didn't work or CVV or something like that. So there is a recovery opportunity, which is another conversion that's going on there.
But that $50 sale has a very different level of sophistication and needs to be generating much higher volume, with much fewer moving parts. Take out a lot more friction and certainly less one-on-one hand-holding.
So again converting leads depends very much on the
- Context of your business model
- Who your ideal clients are
- Your average client lifetime value (LTV)
- Your average sales cycle length
- Your cost of customer acquisition (COCA), also know as customer acquisition cost (CAC)
Measuring and Optimizing Lead Conversion Throughout Your Sales Funnel
Now you can measure, and you can optimize your conversion rates at any stage of the sales funnel.
A very common conversion rate that marketing professionals look at is the visits to leads conversion rate.
So there are two different situations where the visits to leads conversion rate becomes important:
- Let's go back to the high-value B2B, B2G, and B2C purchase where tens of thousands, hundreds of thousands, or millions of dollars in revenue is on the line. Because of size and complexity, there's a sales professional who's involved at some point when a person is sales-ready; when that person implicitly or explicitly raises their hand to show some kind of interest. So early on, you’re looking at what percentage of visitors who hit your website landing page raises their hands and become leads.
- It could be very similar to the $50 e-commerce widget purchase. Except for the only difference: if visitors don't buy on that first visit, your goal is to get them to join your mailing list. So they can learn all about valuable best practices, tips, and hints about getting the most out of widgets. How to plan their widget purchase. And of course a $5, $10, $20, or similar promised discount off that initial widget purchase.
So measuring and optimizing conversion rates can happen at any stage of the sales funnel:
- Visitors to Leads
- Leads to Customers -- What percentage of early stage leads ultimately become customers? In a much more shallow sales funnel with the $50 widget scenario, it's much more simple than the five or six stage conversion process, where you could have four or five interim conversions that happen in between when somebody becomes a lead and when that person becomes a paying customer.
- Abandoned Cart Prospects to Customers -- In the e-commerce scenario, measure abandoned cart prospects to customers ratio: how many win-backs you successfully got relative to people that stopped in the middle of their transaction. Maybe they had an unanswered question. Maybe they did not want to answer an intrusive question, or had an issue with their credit card, or their computer locked up, or their mobile data coverage dropped, or they just got interrupted.
- Sales Opportunities to New Clients -- These are the opportunities that went all the way to your sales team. Your salesperson identified that there's an influencer involved, there's a decision maker, and there's a qualified need. There's a timeline and budget. All of those things went into the sales forecast. So what percentage of those opportunities that hit the deals board ultimately became new clients?
Speaking the Same Language With Your Team When it Comes to Converting Leads
Now when salespeople talk about their close rate, this is what they're typically looking at (“Sales Opportunities to New Clients”). A very common frustration that marketing and sales folks run into when they're brand new to working together, is not speaking the same language.
Sales people love to brag about their close rate: the percentage of qualified opportunities that ultimately close.
Yet from a marketers perspective, marketing wants to and needs to intercept people as early as possible, in the first 70% of the buyer's journey.
So your thought leaders, your subject matter experts, and your company can be seen as trusted advisors that gain a lot more leverage in the purchase process.
And by very definition, that earlier stage lead is further away from that date when that person is ultimately going to purchase.
So it's not an apples-to-apples comparison to look at the close rate, or conversion rate, between a raw, early-stage lead that downloaded an eBook versus somebody that became a customer-- not even close. They're two totally different things: “Visitors to Leads” rather than “Sales Opportunities to New Clients.”
But early on, it's a much wider part of the sales funnel to deliver those leads for people that are really early on, that are just looking for general advice on and solutions to problems. They have company-agnostic and product-agnostic questions they need to get answered. They’re not nearly at the stage where they even know to look for a company like yours, or maybe not even your product/service category.
So we need to be really careful when you're talking with sales professionals when they talk about how awesomely high their sales close rate is -- because what they're referring to is leads that got all the way to sales opportunities.
Improve How You Convert Leads, Optimize Conversion, and Close the Loop
At the top of the sales funnel, early-stage, awareness-stage, you have typical lead generation offer for premium content such as ebooks, webinars, and webinar recordings. 20% is usually considered a very common benchmark for conversion rates on these kinds of lead gen offers. This would be like one out of five of your website visitors converting to an early stage lead.
Over time though, your goal shouldn’t be to just optimize the conversion rate at the top of the sales funnel -- that early stage conversion rate. While it certainly helps, you can have a piece of premium content that converts really well, and you can have a really good, cost-effective traffic source. But what good is that If those leads don't ultimately become paying customers -- and paying customers that you actually want, that are profitable, that fit your business model, and that are delightful to work with.
So ultimately, with closed loop reporting, where you’re able to tie certain marketing activities to which became new customers. That becomes supercritical. So you need to be able to identify revenue, average client lifetime value (LTV), and then work backward to tie those to specific marketing activities that got us in front of those people and continue to keep us in front of those people on a regular basis.
But at the end of the day with converting leads: the conversion rate is the percentage of people that are at your current stage versus those that advance to the desired stage.
It's critical that you measure your conversion rate all of the time and that you always work on improving it. There are always opportunities. There’s a whole separate discipline of marketing called Conversion Rate Optimization (CRO).
Certainly, you need a statistically significant amount of traffic. You need a certain critical mass of volume going through your funnel to be able to make those decisions. But you should always be looking to improve.
You should always be testing. Okay, this is our control. This is the test we're going to run. Let's see if we can beat it.
To Convert More Leads, Meet Your Future Clients Where They Are (Don’t Jump the Gun for Selfish Reasons)
In a digital-first world, it's critical to recognize that most of your prospects want to be left alone early on, in the first 70% of the buyer's journey. This is what Google calls the Zero Moment of Truth (ZMOT). During that first 70%, where they're not yet ready to speak with your sales team, it's critical that you intercept them as early as possible and add value in a way that they want you to add value.
They don't want to be nagged with annoying phone calls or in-person visits that they didn’t schedule. They don't want to be bugged by a salesperson.
Today’s modern buyer wants to be in the driver's seat: to get educated on what matters to them, their problems, their challenges, their goals -- not your problems. Not what you're trying to force down their throats. But where they're starting from.
How do we figure out where they're starting from?
This is the whole idea of building buyer personas. We these people are asking a question that's important to them. Early on, when they're asking Google, Bing, Siri, Alexa, or Cortana -- or when they’re posting a question to their buddies on Facebook, Twitter, or LinkedIn, you need to be the answer that surfaces as the best answer; to intercept them as early as possible, so you can add value, educate them, and build trust.
You need to get trusted advisor status to lift your conversion rates, gain leverage in the sales process, and potentially close sales faster with much better profit margins.
The Bottom Line on Converting Leads
If you want to get better at converting leads, first and foremost know that converting leads has many different meanings.
It's entirely possible that people that have never listened to this particular podcast episode, but do some facet of marketing or sales -- or own a small business or are in some kind of leadership role in a company -- they may have a very different idea of what converting leads is all about, compared to what we talked about today.
So it's very important to ask them to explain to you what converting leads means to them.
Remember, converting leads can be anything and everything from that first initial conversion, where a stranger that has never before heard of your company becomes a lead for the very first time, all the way down to the absolute bottom of the sales funnel -- that last conversion where a sales opportunity becomes a new client.
Or it might even be one step beyond that: we talked about the idea of recurring revenue, repeat sales, and retention -- where a customer becomes a delighted, repeat client and a promoter. This is the lead conversion post-sale, and that's just as critical in a digital-first world, where your brand is no longer what you say it is. Your brand is the collective wisdom of what people find out about your brand when they ask the internet when they pose the question on search and social media.
We've been talking today all about how you can convert leads at the top of your sales funnel, in the middle of your sales funnel, and at the bottom of your sales funnel -- regardless of whether we're talking about a very high-value considered purchase or something inexpensive that’s just a simple commodity or impulse purchase. The two scenarios require a very different approach to converting leads.
I'm so glad to have had you with us for this episode of the South Florida CEO Podcast. I'm Joshua Feinberg, and we look forward to seeing you back again next time.
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