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Welcome to Josh Baker's Practical Advice for Optimizing Your Internet Marketing blog. Here you will find internet marketing optimization and online strategy articles full of tips, tricks, discussions, and thoughts to help you take your marketing and business to the next level of success.
Mar
19

Is Lead Generation ROI a Broken Metric?

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Recently, Craig Rosenberg over at The Funnelholic B2B blog posted about the 3 Lead Generation Metrics That Matter Lead-to-Opportunity conversion, Cost per Opportunity, and Total Pipeline Created.

But what really got my attention in his post was his ability to clearly articulate and bravely state his thoughts on why he doesn’t recommend ROI as a lead generation metric (including his great Alex Rodriguez analogy).

“The marketing reps should be judged by whether they did their job, which in this case is creating pipeline. The sales team’s job is to close that business. Once marketing creates an opportunity, sales must execute in order to create revenue. The net-net: if marketers creates the pipeline, they have done their job and should be judged accordingly.”

In the many conversations I’ve had with other marketers who focus their efforts either full-time or primarily on lead generation, the vast majority agree with this same theory either in whole or in part. Once the lead is sales ready or even when the potential lead raises their hand, there are numerous potential areas of disconnect both human and technological that may cause the lead to either fail to convert, to be considered a “good qualified lead”, or even to be not contacted at all – failures that aren’t the marketers fault but in which they are still judged by the end results.

For example,

Is it the initial response time in the lead follow-up process that’s hurting the validity (or disguising the marketers true positive results and efforts) of most companies currently measured lead-generation ROI metric they hold as truth? According to an unrelated but problem-specific article written by Brian Eisenberg over at GrokDotCom on Increasing “Qualified” Leads From Your Website, he discusses the results from a survey conducted by Omniture and InsideSales.com in which they completed lead forms from over 700 companies and reported that web-generated leads decrease effectiveness by over 6 times in the first hour. Yes, you read that right, a decrease of effectiveness of over 6 times in the first hour – yikes!

Disturbingly so, companies only responded back to them 47.3 percent of the time by email, and by phone just 7.5 percent of the time. Do the math and you can see that an amazingly large percentage of the time they weren’t contacted at all when they filled out forms designed for lead generation by marketing teams. Sure, some of their leads could have been scored and not deemed valuable to physically call back, but not even an email back (manual or even triggered) seems completely absurd and a lost opportunity.  As Brian states in his article,

“Marketers have potential customers who indicated some level of qualification to buy from your company and sales people who practically refuse to respond”

This is just one of the areas that hurt marketers when companies want to calculate the ROI of a lead generation campaign (were the leads bad, or the process broken?), but there are many more. Factor this into that lead generation ROI is what lead generation marketers are responsible for proving their own worth with and this can lead to potential disaster, both in responsibility to their programs (too many times and it could result in the potential loss of their job) and in calculating if certain channels or programs are truly profitable or not in order to continue on with them. I’m not in 100% agreement that it’s entirely the sales people’s fault, but more a fault in this commonplace process that’s proven its absurdness in the Omniture and InsideSales.com study.

Of course this is a touchy and even a controversial subject, but companies really need to now more than ever deeply consider how they truly feel about how much weight they place on the ROI of the lead generation metric they hold their marketers accountable for. Not just for the marketers sake, but for revenues sake. Furthermore, could that metric actually be masking the true happenings of what’s going wrong with the lead pipeline and follow-up process? Does this metric expose the true ability to really measure what needs to be fixed and optimized or does it simply cover it up?

As Craig Rosenberg of Funnelholic states, what marketers should be measured against is CPO – Cost per Opportunity,Lead-to-Opportunity Conversion, and Total Pipeline Created. To me this is a step in the right direction in not only improving how marketers and their performance are graded, but also steps to developing a more valid system of uncovering where leaks in the process are happening. The bottom line is that we all want to make more money but could our current process and performance grading mistakes be leaving potentially easy or easier money on the table than is realized.

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