1. Work with sales to define the difference between a lead and an opportunity. See Leads Are For Marketing, Sales Wants Opportunities for more on this.
2. Work with sales to determine their close ratio of qualified opportunities.
3. Work backward from this determine the number of qualified opportunities that marketing needs to produce.
4. Create a good nurture program to keep churning the opportunities that marketing produces but don’t meet the standards of a qualified opportunity.
5. Evaluate.
Here’s an example to illustrate. Let’s say that I am a marketer for a company that does consulting on lean manufacturing practices. (This one came up in a forum a couple days ago and lean manufacturing is an interest of mine.)
Step 1
My sales team could spend a lot of time talking to “prospects” that are intrigued and willing to engage in a discussion, but not likely to buy my services. Therefore, to focus their selling efforts on only those prospects that are likely to buy, I would want to narrow the criteria further.
In this example, we agree that a qualified opportunity meets these criteria:
Within our target market. To increase our chances of success, we’ve decided to focus only on companies that are single site and in North America or Asia. Our key industries are electronics, high-tech and industrial equipment manufacturers. Later, we may branch out into different industrial sectors or continents, but for now this allows us to focus our efforts.
By the way, this narrowing of the target market is one of the hardest disciplines for most companies to stick to. But, when you take the time to define your target market you can target your marketing investments much better. Plus, your sales team is spending their time on opportunities that they are more likely to close.
Has an identified project leader. This means that someone within the company is responsible for the success of the initiative.
Has executive support. The initiative is not a skunk works project started by a guy who is passionate about it, but hasn’t convinced the rest of the organization.
Depending on your circumstances you could select other criteria. I’d recommend that you don’t define it so tightly that nothing but the “perfect opportunity” slips through. It needs to be just tight enough that you are not wasting the time of the sales team, but give them some benefit of the doubt. They can sell.
Step 2
Work with sales to determine what percent of qualified opportunities they think they can close. You can specify a specific time period, such as six months, if it helps you come to an agreement on a reasonable close ratio. In this case, the sales team thinks that a 30% close ratio of these qualified opportunities within six months is reasonable.
Step 3
Work backwards to determine marketing’s goal. If my goal is 10 new deals per quarter, that means that marketing has to deliver 34 qualified opportunities.
There is a time dimension to this as well. If it takes an average of 3 months to close a deal then marketing has to deliver the needed number of opportunities 3 months in advance.
Another common question is, “What if we focus more on revenue that number of deals?” If you have consistent revenue per deal, the conversion is easy. It’s a little more challenging when your revenue per deal is all over the board.
If you have different products with different target markets, you could set goals per market. However, in many cases I’ve seen you don’t know which offering is going to be the right one for the prospect until you are fairly far into the process.
It’s easy to over think this and get lost in the analysis. I recommend trying to estimate an average revenue per deal and converting that so you can still use the number of new deals figure as the goal. If you are producing the required number of opportunities, and sales is closing their agreed on percentage, but you still are not meeting revenue goals then you didn’t get your average revenue per deal figured accurately.
Step 4
Create a nurture program. As already mentioned, you are going to uncover leads that are almost opportunities, but not quite right. For example, you speak to a person who is passionately trying to convince the rest of his organization to start a project. You can see the company can use your services and they are in the right target market. However, he doesn’t have executive support. In fact, his executives are against the idea.
Turning this over to the sales team will just waste their time. On the other hand, this lead could turn into a great opportunity if your contact can make it happen.
You need a nurture program for opportunities like these. But, not just any nurture program. You need one that adds value.
I talk to many companies that say, “Yes, we have a nurture program.” What they really mean to say is that we toss unqualified leads back into the database and then have Joe, the intern, call them every month to see if they are ready yet. Not good.
I could go into detail on how to structure a nurture program, but I’ll save that for another post. For now, you should know there are three essential components of a good nurture program.
1. It’s educational – It gives the prospect information that they can use. This lean example is a great one because you can continue to deliver educational information on lean practices and their benefits to the prospect through webinars, white papers, and newsletters.
2. It’s prospect focused – A monthly newsletter about what is happening within your company and the customers you closed is not a nurture program. It’s a turn off.
3. It’s opt in – Whomever is in charge of the qualification of the prospect during first contact needs to ask them if they would like to continue to receive information on lean through webinars, white papers and such as they become available. If you have a newsletter, ask them if they would like to subscribe and then send out a confirmation. If they say that they do not want to receive more information, you must honor that.
Step 5 Evaluate
Did you meet sales goals? If not, this is where the finger-pointing between sales and marketing normally starts. However, by following this approach you can remove the emotion and take a logical look at why goals were not met.
Did marketing meet the qualified opportunity goals? If not, marketing tactics need to be reevaluated.
Are the criteria for qualified opportunity set too tightly? It is sometimes better to loosen up the criteria and adjust the close ratio than to make sure nothing but the perfect opportunity gets through.
Are unqualified opportunities slipping through? Is marketing still wasting sales’ time by giving them leads that don’t meet the criteria? Sometimes, sales is actually the problem because they uncomfortable not having the numbers that they are used to and they raid the database looking for leads they might be able to convert.
Is sales following up on 100% of the opportunities passed to them?
Is sales meeting their close ratios? If not, were they set too high? Does sales need more training or a more disciplined approach? Do they have the materials, such as case studies, that they need to close these opportunities?
Successful marketing is as much of a science as it is an art. Demand creation is one of those areas where it helps to unleash your inner analytical personality. If you work diligently through the process you can remove much of the emotion that separates the sales and marketing teams. And, you can deliver what the business needs to meet its objectives.
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