Lead Management is Science, Not Art

October 20, 2010

As a company begins to move from the start-up to the expansion stage, one of the processes that can drag its sales team down is lead management. Companies tend to be starved for leads at the growth stage, so they feel compelled to treat all leads equally. That means spending time to follow up with all leads, while virtually every one, regardless of its likelihood to close, is forwarded on to the company’s sales reps.

Of course, there’s one big problem with that practice: start-up and expansion stage companies tend to also be resource starved. So as a company’s sales reps spend time attempting to qualify leads, it equates to time taken away from cultivating and closing quality leads.

Lead Management Issues

Here are several sales lead management issues I’ve noticed in providing sales and marketing support over time:

  • Sales reps spend more time qualifying leads than shepherding qualified opportunities to close. It should be the other way around. As smart reps begin to understand that, they also begin to spend a disproportionate amount of time on qualified opportunities without paying necessary attention to the stream of incoming leads. There’s little balance and inevitably one end of the pipeline suffers.
  • Most incoming leads have very poor conversion. If a sales rep diligently follows through on every lead, they eventually begin to lose trust in the inbound leads they receive. That, in turn, also deteriorates their follow through on the good leads they should be chasing.
  • Sales reps are not qualified and don’t have the time to recognize the characteristics of high conversion leads. As a result, they use early indicators of interest as proxy. Those indicators can be badly mis-representative of the prospect’s true intent to buy.
  • When a sales rep can’t properly gauge a prospect’s intent to buy, wishful thinking can result in an overly optimistic pipeline and forecast. Deals may then shift from month to month, while quotas and forecasts fall victim to that optimism. That ultimately puts pressure on a company’s marketing department to generate more leads, which only exacerbates the problem.
  • Using inbound leads as the main source of opportunities may cause a company to miss out on a specific market segment or buyer persona that needs to be proactively targeted. For example, a company may receive an inbound lead from an IT person evaluating the product, when the buyer will ultimately be the VP of Marketing.

As a company grows and begins to acquire more customers, those problems only get worse. Sales reps are then responsible for customer onboarding, upsells, and renewals. A sales rep can no longer simply focus on inbound leads or lead qualification. They have to portion their time to ensure all steps in the sales cycle are covered.

Enter Lead Management System

That’s where a robust lead generation system and process should come in to play. As a company approaches the transition from start-up to expansion stage, lead management needs to evolve to fit the development of its distribution model.

John Jantsch‘s recent book, The Referral Engine, offers a nice framework for thinking about creating a system for generating referral leads. Joseph Jaffe’s Flip the Funnel is another great read about making existing customers your most productive salespeople.

With that goal in mind, lead management becomes more science than art. Companies can create a lead scoring and distribution process that ensures sales reps are receiving the right quantity of qualified leads in a timely fashion.

Of course, not all lead scoring is created equal. Some marketers take a non-scientific approach to the process by using gut feelings to assign points and characteristics to a lead. The fundamental flaw in that approach is that a gut-based judgment can fail to identify the true characteristics of a buyer.

Building the right lead scoring system requires the analysis of past opportunities that have resulted in sales. From there, companies can conduct a regression analysis of those opportunities’ characteristics, ultimately providing true indicators that will decide the probability of a particular lead resulting in a sale. The Credit Scoring chapter in Applied Data Mining: Statistical Methods for Business and Industry provides a good read on the statistical modeling that should be the framework of a lead scoring project.

Identifying, classifying, and scoring your leads and opportunities is one, big step toward more effective lead management. But it’s not the final step. Once you’ve established the characteristics of the prospective buyer, it’s time to turn your attention to content management marketing.

Having strong content that you can use in your outbound marketing strategy will allow you to attract the right prospects with the valuable characteristics you identified in the lead scoring model. In the end, that makes your lead management much more efficient and you won’t have sales reps chasing opportunities that have very little chance of panning out. At the expansion stage, that can be the difference between continued growth or unrealized potential.

The Chief Executive Officer

Firas was previously a venture capitalist at Openview. He has returned to his operational roots and now works as The Chief Executive Officer of Everteam and is also the Founder of <a href="">nsquared advisory</a>. Previously, he helped launch a VC fund, start and grow a successful software company and also served time as an obscenely expensive consultant, where he helped multi-billion-dollar companies get their operations back on track.