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Cost of Underqualified Leads


On the surface, the ROI for marketing campaigns can be a straight calculation of spending against tangible revenue generated. Marketers and budget funders must look beyond the surface to gather the true costs of our campaigns. That is, we must consider the costs inherent in processing leads and the costs to our sales organization to engage them. We must also account for the costs of labor and also the opportunity expenses involved in diverting sales resources away from other revenue generating activities.

Some marketing departments view their business development activities as part of a volume play, where a certain percentage of leads produced by marketing will convert to revenue. Certainly a portion do this via a volume-based strategy. The volume-based shotgun approach of calling everyone within a target demographic and leading with product and solution offers will lead to some sales. These closed deals are commonly known as “blue birds”. Blue birds are new customers who marketing stumbles across because the prospect interacted as a result of their pre-existing interest. These blue birds represent a small fraction of any sales pipeline.

Calculating the spend on a marketing activity as a cost against the volume of new business revenue generated often neglects the over- all economic expense involved to engage the larger portion of the lead pool.

To attain the true costs of a marketing campaign we must look at what is involved in to engage all leads across the entire sales organi- zation.

These costs include the following:

• Labor costs for engagement of leads
• Opportunity expense of diverting sales attention
• Operational costs involved in processing and storing data 


Funders must factor the costs of processing and engagement of leads to derive the true costs of marketing investments


Calculating the Real Costs of Leads


The first item on the list is straight forward and most operations can estimate what labor costs on average can be for typical sales engagements. Labor may be the easiest to calculate and it certainly will be substantial.

The opportunity expense of diverting sales attention is a difficult metric to measure, but nonetheless it is real. Think about the other sources of sales revenue generation, including efforts against installed-base customers for cross-sell and upsell opportunities. The majority of an enterprise sales rep’s time is spent on installed-base customer inquiries, as well as pro-active regular account management tasks that help retain a customer. It is where most of the revenue derives from and therefore diverting focus away from this type of activity must be weighed carefully.

There are always inherent operational expenses involved to process and maintain the volume of data that flows from marketing into sales, automated marketing systems, and eventually the CRM data repository. Although, these costs are less in comparison to the others, they are still expenses that need to be taken into account.

The fourth and fifth items can be covered together. The negative effects of unprepared and underqualified engagements are felt by both customers and the sales departments. Sales morale can be negatively affected by constantly weaving through customer rejections, that are caused by unqualified assumptions including thinking the customer is truly interested and has a motivation to engage. Many marketing departments subscribe to appointment setting services that provide only basic levels of qualifications and then connect the sales force with the prospective customers. Neither party tends to have their ducks in a row as they say. Instead, the meetings usually become ill-timed ‘dog and pony shows’ of the products and services to an audience that is unprepared with the information needed to enable a quality meeting. These meetings usually leave both parties wondering why they met in the first place.



The negative effects of underqualified engagements are felt by both customers and sales departments


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