Forget About Hot Leads. It’s Cold Leads that Make the Difference.

When sales teams need marketing to help them make their numbers, the natural response is to go fishing for hot leads. However, as I wrote previously in a white paper on “Lead Recycling,” focusing demand generation activity exclusively on acquiring net new, qualified leads is an expensive proposition for a number of reasons:

• many products, particularly in the tech category, are first of breed solutions and/or of a complexity that demands a more long term, consultative selling process. Prospects may simply not be ready to buy a solution because either 1) they don’t know such a solution exists, or 2) they may not even be aware they have the relevant problem in the first place;

• focusing on only the most qualified prospects leaves many potential (albeit, more long term) deals on the table. A potential customer might have precisely the problem that a particular product or service solves and are anxious to solve that problem, yet may not feel as though they’re ready to buy and so fail to respond to the campaign;

• response rates from tactical campaigns designed to uncover hot leads are likely to be much lower (since active buyers only represent a subset of potential customers), so companies need to spend more money to generate relatively few opportunities;

• lastly, because the campaigns weed out all but those prospects in active purchase mode, they leave the sales pipeline empty once those deals have been either closed or disqualfied. This requires a constant re-loading of the sales funnel with new, expensive leads.

The subject of hot vs. cold leads was a prime topic at a Marketo roadshow event I attended earlier this month, when Paul Albright, the company’s Chief Revenue Officer, gave a compelling presentation on marketing metrics and some of the factors behind his company’s rapid success.

At one point in the presentation, Albright mentioned that for the average company, the proportion of deals that are derived from what he called “slow leads” (later defined as leads stalled in qualified status for more than one month) is 6 percent. [Note: the source for this statistic wasn’t quoted, so if someone from Marketo reads this, feel free to provide any source reference in the comments.]

In contrast, for Marketo, the proportion of sales derived from slow leads is an astounding 50 percent. Furthermore, according to Albright, Marketo views the difference between the industry average (6 percent) and their number (50 percent) as incremental revenue, that is (and here I’m paraphrasing), it’s business Marketo wouldn’t achieve if they ignored existing prospects and focused exclusively on generating new, hot leads.

Why is Marketo’s percentage so much higher than the average? Two reasons: one, they’re in a nascent space (revenue performance management) that requires a long-term, educational sales cycle, so short-term leads are few and far between. And two, more obviously: the company does a very good job nurturing slow leads.

The lesson in all this? If you’re looking for incremental business, don’t forget the leads you have. A systematic lead nurturing program designed to cultivate existing prospects can pay dividends equal to or greater than any efforts designed to generate hot new leads.

For a more detailed discussion on the value of a lead nurturing approach, download a free copy of Spear’s white paper: “Lead Recycling™: A More Cost Effective Approach to Demand Generation for High-Technology Companies”.

3 thoughts on “Forget About Hot Leads. It’s Cold Leads that Make the Difference.

  1. James Obermayer

    Research has shown consistently that B2B inquiries and subsequently leads convert to sales in a predictable time table over a period, on average, of one year. Certainly hot leads (10-15% of the total inquiries in a given month) convert in 1-3 months. After that conversion for inquiries and leads progresses at the rate of about 10% (per group of inquiries) per quarter. This means out of 100 inquiries, 15% will convert in 3 months and 10%-12% in each quarter until the 12 month anniversary. The deciding factor on market share from the inquiries is follow-up. Marketing automation has such great results because it follows-up in place of a sales rep. Sales inquiry follow-up is statistically pegged at 10-25% on average without a policy from corporate which dictates a 100% follow-up policy. The value of MA is follow-up with interesting content which develops a relationship until the inquirer is ready to buy.

  2. Jason Johnson

    Excellent recap. Paul’s comments about 50% of Marketo’s wins coming from “slow leads” have continued to ring in my ears since the roadshow. This is a long overlooked goldmine for B2B companies.

  3. Glenn Friesen | Impact

    Well said — I definitely appreciate your referencing data to prove your argument!

    Customer retention remains more profitable than customer acquisition.

    The same seems true for leads — that lead “retention” (more accurately, lead “development”) is more profitable than lead acquisition.

    Though, both acquisition and retention seem inseparably linked in the pursuit of overall growth, don’t they?

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