It’s that time of year again, when marketers’ thoughts turn to budget cycles, MBOs, and that Webinar series that they really meant to launch in Q3 but just never got around to.
A new fiscal year looms, and we’re busy assisting clients and prospective clients as they sort out their demand generation priorities for 2008. Compared to years past, the program mix has changed – there’s renewed focus on nurturing existing leads, for one – but one consistency remains: the tendency to plan around programs, rather than objectives.
I discussed this phenomenon – we call it “program-centric planning” – once before here. Simply put, it’s the process by which marketing priorities at some companies (too many, in this writer’s opinion) revolve around deliverables – the aforementioned Webinar series, that blog the VP keeps asking for, a target account program for the sales force – rather than quantitative objectives.
Admittedly, planning by the numbers is easier at smaller companies, where there are fewer constituencies to cater to, and marketing can operate more independently. Yet larger firms, who should know better, continue to earmark large portions of their Q1 budget for programs that may or may not represent the most efficient way to support the company’s revenue goals.
What’s the alternative, you ask? Simple: figure out the number of leads you need, and then budget for the precise mix of programs that will get you to that number most cost-effectively.
Here’s a sample scenario:
Say your company’s revenue goal in 2008 is $10 Million. Is demand gen going to drive every dollar? No. SiriusDecisions, a leading analyst firm, estimates that, in reality, as few as 18% of revenue dollars can be tracked back to marketing programs. The rest are due to Word of Mouth (WOM), referrals, PR, sales activity, and so on. Based on that statistic, you’re on the hook for $1.8 Million. But let’s be realistic – say the CEO wants you to drive at least half the revenue, so let’s call the target $5 Million.
Say your average deal is $50,000. That means you need to generate 100 deals.
Next step in the equation is qualified leads. “Qualified” has a different definition depending on who you work for, but typically it’s a lead that meets basic demographic criteria (company size, for example), has a defined need (and perhaps approved budget), and a purchase timeframe of 3 months or less. Your criteria may of course vary.
How many qualified leads do you need to generate to drive 100 deals? That depends on your close rate. Again, close rates vary, but Sirius says the industry average is around 25%, so let’s use that. For 100 deals, therefore, you need to generate 400 qualified leads.
Next step: raw inquiries. A raw inquiry (in some companies, referred to as a “suspect”) is any completed contact form – a white paper download, a Webinar registration, a trade show attendee. How many raw inquiries does it take to create a qualified lead? Again, it depends. If all you do is attend trade shows, the answer will be: quite a few. If you focus on more targeted, albeit more expensive, campaigns – executive mailers, for example – the number will be smaller.
Let’s assume a balanced, integrated mix of programs – online and offline, push and pull. Our experience says that somewhere between 10 and 20 percent of all inbound inquiries will meet qualified criteria. That means 400 qualified leads will require generating between 2,000 and 4,000 raw inquiries.
And that’s your goal. Next, lay out the programs that are already fixtures of your marketing plan: search (PPC) may be one, trade shows and events may be another, and estimate the number of leads those will generate given past metrics. Then for the balance, insert those programs most likely to generate the remainder at the lowest possible cost. (Note: these may or may not be the programs your internal clients are screaming for the loudest.)
What might those programs be? Ah, that’s where the formulaic approach breaks down. The ideal mix of programs depends on your unique combination of audience, product, price point, offer, sales cycle, and other variables (such as whether you need to close a bunch of deals in Q1 so as to impress the board prior to the next round of funding.)
One more note: metrics will change over time. Be prepared to adjust and scale your programs (up or down) based on results as the year progresses. That killer lead nurturing program you launch in Q1 may increase your qualification rate, decreasing the number of raw inquiries you need. Or the new hotshot East Coast sales rep may close every qualified lead you send her way. Just be sure to continually measure, test, and calibrate your plan accordingly.
To calculate the number of raw inquiries you’ll need to reach your revenue goals for the new year, check out our handy online lead calculator (no registration required).