Memo to the CFO: 3 Lead Generation Metrics That Matter

In every interview or conversation I have with marketers, one question always arises: What metrics should lead generation be judged by?  I always answer with the same responses:

1.    Lead-to-opportunity conversion: For every lead you buy, how many turn into sales opportunities.

2.    Cost per opportunity: Instead of CPL (more on this below), calculate the lead-generation costs and divide by sales opportunities created.  This should include your lead development/qualification costs and nurturing costs.

3.    Total pipeline created: How much sales pipeline has been created by your leads?

If this makes sense, maybe  I should address why I don’t recommend CPL (cost per lead) or ROI (return on investment) as metrics:

  • CPL: Bragging about your average CPL is fine, but if it keeps you from higher-converting — albeit more expensive — leads, then you’re missing the boat. CPL should be a by-product of cost-per-opportunity. If a lead is converting, then you should be willing to invest more. Conversely, you may be buying leads for lower than anyone else, but your cost per opportunity is the same or higher because of the expenses and time it takes to convert them. Repeat after me: CPO, not CPL.
  • ROI: ROI is defined as lead-to-closed business.  I get it:  you have to track this. (If you do, make sure you are tracking ROI over a sufficient period of time — probably two to three months after typical sales cycles.)But ultimately, I argue against this metric. It’s simple when you consider it in terms of baseball: Alex Rodgriguez is one of the best players in baseball because he does his job — he fields well, hits home runs, creates runs, etc.  He has not been on a team that has won the World Series. Yet he will still get paid one of the highest salaries in baseball and will still likely win the MVP award. That’s my point: we all play to win (in business, by getting revenue), but everyone has to play well to get the win.  The marketing reps should be judged by whether they did their job, which in this case is creating pipeline. The sales team’s job is to close that business. Once marketing creates an opportunity, sales must execute in order to create revenue. The net-net: if marketers creates the pipeline, they have done their job and should be judged accordingly.

There you have it.  I’m open for debate.

Craig Rosenberg is the Funnelholic. He loves sales, marketing, and things that drive revenue. Follow him on Google+ or Twitter