Conversion rate feels like the most important metric that lead generation teams can measure. But if you only look at the conversion rate, you’ll only see part of the story. To truly understand the full value of each of your programs, you need to do a one-to-one comparison across lots of metrics.
Stock buyers perform fundamental analysis when they research what stocks they should add to their portfolios. By looking at several performance factors, the buyer can better understand how small changes in the company will affect the long-term value of the stock.
My advice is for you to take the same multi-factor approach when judging your portfolio of lead programs.
By comparing the same metrics across all of your lead programs, you can better predict how changing your investment in those programs will affect overall performance. I’ve even put together a handy calculator where you can plug in your numbers and test it out for yourself.
You’ll need to make a copy of the Google Sheet to plug in your numbers.
The best part about looking at the portfolio view of your programs is that this view isn’t limited to your purchased leads. Add in your PPC campaigns, your events, your email marketing, and any other lead generation program with a quantifiable budget and a tracked conversion rate.
Step 1: Gather your programs
I suggest that you compare your programs over a timeline of at least 6 months. This will give you a baseline for spend and conversions that takes into account your full sales cycle. Start by gathering these metrics:
Step 2: Calculate the portfolio totals
Use simple addition to find these two metrics. Add up the total budget you spend across all your accounts and the total volume of leads you get from those accounts.
Total budget: how much you spend across all of your programs
Total (lead) volume: the number of conversions across all your programs.
Step 3: Calculate your effective CPL
Your effective cost per lead (CPL) is your total budget divided by your total lead volume.
Again, this the total across all programs, rather than weighted based on program. You want to understand what you pay per lead across all your programs, not the CPL for each individual program.
Step 4: Calculate the effective conversion rate
When you calculate the effective conversion rate, you don’t take an average of all of your conversion rates. Instead, divide all of your conversions by all of the leads you deal with in that timeframe. This will tell you how many conversions you get across all your programs.
Step 5: Calculate cost per KPI (CPKPI)
One metric of success that many marketing departments use is how many opportunities or conversions — phone calls, successful contacts, or appointments, however you define this — you create during the time period. The amount you spend to create those opportunities is your cost per KPI (CPKPI).
First, gather the total number of conversions you created across all of your programs. Then divide your total budget by the total number of conversions to find the CPKPI.
Step 6: Calculate pipeline created per lead (PCPL)
Pipeline created per lead is the total amount in your pipeline divided by the total volume of all leads. This metric tells your sales team how much each lead contact is worth. When you know this metric, you can remind the sales team that every phone call, email, and client touch potentially contributes that much to the pipeline.
First, add up the total pipeline created across all your programs. Then divide that number by the total volume of all your leads.
Step 7: Analyze
When taken together, these metrics for individual programs and for the portfolio as a whole can give us a deep understanding of
- Overall pipeline
- Overall efficiency
- Performance KPIs over time, especially opportunities, CPL, and average pipeline value (APV)
Step 8: Predict
Now you can start playing with the numbers by adjusting your investments in different programs, testing proposed CPLs, and forecasting the amount of budget you will need in order to meet a revenue or pipeline requirement.
Use the calculator to understand how little changes in any of your programs can affect the whole portfolio.
- How adding in a new program can affect performance or revenue
- How much does each program contribute to your total pipeline?
- Would dropping some programs that don’t immediately convert actually decrease your total conversions over time?
- Do you need to pay top dollar for BANT leads, or would a longer-term strategy with a higher investment in content syndication leads pay off more in the end?
- What is the impact of reducing your display or PPC spend?
- What impact would a greater investment in organic growth have?
- Where could you cut spending to invest in new properties or more sustainable practices?
- How many leads you need to achieve pipeline
You’re probably not going to positively impact all of your KPIs at the same time. So you’ll have to decide what’s more important to you, for example: can you take a reduction in conversion rate if the overall value of the pipeline increases?
Positively impact (most of) your metrics
One way to positively impact the numbers across the board is to increase your Average Pipeline Value (APV).
It’s not about controlling the quality of the leads that you get (because, really, you can’t control that), but you can control what you’re paying for the quality of leads that you get.
To increase your APV, you’ll need to increase the deal sizes that you get from your current conversion rates. One easy way to do that is to increase company size in your lead targeting. This change may increase CPL and decrease conversion rates in the short term, but over the long term those same moves will increase the APV.
You can negotiate CPL (especially when you can show relative worth of the leads you receive) — which is why doing this math is important.
This blog post has been adapted from a talk that I gave at the Music City Lead Generation Summit in October of 2019.