Are you properly qualifying your leads?
Success is not only about how much money you make, but more importantly about how many opportunities you manage to win from your investment, also known as ROI.
Lead Management Science – Avoid Over or Under Qualification of your Leads and Improve your ROI
We will explore how both over-qualifying and under-qualifying your leads can negatively impact your ROI and how to find that sweet spot to maximize your ROI.
For example, Company A invests 50k in their marketing budget and gains 100k in revenue, while Company B invests 10k in their marketing and gains 50k in revenue. Company A earns twice as much as Company B, however, the ROI of Company A is 1:2, while Company B has ROI of 1:5. Which one is more successful? Company B of course, because of their ability to receive a higher return on their investment also known as Cost per Sale. This is different than Cost per Lead.
So what is the difference between CPL and CPS?
CPL (Cost per Lead) is your Total Cost of Advertising divided by the number of Leads Generated. While CPS (Cost per Sale) is your Total Cost of Advertising divided by the total number of Sales Generated. What is often overlooked is how over-qualifying or under-qualifying can impact both your CPL and CPS. This impact can be described as TCPL and TCPS (Total Cost per Lead and Total Cost per Sale). Both TCPL and TCPS cost include all other expenses other than Advertising (management, transportation, complaints, cancellations, time, etc).
Let’s go through to the fine line of qualifying your lead and how it can impact your business.
Lead Qualification Impact to your business
Economics of CPS, CPL and TCPS
Lead qualification has an impact from 5-50% on ROI, with TCPS included.
For example, campaign aiming for 100.000 leads with a closing ratio of 5% makes 5.000 sales. Are you ready to receive and process 100.000 contacts, meetings, and orders? What will be TCPL of this process? Are you even ready to execute 5,000 jobs in a timely manner? And if you are, is it possible to launch a campaign with a budget for 50,000 leads but with a closing ratio of 10% for the same number of sales at the end?
You may think that you need as many leads as possible for more sales, regardless of CPS and TCPS. But, under qualifying leads will bring you extremely high CPL for advertising, and TCPL for all other costs: collecting leads, organizing low-quality sales meetings, future high cancellations rates. This way TCPL can diminish, and in some cases, even to overcome TCPS.
The similar will happen with over-qualification. In this case, CPL and CPS will be extremely high, almost as high as TCPL and TCPS, due to the price of targeting high-quality leads and low hidden costs. But at the end, when we review our ROI, it will also be too low due to our poor sales volume.
Your goal is not to receive as many leads as possible, or only the “leads” that are already looking to buy. Your goal is to find your leads somewhere in between these two extremes.
How will you know that you are on the right track?
Use CPL, CPS, but also TCPL and TCPS metrics, as well as other measurement tools, but also use experience and profound thinking to achieve the right business logic.
What happens with under-qualified leads?
Other than TCPS with very high hidden costs, in everyday business, under-qualification makes unsatisfied salespersons because they are losing time, money, and motivation due to poor closing ratio. For how long they will stay in the organization that gives them a bunch of work with no closures? And how much it will cost you to lose them?
For example, does it make sense to send a salesperson for an in-home meeting with a lead with no budget, or to a meeting without the presence of both decision makers, or just to get a job of carpet or duct cleaning for an average ticket of $250?
You may say that some of them may be highly motivated to prove themselves and excited to take more jobs even with low qualifications, but let’s face it – Is this the strategy you want to build your business upon? Is it smart to push the most of the effort on your salespersons? Or your business development and marketing can try to find a better way for more “easy” sales, better closing ratio and better ROI?
What happens with over qualified leads?
How can you tell you are over qualifying leads?
For example, check out your website visits. Compare average visit to your website ordering form page with the average number of request received. If 1,000 people came today to your contact form and you have only one request, it`s probably over-qualifying (if it’s not just good old over-complicating).
Lead over-qualification will happen if you are targeting your campaigns to extremes or you are asking (and demanding) too much in the first contact in the process of lead generation. If you are doing this, how will you tell the difference between leads and sales? If you sell only to those ready to buy at the moment, why are you generating leads at all? Just sit and wait for them to come in your store or make an online order! Final revenue will be close in both cases.
Yes, at first, over-qualification will save you from hidden costs and some of the troubles in sales and installation stage in lead life cycle. But, on a long term, without pro-active sales approach, you will stay where you are, and that is no good for any business.
In practice, over-qualification is the most common on the websites, call centers, road shows or canvassers campaigns. Companies make too detailed and complicated lead generation “gates” that makes only the most determined customers to apply for a meeting or a quote. Instead of collecting leads, it is like they are trying to collect final orders. For a couple hundred or thousands of dollars home improvement project? On the street? Really?
Generating leads through different media
A process of qualifying leads is more than a collection of basic contact details. So, it is crucial to include additional information about the specific lead that qualifies it for a certain service or product (being careful to not jump into an over-qualification trap).
With properly qualified leads, you will be able to have a more efficient sale, better conversion rate, fewer cancellations, and, at the end, higher ROI and revenue.
Let’s see how lead qualification works for different channels!
Note: Even if there will be some differences, it is important to keep your scripting consistent in every medium.
Many businesses still get the most of their leads trough call center. It is OK since they provide you with control of training, scripts and efficiency. A well-organized working environment with detailed data available gives you the opportunity to test your scripts in short time frames, to make adjustments and focus on a solution that delivers better CPL, CPS and final ROI. Of course, all this is even better with a specialized call center for home improvement industry.
Usually, web leads have lower closing ratio than those from the call center. Simply, people can send more request on different websites in a short period of time even if they are just curious about prices with no intention to invest soon. Simply put, the script of the web form should be tailored to collect data somewhere in between from newsletter subscription and online order. Just enough for qualification, and not too much to discourage them.
Stores are the great channel for capturing qualified leads if you have a simple and scalable solution for store associates to enter leads. Even if they are better informed compared to call center employees, have in mind that store associates are focused on products, with far less experience and knowledge about services, so, forms and scripts should be able to overcome this gap.
New leads generated in a real time are what you need to grow your business. Lead generators are employees whose only job is to generate leads for your installations business. Understanding that they go for the leads, it is natural to tailor scripts to be less “intensive” but also suitable for basic lead qualification.
Canvassers are usually seasonal part-time workers that canvass neighborhoods looking to generate leads. Again, closing ratio for leads that are coming to you is higher than for those you have reached for yourself. This means that you should expect lower quality leads from canvassers, regardless of scripting and training you provided to them.
Tips on qualifying scripts
Qualifying script questions are the starting point. But not just that. They are the entry gate in the process of qualifying leads. After walking through, they become potential sale.
Qualifying lead scripts provide lead generation consistency and control of the lead quality. It is important to define and follow and the structure of the qualifying scripts per each medium. This way you will be able to identify when a sales prospect is qualified and worth spending valuable time with. Some of the key questions for identifying the lead quality are purchase need, authority (decision makers), ability (lead price range) and genuine purchase intention.
- Call Center – In order to make your (expensive) calls more efficient, you should customize scripting based on region and geography.
- Web – Even if website visitors came by looking for your offer, don’t fall into the trap of over-qualification with endless form with mandatory fields
- Lead generators – Let them always be ready providing them access for lead generating software, providing them prospects and specialized scripts for qualifying the leads.
- Store Associate – Provided with proper script, SA should qualify the customer, but also should be trained to aim for an upsell, providing a lead with additional information and products and services offering details
- Home Shows – Due to short training period compared to SA, and a home show competitive environment, presenters scripts should be adjusted for targeting only key questions with sales (or even call center) taking over later.
- Canvassing the neighborhoods – Do you really need too many location information if you know where you send canvassers? For best canvassing results and lead quality, you should tailor your scripts based on neighborhood characteristics such as average ticket value.
Just a few tips for your Marketing
Your campaigns should follow the similar approach and logic. It is not smart to invite everyone to call your call center since operating costs will overcome CPS. You may call everyone to visit your website via TV or paper add since website forms will be an additional filter for lead qualification. But, you shouldn’t waste your money to call everyone everywhere to visit your website via social media or online add since there are already plenty of tools for targeting the right audience.
It is important to understand where are all these lead “gates” in different sales channels so you can make a right message for each one of them. This also means that marketing campaign can`t be analyzed separately from entire lead generation process since it also has a tremendous impact on lead qualification and business in general.
At the end – The Most Important Job
While we talk in this article how important is not to over or under qualifying your leads, it’s even more important to note that you absolutely need to hire and train salespeople who will take your leads to the next level. And remember, it is crucial to take feedback from your sales in order to improve lead criteria and the entire lead generation process.