Art
Siegel

Measuring The Sources Of Your Sales Leads

Direct mail, advertising, e-mail marketing, trade shows, publicity -- lead-generation programs are a huge expense, exceeded only by the sales activity to follow up on the leads they generate. Some of these activities will be more productive than others for your company. So, to spend your lead-generation dollars most efficiently, you need a process for Measuring The Sources Of Your Sales Leads. 

If you have a small business that is just starting out, measuring the sources of your sales leads is easy: You run an advertisement and then count how many customers you get. But even a few weeks later, keeping track isn't so easy any more. Did that customer come from an ad or a referral? From this week's ad or last week's? From the newspaper or the Yellow Pages?

As long as the business keeps coming in, who cares what the source is anyway? You do, because lead source data is your primary source of information on which campaigns are working and which are not, and where you need to spend your time and money in the future.

Asking The Source Question

Many of your best leads come by telephone or from walk-ins. There you are, in direct communication with a customer. Yet fewer than half of all companies bother to ask the source of these leads. When I ask salespeople why they don't inquire about the source, the usual response (besides "I don't think of it") is something like: "I don't want to interrupt the customer by asking that."

These salespeople take that position until we show them how it really works. Take this example of a prospect calling a mutual fund company:

Rep: Good morning. This is Rick Johnson. How may I help you today?

Customer: Hi, Rick. My name is Mona Shapiro. I'd like some information on your High Yield Bond Fund.

This is the point where most reps start talking about their fund. But Rick knows better:

Rep: Sure, I'd be happy to help you with that, Ms. Shapiro. By the way, how did you happen to hear about our High Yield Bond Fund?

Customer: Well, I was looking through the latest issue of Barrons, and the particular article I read discussed the benefits of junk bonds at this time.

Rick now knows that Ms. Shapiro reads Barrons, so she is probably a more sophisticated investor than most. He can use more technical investment language with her. But he's not done using the source.

Rep: You know, I missed that article. What did they give as the major advantages?

Customer: It was primarily that the spread between junk bonds and Treasuries was running near an all-time high, so they were a good alternative at this time to equities. And since I'm approaching retirement, I want to reduce the risk in part of my portfolio.

Here's what Rick has accomplished with this questioning approach. Sure, he found out that the source of the lead was Barrons, but more importantly:

• He got Ms. Shapiro talking about herself and the factors that are motivating her in this purchase decision.
  
  
• He has build terrific rapport with Ms. Shapiro by focusing on her interests, not his. Strangely enough, asking her where she read about his mutual fund is mostly perceived by the customer as a question about her reading preferences.
  
  
• He has gathered a great deal of specific information he can use to describe his product in relation to her needs and to use as a springboard for further questioning.

The source question is highly effective at the start of a sales conversation when it is used as a springboard to determining the prospect's needs and frame of reference. In fact, there are few opening questions that are as effective, because the source was the direct catalyst for this contact.

Tracking Leads At Your Web Site

I recently spoke with a client who was concerned that his trade magazine ads were resulting in far fewer bingo leads than last year. When we spoke with the magazine publisher, we learned that all of their advertisers are experiencing a similar drop. The reason: More readers are going to the advertisers' Web sites for more information rather than circling the bingo card and possibly waiting weeks for a response.

Although bingo leads have always tended to be lower in overall quality than many other types, at least you knew the source. But when trade magazine readers go directly to your Web site, it's harder to know what drove them there.

Probably the best way to determine the source of your Web traffic is to use unique Web addresses in your ads. Let's say your primary Web address is www.new-wave.com. If you place that Web address in every ad, you make your address easy to remember and type into a browser, but you lose the ability to track the source.

To ease tracking, you can create a special page on your site keyed to each ad. So in one ad, you list your URL as www.new-wave.com/hot (where "hot" is a short, easy-to-type word that relates to what you are selling). You use a different word for each ad source.

Important: If you use this approach, keep the URL really simple. If you make it several directories deep, with lots of extra characters to type, many people just won't bother.

Your Webmaster should know how to make an address like this work, as well as how to track the number of people who type in that address. At that unique address, you have two choices:

• Set up a unique "welcome" page that greets readers of that particular magazine and then gives them links to enter your main site.
  
  
• Set up a blank page at that address that automatically forwards to your home page. This lets people go to the page they really want, while letting you track them along the way.

Coding E-mail promotions and Web advertising
This same approach can be used when you use mass e-mail as a lead-generation tool or purchase banner advertising on other sites. In both instances, you ask the recipient to just click on a link, rather than type in the URL, so you have more freedom to name the unique addresses anything you want.

What To Do With The Data

To track all of this, you need a current-generation contact manager, such as GoldMine, Act or Maximizer that allows you to enter source codes for each sales lead and then generate reports.

Ideally, everyone in sales should be logged onto the contact manager when speaking with a prospect, and those who handle trade-show, bingo, response-card and other mass leads should have access as well.

Oops! We didn't get a source
No matter how hard everyone tries, you're going to receive leads for which you don't know the source. People come directly to your Web site without leaving a trail. People call your company, and the salesperson forgets to ask. And some people just don't remember where they heard about you.

For all of these, you need to create an "other source" code (or multiple codes: one for unknown Web leads, one for call-ins, etc.).

Turning source data into information
Once you know the number of leads you receive from each source, you're almost there. You're not in business to generate leads; you're in business to sell. So the next step is to track the results from those leads through each step in your sales cycle.

Let's say you typically have five major steps in your sales cycle:

1. Receive a phone inquiry from a prospect. Conduct a preliminary phone conversation to discuss needs, present an overview and qualify the prospect.
   
   
2. Send a literature kit to qualified prospects.
   
   
3. Conduct a follow-up conversation (phone or face-to-face) with people who received the kit.
   
   
4. Send out a custom quote/proposal to those prospects that are still interested.
   
   
5. Close.

A lead-tracking chart in action
Let's say that this month you have advertisements running in two publications, you conduct one direct mail campaign, you have write-ups in three trade magazines and you also receive leads from people who visit your Web site. In addition, you'll receive leads from other sources, such as referrals and old mailings.

Your lead-tracking chart for the month might look like this:

You might have a different cycle for people who initially contact your company via other means, or for products that have a simpler cycle. For example:

1. Receive e-mail (or bingo card) inquiry from a prospect.
   
   
2. Send a low-cost response that directs customers to a self-service area on your Web site.
   
   
3. Close.

Thus, you need to create a different chart for this sales cycle.

Why bother to track at this level of detail?
Advertising is expensive. But for most companies, literature fulfillment and sales time is even more expensive. One of the costliest situations is for you to have a lead source that generates many leads -- all of which require a sales contact and literature kit -- but that produces few closes.

This kind of information tells you a great deal about which lead sources are most effective in really bringing in the business. It can also help you uncover sales issues you need to fix. In March, perhaps, 50% of phone-in leads that receive a proposal convert to customers. By August, only 30% are converting. It's time to take a closer look at your proposal or the way it is being presented.

What About Total Cost Of Sales?

So far, you've got great information about which lead sources generate the sales, but you also need to consider the costs associated with converting those leads to revenue. So a further refinement of this tracking process is to enter the results into a spreadsheet program that includes cost data.

Here are some examples:

• One of your ads costs $2,500 per month, including media and an allocation of the ad's development cost. If you receive 100 leads for the month, the cost for each was $25.
  
  
• Based upon your average hourly rate for salespeople, plus 800-number charges, and an average call length of six minutes, handling a telephone sales lead might cost you $5.50.
  
  
• Sending out a fulfillment kit, including printing and postage, costs you $13.50.
  
  
• And so on for each step.

You now have a cost chart like the one below for that advertisement:

Multiply each of these costs by the number of repetitions of each step per close, and you've got a very good idea of how much each sale is costing you. When you do this, you might be very surprised. An inexpensive lead source such as publicity resulting from press releases might be very costly in terms of subsequent steps. And a very expensive trade show might perform better, by producing bigger orders with fewer steps.

Continue this detailed tracking for a few months, until most of the leads have either converted to sales or gone away, and you'll have a much clearer picture of where to invest your future lead-generation dollars.

Summary

Lead-generation campaigns, and their resulting fulfillment and sales activities, represent an enormous expense for your company. That is why it is so important for you to:

1. Track each new lead to determine its source.
   
   
2. Follow each lead through to the close to learn which sources generate the best results and to observe the efficiency of each step in your sales process.
   
   
3. Apply a dollar amount to each step to learn the true cost of sales for leads resulting from each source. 

SeaBird Associates Inc
3011 NE 7th Drive
Boca Raton, FL 33431
Phone: 561-750-9233
E-mail: Art Siegel

About Art Siegel