Overview

Allocating an adequate budget towards your marketing initiatives can be a balancing act. You want to spend just the right amount so that leads are generated and converted on a consistent basis. But how can you determine what campaigns will be most effective in targeting the correct individuals? What is the likelihood a lead will convert and become a paying customer? Who should your marketing and sales team focus their efforts on and who should they disregard?

These types of questions can all be answered by understanding what lead value is, how it’s calculated, what impacts it, and how you can boost it. Your lead value is a true indicator of how successful your business is and therefore, should be a core aspect of your business model.

What is Lead Value?

Lead value can be defined as the estimated worth of a lead over the course of their lifetime, regardless if they eventually become a customer or not. Understanding the value of your leads will allow you to make better informed decisions on how to most effectively acquire more leads. Stated another way, lead value helps justify your marketing spend, giving clear guidance as it pertains to how much you should spend and what exactly you should spend it on. Your sales and marketing teams need to work in tandem to determine the best approach in generating leads and converting on them. There are a few ways to calculate lead value depending on the way your business operates or if value is calculated based on profits or revenue. Below are a few calculations you can use:

Total Lead Value = Total Revenue / Total Number of Leads

Lead Value = Average Sale Value x Conversion Rate

Average Lead Value = (Total Revenue / Number of Leads) x Percent Profit

The third equation is the most accurate calculation when it comes to determining how much each lead makes for you. Here’s an example to give you an idea of how this calculation works:
If your company brings in $400,000 each month coming from 200 leads at 5% profit, the average lead value would equate to $100. That means each lead you generate will be worth $100, no matter if they become a paying customer or not! Obviously you want more paying customers, as this equates to a higher sales revenue, and therefore, a higher lead value.

Why should companies seek to improve Lead Value?

The ultimate goal of any company is to generate sales and make as much profit as possible. Therefore, it shouldn’t come as much surprise that you want the value of each of your leads to be as high as possible. If your total revenue goes up then so will each lead’s value. Improving lead value will be directly influenced by the marketing dollars you spend to generate leads, and hopefully, convert them into prospects. Otherwise known as lead conversion, it can be defined as a marketing and sales process that involves converting leads into customers through the use of nurturing strategies such as behavior automation, retargeting, and email nurturing. The process of lead conversion begins once leads have been generated. Converting leads to customers plays a critical role in the success of your business. A higher conversion rate equates to more money coming through the door and consequently, a higher lead value.

When should companies focus on addressing it?

It’s important for companies to address lead value constantly since it helps determine if their marketing efforts are working, if they are in need of refinement, or if the budget they are allocating to these efforts aren’t worth it. If a certain campaign isn’t working very well or isn’t producing the results the company expects, they will have to address what needs to be changed in order to keep their revenue at a healthy level.

How should a company improve Lead Value with Marketo Engage?

A company can drastically improve their lead value with Marketo Engage by establishing a lead scoring model. Lead scoring is a systematic way to rank and prioritize leads who may be on the cusp of converting into customers. There are two aspects to it, which include demographics or qualifications and behavior or engagement. The former represents who you want to do business with and the latter represents who wants to do business with you. Having both components work in tandem with each other will help create a scoring system where your sales team will be able to prioritize leads based on their score, and therefore, the most qualified sales-ready leads.

The major benefit of a lead scoring model is that it will objectively rate if a lead is ready to be passed to the sales team by scoring the actions they take. A point value is assigned to each action with their score being calculated in a cumulative manner. The more positive actions they take, the higher their score will be. Within your model you’ll need to set certain threshold values and establish an automated process so that Marketo can automatically move leads from one level to the next based on their actions.

This process is managed through Lifecycle Processing, where a lead’s lifecycle is defined by the progression from lead to contact. They will progress through the Marketing Funnel from the top (all leads start here), to the middle (where they’ve expressed some interest), and to the bottom (they are ready to purchase). You’ll need to set up system-based triggers (like when a score hits a certain threshold) and process-based triggers (something that’s set up by your team, like if a sales rep changes a lead’s status to “disqualified” based on their most recent interaction with them). The graphic below gives a good representation of what this would look like. The take home idea here is that leads need to be treated based on where they are at in the buyer’s journey, and having a good lead scoring model is necessary in processing leads throughout their lifecycle.

Conclusion

Marketo Engage provides all the necessary tools to process leads objectively through a sound automated process. With the data it collects, your marketing operations and sales team will see how leads are progressing, as a result of their actions influenced by marketing campaigns, and determine if their efforts are leading to the revenue they’re expecting. If there’s a need to refine content that isn’t providing sufficient lead conversion rates, your lead value will be an indicator of this. It will also allow your sales team to focus their efforts on leads who are sales ready and disregard those who aren’t or should be disqualified altogether.

Properly managing leads in your instance while taking lead value into consideration will allow your business to operate in the most efficient and effective way possible. If you’d like to learn more about lead value and the implications it can have on your business, contact us today!