According to marketing automation leader Marketo, “Lead scoring is a shared sales and marketing methodology for ranking leads in order to determine their sales-readiness.” Yes, lead scoring helps companies prioritize leads based on their stages in the buying cycle. But when done correctly, lead scoring can also help businesses actively seek out prospects that are likely to bring the most value based on their similarities with previously won deals.
To do this, companies can score leads based on a number of criteria, including industry, company size, content downloads, website visits and much, much more. This is all fine and good, but where many opportunities are lost is when companies take a one-dimensional approach to examining the value of a lead.
Lead scoring is not a straight shot from lead capture to revenue; rather, it should be treated as a matrix where a lead is carefully plotted on a plain of desired outcomes and ranked accordingly. Here are three important but less obvious factors you may have missed when developing your lead scoring strategy.
Lead Yield is just one example of a Yield Measure, or a set of new sales metrics that can help you understand how much value you get in return for your investments at each stage of the sales pipeline. The formula for lead yield is as follows:
Sales Revenue / # of Leads Generated
Lead yield is an important metric to consider when establishing your lead scoring strategy because rather than simply pointing out the leads that have generated the most revenue for your business, it helps you understand them on a volume scale.
For example, imagine that one of your largest deals in company history came from the technology space. But of 1,000 leads from that industry, it was the only one that closed. In contrast, deals from the publishing space only generate 50% of the revenue of this technology deal on average. However, of 1,000 leads generated from the publishing space, 100 closed. Clearly, giving leads from the tech industry a higher lead score than those from the publishing space based on a desired revenue number would be a mistake.
The image below illustrates another scenario in which lead yield can uncover the most valuable prospects for your business:
Understanding this gives you deeper insight into the qualities you should be looking for when it comes to prospecting – i.e. contact title, company size, industry, other technologies in use, etc. Furthermore, it also gives you an opportunity to dig in and understand why your business may be failing to close more high-grossing leads.
Customer Acquisition Costs (CAC)
Customer acquisition costs, or CAC, can be calculated using this simple equation:
Total Sales & Marketing Expenses / # of New Customers
By segmenting your customer base according to lead source, industry or other key lead scoring criteria and using this formula, you will quickly be able to see which types of customers cost your business the most money to acquire, and those that cost the least. When you compare these traits to those of your customers with the highest lead yield, you should be able to pinpoint key lead characteristics that will generate low cost, high value wins for your business, and score them accordingly.
Did You Know? Organizations that use lead scoring experience a 77% lift in lead generation ROI over organizations that do not use lead scoring.
Sales Cycle Length
While this metric is easy to calculate, factoring it into your lead scoring strategy can have a big impact and result in major rewards. One important thing to remember is, when considering sales cycle length in lead scoring, it’s all about optimizing for your current goal, be it low risk quick wins or high dollar slow movers.
Start by simply adding up the amount of time previously won leads took to progress through each stage of your sales pipeline. Then, calculate the lead yield and CAC of leads within each of these time frames and start scoring. If you’re lucky, you may even discover a sweet spot: high dollar quick wins!
This sophisticated approach to lead scoring is highly effective yet also very complex. This is why new scientific sales solutions with the power to dynamically analyze millions of data points at once are emerging to help companies uncover the qualities and activities driving the most revenue. To learn more about these tools and the types of metrics that can help improve your lead score, enroll in our Sales Science Academy.