Are you stuck deciding where you should invest: prospecting vs lead generation? Then, we are here...
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As a B2B marketer, you understand that lead generation stands shoulder to shoulder with your most finely-tuned marketing and sales strategies. Without leads, the very foundation of sales crumbles.
However, on average, only about 22% of businesses are satisfied with their lead generation conversion rates. It indicates substantial room for improvement in your lead-to-deal conversion process.
Now, for your B2B enterprise, you direct significant investments toward lead generation and conversion. However, a predicament looms large. Not all enterprises possess a clear understanding of the following aspects:
- The precise quantity of leads required
- The correct approach to measuring sales lead conversion rates
In the following discourse, we will unravel this problem and answer pivotal questions like – what is a lead conversion rate? What should your ideal sales lead conversion rate be?
We’ll also cover the basic formulas for lead-to-customer conversion rate. Plus, we’ll discuss critical metrics to gauge your success and elevate your leads to sales conversion rate.
So, let’s unearth these answers and harness the full potential of leads for the betterment of your business.
What Is Lead Conversion?
Lead conversion involves the transformation of an unknown prospect into a potential customer by engaging in specific actions.
For example, when a professional visits your software company's website, they may initially explore its features or blog posts without direct commitment. However, they transition into a lead when they undertake any of the following actions:
- Download a whitepaper
- Request a personalized demo
- Sign up for a webinar
These actions indicate their greater interest and potential readiness to explore or invest in your business solutions.
Moreover, "conversion" encompasses various stages that potential customers go through.
For instance, the below-mentioned activities are all examples of lead conversion:
- When these leads advance from general inquiries to becoming qualified prospects for your marketing or sales teams
- When they make a purchase
What Is Lead Conversion Rate?
Your lead generation conversion rate measures the percentage of business leads that successfully convert into paying customers or take a desired action. It quantifies the following:
- The effectiveness of your lead generation process
- The subsequent ability to convert those leads into actual sales or specific goals
The fundamental formula appears as follows:
Lead Conversion Rate = Number of Leads / Total Visitor Volume x 100
For example, if your platform attracts 20,000 monthly visitors and 1,000 of them sign up for a product demo, your conversion rate is 5%.
However, knowing the conversion rate isn't the sole factor. You must also understand the lead-to-sale conversion rate.
What Is Leads to Sales Conversion Rate?
This metric indicates the percentage of acquired leads that result in a purchase. The formula for lead-to-sale conversion is:
Sales Lead Conversion Rate = Converted Leads / Total Number of Generated Leads × 100
For instance, if you obtained 1,200 leads and 60 of them completed a purchase within the same period, your lead-to-sale rate is 5%.
How Many Leads Do You Need for Your Business?
Numerous companies believe that the greater the number of leads funneled into their sales process, the better the outcome. Insufficient lead generation indeed hampers potential business growth.
However, assuming that more leads are invariably advantageous is an oversimplification.
Conversely, amassing a surplus of leads can detrimentally impact your business. An overflow of potential clientele can overwhelm your team’s capacity to manage them effectively.
This influx poses various lead generation challenges for your sales and marketing teams, leading to a range of issues:
- Heightened difficulty in evaluating and nurturing leads.
- Sacrifice of quality for the sake of quantity.
- Dilution of the information stored in the CRM system. It complicates pattern identification.
- Increased expenditure on marketing efforts directed at prospects that fail to convert.
- Wastage of time and resources as sales teams engage with unfruitful leads.
- Inability to achieve set conversion objectives.
- A mounting pressure on marketers, sales managers, and sales staff, potentially leading to poor retention rates.
- Considerable challenges in accurately measuring return on investment (ROI).
As you can see, exceeding the handling capacity of leads can result in various complications. Contrary to popular belief, an excessive number of leads does not enhance business or sales outcomes; instead, it causes significant harm.
Therefore, you should understand the importance of mastering calculation techniques to gauge your ideal lead quality. Here’s how:
How to Calculate the Number of Leads?
Next up, how will you forecast the exact number of leads required by your firm? Well, to measure the number of leads, you need to follow two steps:
- Firstly, set clear revenue objectives
- Secondly, understand your average sale price
These metrics help you determine the number of new customers needed to meet your goals.
Here’s the formula:
Revenue goal / Average Sale Price = Number of Customers Needed
Suppose your revenue goal for the period is $3,500,000, and your average sale price is $7,000. Using the formula, you'd calculate that you need 500 customers to achieve your target.
However, it's essential to note that the number of customers required doesn't directly equate to the number of leads. Not all leads immediately translate into customers.
Therefore, determining the necessary number of leads involves understanding their origin and the methods used for acquisition. In this case, you can use our formulas for lead conversion rates.
Are There Any Benchmarks?
There are no said benchmarks to set your target lead quantity. The number will depend on the size of your firm, your industry, your budget, and several other factors. However, here are some statistics to give you an idea:
|Cosmetic and Dental
- Most mid-sized companies typically generate less than 500 qualified leads each month.
- On average, average-sized B2B companies produce approximately 1800 leads monthly.
- The B2B e-commerce sector maintains an average lead conversion rate of 3.2%.
- Within the IT and service industry, there is an average monthly generation of 3,660 leads.
- Lead conversion rates for the financial industry stand at an average of 4.3%.
- Professional services exhibit the highest lead conversion rates, reaching 9.3%.
- The travel industry maintains an average lead conversion rate of 4.7%.
- B2B Technology and Real Estate report the lowest lead conversion rates at 1.7%.
- In the healthcare industry, the lead conversion rate averages 5.6%.
- The average cost per lead across all industries is $198.44.
- Organizations consider four out of every five leads to be marketing-qualified leads.
How Many Leads Convert into Sales Opportunities?
Each lead produced bears the potential to evolve into a paying customer. Regrettably, not all leads materialize into this coveted outcome.
However, the percentage of leads translating into sales varies significantly among businesses. This metric is contingent upon various factors, such as:
- The influx of new business leads into your pipeline
- The effectiveness of lead qualification
- The potency of your lead nurturing strategies
Furthermore, the ideal proportion of converted leads differs for each business. Hence, understanding how to compute lead conversion rate is critical.
Moreover, you must also evaluate your leads – to gauge the appropriate quantity of converted leads tailored to your specific business needs.
5 Additional Lead Conversion Metrics
Several additional metrics related to lead conversion warrant your attention:
1 Conversion ROI
This metric illustrates the return on investment derived from each conversion.
- Formula: Conversion ROI = (Lead Value − Cost per Conversion)/ Cost per Conversion
- Example: If the lead value is $200 and the cost per conversion is $100, the conversion ROI would be 1 (100%).
2. Lead-to-Opportunity Ratio
This metric offers insight into the percentage of leads that successfully transform into meetings and then sales opportunities. Monitoring this metric allows valuable insights for enhancing and refining your conversion strategies.
- Formula: Lead-to-Opportunity Ratio = Number of Leads that Convert to Sales Opportunities / Total Number of Leads × 100%
- Example: If out of 200 leads, 40 convert into sales opportunities, the lead-to-opportunity ratio would be 20%.
3. Cost Per Conversion
This metric aids in understanding the expenses incurred by your business to acquire each customer.
- Formula: Cost per Conversion = Total Marketing and Advertising Expenses/ Number of Converted Leads
- Example: If the total marketing and advertising expenses amount to $5,000 and there were 50 converted leads, the cost per conversion would be $100.
4. Time to Conversion
The time to conversion metric signifies the duration visitors take to transition into leads.
- Formula: Time to Conversion = Total Time Visitors Spent on the Site/ Total Number of Leads
- Example: If visitors spent 10,000 hours on the site and 100 leads were generated, the time to conversion would be 100 hours per lead.
5. Lead Value
The lead value metric delineates the significance of each acquired lead in contributing to your company's success.
- Formula: Lead Value = Overall Sales Value/ Total Number of Leads
- Example: If the overall sales value is $100,000 and there are 500 leads, the lead value would be $200 per lead.
4 Tips to Improve Your Lead-to-Customer Conversion Rates?
Now, you've understood the significance of lead conversion, its role in shaping your business, and the pivotal metrics that gauge your success. So, it's time to explore lead generation strategies to propel your conversion rates:
1. Enhance Your Lead Capture Methods
Securing a lead precedes their transformation into a paying customer. Capturing visitors' interest and turning them into leads lays the groundwork for their potential conversion. Optimizing your lead-capture approach is pivotal to enhancing your average lead conversion rate.
Improving lead capture involves focusing on gathering pertinent information. Beyond the basics, like names and emails, consider acquiring additional data to qualify visitors better. Effective means to gather essential information from visitors encompass:
- Lead capture forms
- Website pop-ups
- Dedicated lead-capture pages
- Appointment-scheduling applications
Tailor your lead-capture techniques based on your business objectives and nature:
- Customize methods for each campaign
- Tweak the call-to-action
- Offer incentives that entice visitors to transition into leads
2. Optimize Lead Qualification
Quantity doesn't always equate to quality in the world of leads. Emphasizing the lead-qualification process plays a pivotal role in shaping your conversion strategy.
Reworking your lead qualification approach can elevate the quality of each lead and subsequently increase your leads-to-sale conversion rate. Therefore:
- Invest more time in qualifying leads before initiation of the conversion process.
- Align your sales and marketing teams to establish a shared understanding of what distinguishes a marketing-qualified lead (MQL), sales-qualified lead (SQL), etc.
- Define the customer lifecycle framework and how different types of qualified leads stack against one another.
This combined approach helps your sales team by directing efforts toward leads more likely to convert, saving valuable time.
3. Enhance Lead Nurturing
Improving your sales lead conversion rate involves elevating lead nurturing techniques. Lead nurturing encapsulates the process of cultivating leads, stoking their interest, and preparing them for sales. Effective lead nurturing employs tactics such as:
- Tailored follow-up messages
- Segmentation of leads based on behavior and interests
- Strategic email marketing to trigger desired responses
- Directing sales-ready prospects to the sales team
These nurturing strategies facilitate faster and easier generation of sales-ready prospects.
4. Accelerate Speed to Lead
The swiftness in converting a lead into a customer significantly impacts lead conversion rates. As such, qualify leads promptly through your capture form using tools like scheduling applications.
These tools empower visitors to schedule conversations with your sales representatives promptly upon capture. Streamlining this process accelerates lead qualification, propelling your speed to lead and maximizing the effectiveness of your sales conversion strategy.
The Bottom Line
Following this guide, you gained insights into lead conversion, essential formulas for calculating conversion rates, and other relevant metrics – along with strategies to enhance your business's conversion rates.
As we conclude, a crucial tip remains: the process of generating, qualifying, and converting leads is challenging. Seeking assistance can be beneficial.
For precise lead generation strategies tailored to your business, the experts at Revnew are available to provide support. Trust your lead generation to us for enhanced results!