THE LEAD QUANTITY MYTH:
WHY DELIVERING FEWER LEADS
RESULTS IN MORE SALES
By Chris Bucholtz
Introduction
Ask most sales people what they want most from marketing, and the answer you’ll get is
“more leads!” Sales is a numbers game, they may say, and so it must be true that the more
leads marketing piles on sales, the more deals sales will close.
The emotional makeup of salespeople fuels this notion. Their confident nature leads them to
believe they have at least a shot with every prospect they speak to. So bring on the leads!
The tragic reality is that more leads can sometimes mean fewer sales – it can damage sales
reps’ ability to focus on the right deals and drive their conversion rates down.
So sheer quantity is not what sales really wants – they want a higher quantity of leads
that are going to close, not simply more leads. Lead quantity is a mythical objective; the
real objectives are more closed deals and more revenue. Even if sales can’t articulate it,
what sales really wants from marketing is more and better qualified sales. But until sales
recognizes this, it’s impossible to ask for it. In the same way, unless sales and marketing can
work together to define what a qualified lead is, the default approach is to revert back to
sheer lead quantity, a practice that helps neither sales nor marketing in the long run.
A high quantity of poorly-qualified sales costs your sales team time, drives down lead
generation ROI, forces sales people to devote more effort to database clean-up, and requires
more sales headcount – factors that point out that the default desire for sheer lead quality is
a completely self-defeating impulse.
How do you change thinking about leads to place the emphasis on quality? We’ll define
the problem and provide numbers that show that lead quality – not quantity – is the key
to increased revenue, reduced sales workload and greater satisfaction between sales and
marketing.
© 2014 Callidus Software Inc. All Rights Reserved.
2
!!
The Hazards
of Linear Thinking
Some believe sales is an equation: If X number of leads produce Y number
of closed deals, then If you make X greater, Y will be greater, too, right?
That’s a quaint thought, but it’s not the way it works.
Sales does involve numbers – specifically, revenue numbers.
To increase those numbers, sales people must focus on productivity.
And burying sales people under a load of leads doesn’t help with that.
A sales manager who subscribes to the lead quantity myth might see other aspects of sales
in the same light: “If my staff has four appointments a week and we force them to take
eight, then sales will double!” The problem here is that time itself is not part of his equation
– it remains constant. Now his sales team is spread thin over the same amount of time, and
so they can’t devote as much time to each customer. Even with twice the appointments,
the sales team is unlikely to convert more leads. In fact, because they have less time for
research, preparation and face-to-face meetings, the chances of converting leads drop –
and more appointments may result in fewer closed deals, not more.
The same concept applies to the leads themselves. There are only so many leads a sales
rep can work in a week; overloading reps forces them to prioritize leads on their own,
taking time away from selling. That also means that leads that don’t get priority are never
worked, thus wasting marketing’s efforts. To get more leads in front of sales, marketing is
now passing colder leads to them – but makes no differentiation from qualified leads, so
sales spends more time with prospects who are less likely to buy and less time with the
prospects who are most likely to buy. The diversion of focus from the qualified leads has an
impact in the form of lost deals and reduced revenue.
© 2014 Callidus Software Inc. All Rights Reserved.
3
SQLs vs. MQLs
It’s also important that sales and marketing
work from a common set of goals. Marketers
may be goaled on lead numbers, while sales
is goaled on revenue. When this happens,
marketing may meet its objectives while
sales fails miserably. Re-orienting goals for
both sales and marketing around revenue
is critical to ensuring that all processes are
aligned toward the business’s objectives.
Sales already prioritizes leads – the ones that
pass muster (and often pass through a lead
qualifying team under sales) are described
as sales qualified leads (SQLs). The leads
that marketing passes to sales, based on its
own criteria, are called marketing qualified
leads (MQLs). The fact that so many sales
and marketing organizations have different
criteria is itself an indication of how badly
sales and marketing are misaligned.
While these steps seem logical, most
businesses have yet to implement them.
According to a 2014 study by CSO Insights,
less than half (49.7 percent) of businesses
have a formally agreed-upon definition of
a qualified lead. About 31 percent said they
had an informally agreed-upon definition,
and 19.3 percent admitted to having no
definition at all.
Marketing’s definition of an MQL can be fluid
and evolve according to changing goals
and objectives. Sales’ definition can change
as well, depending on sales managers’
directives. This can lead to a dramatic
disconnect between the two – the leads
marketing thinks are qualified may not be
accepted by sales.
The key to preventing a flood of leads that
hinder rather than help sales is to make sure
the definitions of MQLs and SQLs are as
similar as possible. This can only be done
by having sales and marketing cooperate
on developing a common set of definitions.
This cooperation should be initiated and
managed by marketing but the criteria
determination should be largely dominated
by sales – with a first-hand knowledge of
what indicates a likely conversion, sales
brings real-world experience to the process.
Once those definitions are set, they may be
revisited – but by both sales and marketing.
Those definitions should evolve over time –
but with sales and marketing in conjunction.
Drifting away from a common goal will recreate the mismatch that plagues so many
sales organizations and damage the mutual
objective of finding better qualified leads.
© 2014 Callidus Software Inc. All Rights Reserved.
4
The Implications for Sales, and the Implications for Marketing
When a sales organization gets more leads but delivers poorer results, the implications are
grave. If managers believe in the Lead Quantity Myth, they’re likely to show their team’s poor
performers the door, and criticize the survivors who couldn’t do more with the leads they were
given. The blame goes in the other direction, too – from a sales perspective, clearly the leads
were substandard, and sales managers are likely to accuse marketing of being the source of
the problem.
Marketers are equally frustrated. Sales received more leads than ever, but their performance
deteriorated? Clearly, the reps in sales aren’t good at their jobs. Marketing gives sales what it
asks for, then sales can’t close the deals!
The average tenure for a vice president of sales is 18-24 months, according to Miller Heiman. At
the same time, average tenure for chief marketing officers has been trending up – now at 45
months, according to Spencer Stuart. That means that tenures for the roles have flip-flopped
in duration over the last 10 years; marketing is no longer the first fall guy for a failed sales/
marketing approach. Both sales and marketing are on the chopping block.
But there’s still a lot to lose – jobs and, in sales’ case, commissions. The key is to escape the
fallacy of lead numbers and balance quantity with quality.
&
y
t
i
l
a
u
Q
Quantity
Balancing Quality and Quantity: the Numbers
When they attain their objectives, marketers goaled on pure lead numbers and on low per-lead
costs don’t actually increase sales, and the leads they generate are more expensive to work.
This paradox is well illustrated by a 2014 study by Ascend2, that showed that lead sources that
marketers viewed as having the highest costs – trade shows, advertising in traditional media,
third-party publishing and third-party webinars – also were found to be the best sources of
high-quality leads. Cost per lead was greater – but so was the close rate. With fewer leads
sourced and less sales time invested, value per lead was far greater with quality leads.
In a study of over 3000 meetings split between vendors whose lead generation goals had
different emphases around quantity and quality, demand gen expert Mike Damphousse
© 2014 Callidus Software Inc. All Rights Reserved.
5
demonstrated http://www.green-leads.com/b2b-blog/bid/19181/Sales-Ready-LeadsQuality-vs-Quantity the economic value of balancing lead quality and lead quantity. He
discovered that the cancel/reject rate of leads was lower for vendors who emphasized
quality over quantity (12 percent vs 20 percent); leads converted to the pipeline at a
higher rate (36 percent to 31 percent).
Getting more granular, he discovered that, when it came to appointments, the numbers
seemed to favor quantity at the start of the process, but by the end of the process it was
clear that quality delivered results far more economically. The quantity vendors set 100
meetings, to the quality vendor’s 80 – but 20 of those 100 were rejected (vs. 10 for the
quality vendor). That still meant the quantity vendor completed 80 meetings to the quality
vendor’s 70. But in both cases, 25 of these meetings converted to deals in the pipeline. At
a cost of $750 per meeting, 80 meetings cost $60,000, or $2,400 per conversion, while
the quality vendor’s cost was $52,000 for 70 meetings, or $2,100 per conversion.
And while the number of meetings is the same in this example, by better qualifying leads
marketing can give sales an advantage in securing, on average, bigger deal sizes. The
result is that, for a lower cost, sales can close higher-value deals and do so at a higher rate
because it can focus its efforts on the leads most likely to close – more deals for more
money in less time.
Conclusion
Mandating a large number of leads from marketing without understanding how well they’ll be
qualified is a guaranteed way to frustrate both sales and marketing. Instead, step back and
remember your real goal – increased revenue – and focus on aligning sales and marketing
around what a qualified lead is and how sales and marketing can work together to set that
definition. Then, give marketing the resources to effectively pursue quality leads that match
those criteria. The initial cost of lead gen may be higher per lead, but in the end the average
value of each lead will be much greater as well. At the same time, passing fewer, betterqualified leads to sales means that sales can limit its participation in lead qualification and do
more of what it does best: selling.
© 2014 Callidus Software Inc. All Rights Reserved.
6