Metrics, Metrics, Teams. How to Set-Up the Ultimate Lead Generation Machine — Part 2

A comprehensive guide to help you take action and optimize your Customer Acquisition Cost (CAC)

[This article is part of a group of 4 dedicated to providing an insightful guide to online lead generation: “How to Set Up the Ultimate Lead Generation Machine”. Part 1: CAC, Sales Volume & Business Optimum; Part 2: Metrics, Metrics, Teams; Part 3: Log, Build, Automate; Part 4: Arbitrage Tips & Tools]

In Part 1, we explored the two main drivers of all lead-fueled businesses: CAC and Sales Volume, and discussed how to set your business targets to find your Gross Margin Optimum. Even if very detailed, the first article was a helicopter view of the lead generation problem, barely touching the surface of concrete, actionable insights for marketers, sales directors and other decision makers.

In this second article, I intend to go much deeper into each step of the lead generation funnel, detail who is responsible for what within a regular organization, and introduce the main KPIs you should focus on. If there is one thing I’m 100% sure of in this industry, it is that the three factors of success are Metrics, Metrics, and Metrics. I mean it—lead generation is all about key metrics!

Metrics, Metrics, Metrics. Lead generation is all about Key Metrics.

Here is what I will cover today:

• The breakdown of the lead generation user experience funnel and the naming and conventions used by professionals to describe each of its steps
• All lead generation key metrics you should know about (and how to compute them)
• How to organize a high performing lead generation team and which KPI each team should focus on.

Are you up to it? I am, let’s get down to it.

1. The 8 Steps of the User Experience Funnel

Let’s start from the start. The lead generation process is a funnel made of different steps along the consumer online buyer journey. From the ad displayed, viewed and eventually clicked by the prospect, to the final consumption of the product or service. The art of lead generation relies on how you can actually help people with a need, a question or a project. Like my grandma looking to remodel her sunroom for instance. Guide her through the different layers of the funnel as fast, safe and effectively as it can possibly be to secure a good deal aligned with what she is looking for in the first place.

That is why you need to build a comprehensive understanding of your own funnel using key metrics that are widely used in the Industry. Looking more closely into it, most user experience funnels are made of 8 steps:

I think the slide seen above is quite self-explanatory. The online buyer journey starts in a Channel (Google Search, Facebook, Linkedin, Instagram, the email inbox or an online newspaper for instance). In this channel, the user browses content and is frequently exposed to online advertising. This is how Views (Step 1) are generated. If the ad audience targeting, copy writing, and imaging are all well executed, then the user will eventually click on it. Congrats, you just generated a Click (Step 2)! Keep in mind that for many technical reasons, all clicks do not end up becoming Visitors to your website. Online marketers usually see a discrepancy of roughly 5 to 10% between the number of clicks channels claim to have generated (i.e. that you have to pay for) versus the number of visitors your website analytics provider will count for you.

When landing on your website, users will soon enough be exposed to:

• Free Contents to help them self-qualify their intent and leave the page if not interested
• Calls To Action (CTA) like Newsletter subscription boxes, Lead Magnets (usually a piece of digital, downloadable content, such as a free PDF, report, eBook, white-paper, video, etc.), Forms and Toll-free Telephone Numbers.

When users find what they are looking for on the website, and willingly share their contact information to start engaging with a brand, they become Conversions. However, not all conversions are equal. Some are purely useless. Others are not ready to be sent to the sales team. Finally some are good, worth working on, what the industry calls Marketing Qualified Leads (MQL).

What is the difference between Conversions (aka Captured Leads) and Marketing Qualified Leads (MQL) anyway?

• Obviously fake conversions: wrong phone number, email address, zip code. Silly personal data (name = Mickey, last name = Mouse), irrelevant answers to mandatory open field questions (“blablabla”). These leads are called Scrub Leads.
• Duplicates: leads you already have in your database.
• Conversions with mandatory fields missing: theoretically this should never happen if you use automated fields validators, and if they are implemented properly. But you know, errors happen everyday in the technical world and sometimes you end up logging conversions that miss some crucial information, preventing them from being considered MQL. These are Scrub Leads too.
• Conversions without Compliance: users browsing with an Adblock sometimes prevent the landing page from logging proper user consent (TCPA / GDPR language). This usually happens when you use a third party compliance service. From a purely legal standpoint, you don’t want to take the risk of calling back these leads.
• Conversions that need to mature: some conversions need more time to mature through the lead nurturing journey before being put in contact with the Brand’s salesforce. For example a white-paper download is a Conversion, but the intent is usually very low: at this point the user is probably not ready to buy anything from the brand. You will have to send a couple (automated) emails to understand A) if this is an interesting lead for you and B) if the user is now ok to start the sales process. If the answer to these two questions is yes, then you can consider it a MQL.

Disclaimer: leads needing to mature are very e-commerce centric. Most telesales-based brands skip this step, and try to connect as quickly as they can when they get access to the user phone number. They consider that the intent at this point is consistent enough to give it a try.

Now, the sales team has just received a MQL to start working on. Obviously the first thing to do is to reach out and contact the consumer, usually by phone. If someone picks up the phone, then most professional outbound call softwares will consider the call a success and the MQL a Contacted Lead. If the user is not reachable after a given number of attempts, then the sales process will stop and the lead will stay a MQL. You can keep in mind that the Contact Rate depends both on the quality of the Intent (i.e. MQL quality) and the salesforce call back process (mostly the time duration between the moment a lead is flagged as MQL in your system and the moment the lead receives a call).

From Contacted to Sales Qualified Leads (SQL): once your sales representative has the prospect over the phone, he/she will try to quickly assess if there is a real business opportunity lying behind the inquiry. To do so he/she will have to answer three questions:

• Does the contact information match with the person over the phone? (obvious, but critical)
• Does the person have a real need / question regarding the type of product / service offered by the brand?
• Is the person ready to consider buying such a product / service

Yes, Yes, Yes? Then this contacted lead becomes a SQL!

SQL are probably what you had in mind when you started reading this article. What your team is highly focused on. And yes! SQL are a cornerstones to lead generation optimization.

Last but not least, some SQL will finally be transformed into sales, and become customers. Why then split the “Sales” step into Gross Sale & Net Sale? There is nothing mandatory here, but this split is usually very useful when tied to business operations. Let me give you two examples: education brands differentiate Enroll (deposit) vs Start. Home improvement brands like home security providers or bathroom contractors differentiate Sale (deposit) vs Installed (full payment). So, as you can easily imagine, there is another drop-off between Gross and Net Sales, that you want to monitor and optimize.

Now that we have divided the buyer experience into mutually exclusive steps (meaning that a prospect cannot stand on more than one step at a time), with clear naming, we can start computing key metrics and measure drop off between steps to understand where to start the optimization work!

2. The Lead Generation Funnel Key Metrics (KPIs)

Each step of the funnel can be measured in Volume, Rate and Cost. In this section, I will present the main metric for each step, and how they interact to build the metric you need.

There are no successful companies, only successful teams.

Keep in mind that all key metrics are interlinked and that combined, they will lead you to the next stage of the journey, and eventually to your final destination: a sale. This is why I used the multiplication symbol between all of them on the slide seen above.

I believe that there are no successful companies, only successful teams. In a typical lead generation organization, each team will take care of running, monitoring, and optimizing a few parts of the funnel:

A) The Traffic Team

Dolead’s Traffic Team working from our EMEA HQ in Paris (Library Room)

The Marketing Team, more precisely the Online Traffic Team, is in charge of generating high volumes of high converting clicks on the landing page, at the lowest average cost per click possible. We already explained here why generating high clicks volume with low CPC is a very challenging target. Auction-based channels won’t let you be successful without a strong determination, extensive testing, and a good set of hacks.

The traffic team will focus first on Reach, meaning generating Hits, the number of times ads are displayed.

Views (Reach):

• Volume = #Hits (number of impressions)
• Rate = %Impression Share (the percentage of total possible impressions you captured)
• Cost = Not to be computed as most channels are CPC-based. Still, if you buy display, video or email traffic, you may have to pay per impression (Cost Per Thousand, Cost Per Mille, Cost per View for video advertising)

Then, the team will have to answer the following questions: is the audience qualified enough? A good performing audience for a given campaign? Is the ad displayed well performing? Clear enough? Attractive enough? Visible enough?

Clicks:

• Volume = #Clicks (number of clicks)
• Rate = %CTR (Click Through Rate)
• Cost = $CPC (Cost Per Click)

Clicks = Reach x CTR

Cost (Marketing Budget) = Reach x CTR x CPC

If you want to take a closer look into today’s main CPC-based channel and its Auction Model, you can watch the video by Google Adwords’ Chief Economist Hal Varian, explaining how CPC, Bids and CTR are interlinked.

B) The Website Team (Marketing Operations / Tech Team)

There are two ways to create a well performing website. One is to ask your internal or outsourced Tech Team build and optimize it. Another one is to let the Marketing Team leverage an external landing page and A/B Testing software, like ABtasty, Unbounce or Instapage. The second option is much more agile, but less customizable.

Dolead’s Tech Team working from our EMEA HQ in Paris

The goal here is to convert clicks into actionable MQLs you can transfer to the Sales Team:

Conversions:

• Volume = #Conversions (number of raw conversions logged into your system)
• Rate = %CVR (Conversion Rate)
• Cost = $CPA (Cost Per Acquisition, Cost Per Conversion)

Conversions = Reach x CTR x CVR

CPA = CPC / CVR

Now, you need to convert conversions into Marketing Qualified Leads. Remember, some conversions will turn into scrub leads. Here is where you usually need the Tech Team to set-up rules to automatically exclude fake/bad leads.

Marketing Qualified Leads (MQL):

• Volume = #MQL (number of “good” leads captured)
• Rate = %MQL (MQL Rate)
• Cost = $PPL (Price Per Lead = Cost Per Lead = Cost Per MQL)

MQL = Reach x CTR x CVR x MQL Rate

PPL = CPA / MQL Rate

The PPL is usually the Price you pay to an external lead vendor, when you decide to outsource part of your lead generation efforts.

C) The Sales Team

Last in line, first to reach out to new potential customers. The Sales Team carries a heavy burden on its shoulders. Now that the marketing budget has been deployed and the leads have been qualified by the Marketing and Tech Teams, they have to convert all these efforts into sales, into revenue and into return on investment.

Dolead’s Sales Team working from our EMEA HQ in Paris (Canopy Meeting Room)

The Sales Team follows a three steps process: Contact, Qualify, Sell.

Contacted

• Volume = #Contacted (number of contacted MQLs)
• Rate = %Contacted (Contact Rate)
• Cost = You don’t really need this metric. But you can compute it if need be (Price/Cost Per Contacted)

Sales Qualified Leads (SQL)

• Volume = #SQL (number of Sales Qualified Leads)
• Rate = %SQL (SQL Rate, Approval Rate)
• Cost = $PPSQL (Price Per SQL, Per Approval)

Sale (Gross & Net)

• Volume = #Sales (number of Sales)
• Rate = %SR (Sales Rate)
• Cost = $CAC (Customer Acquisition Cost)

3. When the Dust Settles: What Matters Most

You need 3 teams to run and optimize your lead generation funnels. Traffic, Marketing Operations and Sales. These teams have very different skillsets and know-how.

To simplify, if you had to give clear guidelines to each of your teams, you could focus on 3 main metrics: Cost Per Click (CPC), landing page Conversion Rate (CVR) and Sales Rate (SR). Teams are everything within an organization. Because all KPIs are interlinked, you need to make sure your teams are also interlinked, and learn to work together as one, even if they focus on different targets.

Organizing your teams that way will help you better serve your prospects, optimize your lead generation efforts, and monitor drop-offs between every key metrics.

At the end of the journey, this will also allow you to optimize your CAC: as you can see on the slide above, there is another way to compute CAC leveraging each team’s KPI.

CAC = CPC / (CVR x SR)

Conclusion

After reading all this, I do hope that you have a comprehensive understanding on how lead generation works, you know all the metrics you need to monitor to start optimizing your lead flow, and you have a better vision of your ideal team organization. Now, I hear you thinking “Ok this looks very powerful. But moving forward, can I build my own ultimate lead generation machine?”

The answer is Yes you can! And without a single line of code. We will cover this in my next article.

[This article is part of a group of 4 dedicated to provide an insightful guide to online lead generation: “How to Set-Up the Ultimate Lead Generation Machine”. Part 1: CAC, Sales Volume & Business Optimum; Part 2: Metrics, Metrics, Teams; Part 3: Log, Build, Automate; Part 4: Arbitrage Tips & Tools]