Building up an expansive leads list is great—but if you aren’t converting these leads into paying customers, you’ll soon be dead in the water. A recent study for The State of Lead Conversion in Marketing and Sales found that a measly 12% of marketing professionals claim to be very satisfied with their lead conversion capabilities. That’s a shockingly low number, which the same study attributes to difficulty in both actual conversion activities as well as in figuring out whether current efforts are significant enough to make a difference.
What is Lead Conversion?
Many marketers define “lead conversion” as the point at which a lead converts into a paying customer—although others argue that it’s any point in which a lead progresses along the steps that comprise the sales funnel. The term is also used to describe a combination of strategies you implement to move a lead towards a sale. While a discussion on these strategies is certainly relevant, what matters to us now are the metrics that help you determine whether you’re succeeding or need to switch gears.
The Key Lead Conversion Metrics
The purpose of these metrics is to help you objectively measure the success of your campaigns—and the teams that run them—in converting leads into customers. A word of caution, however, is that while you can take the metrics as they are, it’s best to compare them to your industry’s standards to better assess performance.
1. Lead Conversion Rate
This measures how effective you are at converting website visitors into leads. To calculate lead conversion rate, divide the number of leads by the total number of visitors, then multiply that by 100%. For example, if your website has around 500 visitors, and 20 of that number fill out your lead capture form, your lead conversion rate is 4%.
2. Lead-to-Sale Conversion Rate
The lead-to-sale conversion rate takes things to the next level as it measures how effective you are in turning a lead into a paying customer. This rate is of utmost interest to marketers and sales teams because it shows how many leads become sales and drive revenue. You get this number by dividing the number of converted leads (those that buy) by the total leads number. Using the previous example, if 5 of the 20 leads makes a purchase, your lead-to-sale conversion rate is 25%.
How It All Comes Together
If there’s one thing the relationship between these two rates reveals, it’s that the quality of leads matters more than the quantity. It’s a common mistake of marketers to judge their leads list by how many contacts are on it—and to push for more and more if the numbers aren’t satisfactory. Your efforts are better spent on developing a qualifying process that vets whether a lead is more likely to make a purchase.
It’s understandably a challenge to develop a strong qualifying process that ensures your lead-to-sale conversion rate is viable. That’s why many businesses subscribe to services like those offered by DemandScience. Take PureSyndication, for example. It aims to put your best content in front of the people who are most inclined to purchase from you—based on intent data markers like what they search for, their engagement with you and your brand, and other key indicators.
The specific leads that PureSyndication targets also come from a B2B contact database that’s already verified and vetted to begin with, as well as organized along an expansive list of categories and classification points. This makes it easy to create a target list based on your ideal customer profile as well as look-alikes. It’s a significant advantage over developing a lead generation campaign from scratch. In a sense, it works on both your lead conversion and lead-to-sale conversion rates at the same time.
Other Relevant Metrics
If you want a deeper analysis of your conversion performance, there are several other metrics worth looking into.
3. Lead-to-Opportunity Conversion Rate
This important metric measures the percentage of your leads that convert to opportunities, which will help you assess and improve your sales performance. It guides you in building a pipeline and helps in forecasting. It differs from lead-to-sale in that it measures your success in getting your leads to a certain point before making a purchase—perhaps in terms of interest or intent. The definition of opportunity is for you to decide.
The formula to compute is pretty simple. Divide the leads converted into opportunities by the total number of leads and multiply it by 100. A “great” lead-to-opportunity conversion rate varies by industry, business, and even marketing strategy. But most lead-to-opportunity conversion rates hover around 12% on average. That’s a number that can be significantly improved upon, of course, given adjustments to your overall approach to leads and your strategy in converting them into opportunities.
4. Cost Per Conversion
To calculate cost per conversion, divide your total advertising and marketing costs by the number of actual conversions. This metric will give you a broad view of how much you’re spending to get those conversions. It’s not as specific as you might like as costs can vary based on several factors. But to quickly gauge the effectiveness of your conversion campaigns, it’s good enough. If you’re spending too much for too little, it’s a sign you may need to adjust your strategy.
5. Lead Value
Lead value is computed by taking the total sales value and dividing it by the total number of leads in your pipeline. This general figure is roughly the value that leads contribute to the overall success of your business, which can help you make smarter decisions about how you get more leads. It also aids in forecasting sales and—important for marketers—helps in justifying spending to acquire more potential customers. In essence, it’s the lifetime value of every lead that you get and convert.
6. Conversion ROI
If you want to figure your return on investment from every lead conversion, subtract the cost from the lead value and then divide the resulting number by the cost again. What you end up with is a percentage value against which you can gauge the effectiveness of your efforts. Note, however, this ROI assumes that your month-over-month sales growth is directly attributed to your marketing campaign. This formula doesn’t take sales activity into account, which likely has a significant impact on conversion.
7. Time to Conversion
The final metric you can use is called time to conversion and it measures exactly that—how long it takes for a visitor to your website to become a lead. You divide the total time spent by your website visitors and divide it by the overall number of leads. It’s a great way to gauge if there are entry points on your website you can better optimize for lead capture. Of course, it could well be that a longer time means your visitors are taking time to consume your content, which isn’t a bad thing.
Being able to track the performance of your lead generation is key to its success. Alternatively, you can also engage the services of a partner who is experienced in drawing in the right kind of leads. With DemandScience’s PureSyndication service, you not only reach verified and validated leads, but we also track and monitor key metrics for you to ensure the efficacy of your conversion efforts. Talk to us today about who you want to reach out to—we’ll help make those meaningful connections.