What’s Worth More?

I’ve recently been involved in an ongoing online discussion regarding marketing automation, lead generation, and lead management (including lead nurturing).  The discussion has been focusing on the approach organizations should take in implementing marketing automation.  During the course of this dialogue one of the participants made the following statement:

“I guess I would add that neither lead nurturing nor marketing automation solves the core problem that most marketers actually have – getting more new leads. Neither help you get more fresh leads into your database – which is critical because most contact info expires at the rate of 20-30% per year”

This statement got me thinking.  Where should the focus be in an organization?  Should it be on lead generation, or lead management?  Which of these processes should have priority?

First, for discussion’s sake, let’s quickly define the difference between lead generation and lead management:

  • Lead Generation is creating responses that go into the top of the sales/lead funnel.
  • Lead Management is the process of managing leads through every stage of the sales/lead funnel through 6 integrated processes i.e The Lead Management FrameworkTM

Lead generation is about filling the top of the funnel.  It’s about getting responses in the front door.  So, for many marketing and sales executives, the logic follows that if you get more in the top of the funnel, you’ll increase those closed deals that come out of the bottom of the funnel. However, if you look at the various studies that have been conducted by Sirius Decisions, Gartner, Forrester and others, up to 70-80% of generated leads don’t receive the proper follow-up.  Another study conducted by MarketingSherpa showed that 70% of all initial leads generated are NOT in a “buy-mode”.

These statistics indicate that for many companies, the lack of effectiveness in lead generation comes from ignoring the leads they already have.  These companies focus on the 10-15% of leads that are immediately sales ready, yet they ignore the 70% that aren’t.   The results are typically very low conversion rates.  Their remedy is to spend more so they can put more in the top of the funnel. This only compounds the problem, resulting in even MORE leads being ignored, and a potentially negative marketing ROI.

So perhaps a focus solely on lead generation isn’t the answer.  Instead, a focus on managing leads (the 70-80% that are currently ignored) has been proven to bring a higher return and higher conversion rates on lead generation activity.  Forrester does a great job at showing the difference between the two approaches:

Lead Generation Approach Where Leads Leak

Leaking Funnel for Lead Management

Process Based Lead Management Approach

Process-based Lead Management

The shift from lead generation to a lead management approach allows you plug the leaks that exist in your lead management process.  With this approach, you now have 70-80% more opportunity to close a sale.

For those who are looking to make a business case for shifting to a lead management approach, here are some facts that will help:

  • The Annuitas Group has helped its clients identify over $500 million in new revenue using a lead management process approach
  • Companies that automated lead management processes realized 10% or greater revenue increase within six to nine months (Gartner, “The Top Six CRM Marketing Processes for a Cost-Constrained Economy,” 2008)
  • Companies with best-in-class processes vs. companies with average processes achieved 25% or greater improvement in Waterfall Conversion Rates (SiriusDecisions, “Field Marketing 2.0: The Heart of Growing Conversion Rates,” 2008)
  • Leads nurtured as part of the lead management process achieved a 47% higher order value when they closed compared to leads that closed, but were not nurtured. – Aberdeen, 2009

So, you decide.  Fill the funnel with more, or manage what you already have?  The numbers seem to indicate that success comes with following the latter.