Lead scoring for B2B tech companies (Part 1) - Why Lead Scoring?

Why Lead Scoring? - The Problem

Many organisations struggle to align sales and marketing.  With two distinct sets of objectives and metrics (the primary sales metric is Revenue, the primary marketing ‘currency’ is Leads), sales and marketing are often at logger-heads.  Sound like a familiar problem?  By implementing an agreed lead-scoring system, sales and marketing can effectively set up a clear ‘interface’ between the two departments, where each department knows the expectations and responsibilities of the other.  The important word here is ‘agreed’.  If marketing goes ahead with the implementation of a lead scoring system, it will be quickly rejected by sales – it will fail to meet expectations.

There are three common complaints that come from the sales department:

•  We don’t have enough leads.
•  We don’t have enough ‘good’ leads.
•  We have too many leads.  We can’t see the wood for the trees.

Lead scoring tackles two out of three - the volume of leads is set by the success or failure of your marketing campaigns.  With no leads coming in from campaigns, they can’t be scored.

Sales people are employed to sell.  They are commission-focused, so any activity that is not pushing a prospect towards a signature on a contract (such as qualifying leads out of the list) is frustrating.  They see commission cheques shrinking when they are not selling.  Sales managers see pipeline estimates shrinking and bonuses disappearing, so a lot of pressure is brought to bear on marketing.  As a profit centre, sales is beloved of the CEO and - rightly or wrongly, -the sales director’s opinion will almost always have more weight than that of the marketing director (a cost center in the eyes of the CEO and CFO).  The fact that revenue generation begins with marketing is often lost, especially when the organisation isn’t tracking leads all the way to the point of revenue.

What is Lead Scoring? - The Solution

Lead scoring is assigning points to an individual prospect based on specific explicit and implicit criteria to objectively and unambiguously quantify the value of the prospect to the sales organisation.  Leads are scored across two groups of criteria - Explicit and Implicit - which combine to give an overall lead ranking which defines the objective value of one lead against another.  The explicit lead score is based on how well the prospect's profile matches the sales team's target profile.  The implicit lead score is based on how engaged the prospect is - e.g. does the prospect's behaviour indicate intent to purchase?

Explicit lead score is built up by assigning scores to each of the individual elements of information that can be captured about the prospect.  To use a loose example, a lead's explicit score may be incremented by 100 points if the prospect is a CEO, but only 10 points if the prospect is an IT Manager (as the CEO has greater authority to purchase).

The Implicit lead score is built up by assigning points to specific behaviours e.g. viewing a whitepaper might add 10 points to a lead score, but viewing a product flyer might add 100 points as this is more indicative of a specific interest in the product.

Together, explicit and implicit lead scores form a 2-dimensional lead scoring matrix in which leads can be ranked for easy categorisation.  In order to place leads within this matrix, lead thresholds must be decided and applied to the Explicit leads score (to rank the lead as A, B, C or D) and the Implicit lead score (to rank the lead as 1, 2, 3 or 4).  The combined explicit and implicit rankings give the lead a 2-digit alphanumeric value which places it in the lead scoring matrix.  Using this matrix, both sales and marketing can identify which are the hot leads (and which are cold).

Lead Scoring Matrix

Benefits

The act of defining lead rankings in conjunction with sales has a number of benefits:

• Reduce noise.  Sales people get the sales-ready leads they want.  They spend less time qualifying out tire kickers, respond more quickly to qualified leads with better results, spend more time selling, and generate more revenue more quickly.  This point stands up on its own.  Case closed.
• Marketing develops a better understanding of the target customer.  The process of defining leads scores enables marketing to better understand the needs of the sales team.  Through better understanding, marketing can focus activity and spend to source the leads that salespeople want more effectively.
• No more squabbling over lead quality.  By understanding what the sales teams want, marketing can deliver this, and life is easier for sales.  The complaints evaporate and the marketing and sales leadership are back on speaking terms and pulling in the same direction.
• Target your marketing spend on campaigns that deliver revenue.  When leads are ranked, it becomes more apparent which campaigns are yielding low or high scoring leads.  Campaigns which yield low quality leads can be dropped in favour of those yielding high ranking leads.  This translates to lower Cost Per Lead (CPL), released marketing budget, higher revenue and higher profit.

"Companies that get lead scoring right have a 192% higher average lead qualification rate than those that do not."  Aberdeen Research.

The benefits of implementing a lead scoring system are undeniable - and have been proven by many leading organisations.  However, implementing such a system is complex and requires fairly sophisticated Marketing Automation software to work, not to mention good understanding of customers and the ability to sell the idea to the organisation.  Marketing and sales need to work closely together to develop a mutual understanding.  Essentially, a lead scoring system captures the expectations of the sales people and applies this as a lead quality filter.  In practice this is not so simple – leads rarely flow through the pipeline in a uniform manner, and a new lead scoring system must be ‘tuned up’ before it reaches optimum performance.

 

Strategy

Lead Scoring is a Sales-Marketing Integration (SMI) project, not a marketing technology project.  Sales and marketing must be jointly involved in the process to ensure success.  However, as salespeople tend to refuse to get involved in anything that distracts from selling, the situation can become a catch-22: sales are so busy qualifying out bad leads that they don't have time to devote to a lead scoring project.  It's the usual story - operational pressures prevent improvement programs.  As salespeople are so naturally resistant to non-selling activity (e.g. work that doesn't directly contribute to commission), there is a natural resistance to change and the project will need buy-in from the CMO and sales director to actively drive success.  Consequently, building a business case aimed at these two stakeholders is critical.

Takeaways

• Marketing needs to think in terms of quality not quantity.  Forget about “number of leads” as a metric.  One lead that converts to a sale is better than a million that don’t.
• The sales people need to be able to see the wood for the trees.  Lead scoring allows you to filter out the tire kickers and avoid swamping sales.
• The sales and marketing teams need to work closely together to get it right.  A one-sided attempt at lead scoring is almost certainly doomed to failure.
• Don't even think about implementing supporting technology until you have the scoring model agreed with Sales