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Do Poor Leads Really Cost 20x the Cost of Qualified Leads?

Run for cover if your marketing agency bangs about the sheer number of leads they'll generate for your sales team. Because bad leads really can cost you 20 times what good leads do. It can be hard to see, however this blog post makes it clear, and advises on how to reduce these costs.



Every business thrives on high-value, high-likelihood leads. Poor leads, on the other hand, are those so-called potential customers who are not likely to convert into paying customers at any time. They may have downloaded an ebook, registered for your newsletter, or made a very simple enquiry.


This does not a qualified lead make.


An interested party? Yes. An early-stage lead? Maybe.


However, in no way are they the sort of lead that should now go and waste your sales team's time nurturing, qualifying, and hoping. Of course, while every business may have some poor leads, having too many of them can be detrimental to your business in terms of direct costs, opportunity costs, and staff turnover costs.


In fact, poor leads from an agency or internal marketing team focused on quantity and not quality could be one of the most significant costs your business is incurring right now.... and one of the simplest to eliminate.

In this blog, we'll outline the true cost of having too many poor leads flowing into your business from your lead generation machine - and why qualifying them properly before handing them to the sales is so critical.



Defining Poor Leads


Poor leads are potentially potential customers who are more than likely not ever going to become paying customers. Or worse, leads that have not been nurtured or qualified and where no one really knows whether they will ever become a customer one day or not - or whether they even look like a customer - or where they are in the buying journey.


This can be because they're not really interested in your products or services, or they're cross-quoting you only, or they don't have the financial resources to purchase from your business, or they don't have the authority to make the buying decision. Or any number of other reasons.

Poor leads can result from your marketing strategy not aligning with your target audience's needs or interests or you have not correctly defined what truly makes a genuine lead with genuine buying signals. (a process that should be done on day one between you and your new marketing agency and your sales team).



The Cost of Poor Leads


Having too many poor leads can have a significant impact on your business's revenue and profitability. The cost of poor leads can manifest in several ways:


1. Wasted Direct Costs

The direct cost to a sales team of pursuing poor leads can be significant. Here are some statistics that highlight the cost of poor leads to a sales team:

  1. The average salesperson spends 21% of their time on poor leads. This means that more than one-fifth of their time and effort is being wasted on leads that are unlikely to convert into paying customers (Hubspot). So let's say they earn $100K per annum conservatively. That's $20K right there you are throwing away in direct costs - let alone the opportunity cost of what they might have otherwise been doing if focused on closing genuine leads.

  2. That's how the cost of a poor lead can be up to 20 times the cost of a good lead. Twenty times! This is because pursuing poor leads requires time and resources that could have been spent on more promising leads. (Hubspot)

  3. According to Hubspot, businesses that have a formal process for lead nurturing in place generate 50% more sales-ready leads at a 33% lower cost. Failing to properly nurture leads that aren't yet ready to buy can lead to lost opportunities and decreased conversion rates. (Hubspot)

  4. A study by SiriusDecisions found that the average B2B salesperson makes only 1.3 sales per month. Are you budgeting on that reality? Any other 'sales' are often closed business that arrives as a bluebird, repeat business, or lucky lead. This means that every lead is valuable, and pursuing poor leads can be a significant drain on a sales team's resources. (SiriusDecisions)

2. Opportunity Cost/ Lost Opportunities


In addition to the direct costs of pursuing poor leads, there are also significant costs associated with missed opportunities (as we touched on above). Missed opportunities occur when potential customers who would have been a good fit for your business go unnoticed or choose a competitor instead while your sales team have been wasting their time on poorly qualified leads (or non-qualified leads).


Here are some stats to make the point:


  1. 61% of B2B marketers send all leads directly to sales, but only 27% of those leads are qualified. This means that many potential customers are not being properly vetted, and good leads may be falling through the cracks. (MarketingSherpa)

  2. B2B companies with a documented sales and marketing strategy experience 24% faster revenue growth than those without one. Having a documented strategy ensures that potential customers are being properly targeted and qualified, leading to fewer missed opportunities. (Hubspot)

  3. 58% of B2B marketers say that generating high-quality leads is their biggest challenge. This means that many businesses are struggling to identify and capture good leads, leading to missed opportunities. (B2B Technology Marketing Community)

  4. A study by Marketo found that, on average, only 4% of website visitors are ready to buy. This means that businesses need to have a strategy in place for nurturing leads that aren't ready to buy yet. Failure to do so can result in missed opportunities. (Marketo)

3. High Salesperson Turnover


Poor leads can significantly lead to the high cost of high turnover in a sales team. Here are some statistics that highlight the cost of poor leads to conversion rates:

  1. The average cost of replacing a sales rep is $97,690, according to a study by DePaul University.

  2. Research by the Bridge Group found that the average tenure for a sales development representative (SDR) is just 14 months. This means that companies may be constantly in a cycle of recruiting and training new reps, which can be costly.

  3. A study by CSO Insights found that the average ramp-up time for a new sales rep is 5.3 months. This means that it can take several months before a new rep is fully productive, which can impact revenue in the short term.

  4. According to research by the Aberdeen Group, companies with a high turnover rate (above 20%) experience 60% more customer complaints and 21% lower customer retention rates. This suggests that high turnover can have a negative impact on customer satisfaction and loyalty.

  5. A study by the Harvard Business Review found that companies with a high employee turnover rate (above 20%) have lower profitability than those with a lower turnover rate. Specifically, companies with a high turnover rate had an operating margin of just 4.5%, compared to 16.4% for companies with a lower turnover rate.


4. Decreased Customer Lifetime Value


Poor quality leads can have a negative impact on the lifetime value of customers, as sales teams may struggle to close deals or may not be able to provide the level of service that customers expect.

Here are some statistics related to the cost of decreased customer lifetime value due to poor quality leads going to B2B sales teams:

  1. According to a study by Bain & Company, increasing customer retention rates by 5% increases profits by 25% to 95%.

  2. According to research by Forrester, companies that improve their lead management processes see a 10% or greater increase in revenue within six to nine months.

  3. According to research by the Temkin Group, customers who have a positive experience with a company are 80% more likely to continue doing business with that company in the future.

  4. A study by Epsilon found that customers who are satisfied with a company's customer service are 15 times more likely to remain loyal to the company.

  5. The cost of acquiring a new customer can be up to 25 times more expensive than retaining an existing one.


So what can you do to reduce these costs?


Here are 5 steps to improve the quality of the leads being handed from B2B marketing teams to sales teams, and work towards reducing these direct and indirect costs almost immediately:

Establish clear criteria for lead qualification

Your marketing team and sales team should work together to establish clear criteria for lead qualification. This can include demographic information, firmographics, engagement level, and any other relevant information. Having a clear understanding of what makes a lead qualified will help ensure that marketing is generating high-quality leads that are more likely to be accepted and actioned by sales, and convert into business.

Use data to inform lead generation

Your marketing team should use data to inform lead generation efforts, such as analysing website traffic, social media engagement, and content consumption patterns. This can help identify which types of content and messaging are resonating with potential customers, and can help inform future marketing efforts to generate high-quality leads.

Nurture leads before handing them to sales

Your marketing team should implement a lead nurturing program to engage and educate potential customers before handing them over to sales. This can include personalised email campaigns, targeted content, and other tactics to build trust and establish a relationship with the lead.

Conduct regular lead quality reviews

Your marketing and sales teams should conduct regular reviews of lead quality to ensure that the leads being generated are meeting the established criteria for qualification. This can help identify any gaps or areas for improvement in the lead generation process, and can help ensure that only high-quality leads are being handed over to sales.


Communicate regularly between marketing and sales

Your marketing and sales teams should communicate regularly to ensure that they are aligned on lead quality, lead generation efforts, and any other relevant information. This can help ensure that both teams are working together effectively to generate and convert high-quality leads.


By following these steps, B2B marketing and sales teams can work together to improve the quality of the leads being generated and handed over to sales. This can help reduce direct and indirect costs, increase conversion rates, improve customer satisfaction, and drive positive healthy and profitable business growth.

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