The Australian Small Business Blog

Wednesday, July 15, 2020

Lead Generation vs Sales Conversion – What’s Your Priority?

by Dr Greg Chapman

So you want more sales? I think I may have heard that once or twice before! Under my Five Profit Driver model of marketing there are 5 strategic areas on which you can focus:

• the Number of Enquiries
• the Conversions to Sales
• the Average Value per Sale
• the Number of Times a Customer Buys from You
• the Gross Profit Margin per Sale

However, nothing happens until you generate the enquiry. Therefore, should getting more leads be your priority?

Not so fast.

There are Good Leads, Bad Leads and Ugly Leads and every ‘ungood’ lead costs us time and money. But let’s say your marketing is sufficiently focused that you’re mostly attracting Good Leads. It’s impossible that this will be 100% the case, but if it’s the overwhelming majority, you should be happy with your campaign. (If it’s not, try narrowing the focus of your campaigns.)

We can ratchet up our campaigns to get more Good Leads, or we can analyse what is happening in the 2nd Profit Driver, Sales Conversion. What should be the priority?

If we increase the ‘Good Leads Campaign’ there will be associated costs and the risk is that this campaign will be more diffuse, because, by definition you have expanded it. Your lead quality may decline, but on balance, a small increase in the Total Cost per Sale may be something you can live with. As a result, you may also see a decline in your Sales Conversion Rate, but if it’s already very high, say 80-90% that will probably be ok for you, but watch closely what happens as you do that!

On the other hand, if your Sales Conversion Rate is a long way south of that range, major increases in sales are achievable by improving your Sales Pipeline.This requires you to properly define the steps in your Sales Pipeline and identify where the leaks are occurring and to develop strategies that minimise leaks. If your Sales Conversion Rate is around 30%, you have the opportunity to increase your sales by 2-300% as many of my clients have.

There is some frontend cost, mainly in time, to develop a highly effective Sales Pipeline and to train sales staff, but once you have made that investment, it continues to pay dividends forever more. And once your conversion rate is up at the 80-90% level, you will be in a position to expand your ‘Good Leads Campaign’. Doing this before you fix your Sales Pipeline just means that you will be burning more leads, more quickly and at greater cost.

So before deciding where you will be focusing your efforts on increasing new sales, review your sales data, and decide what your priority should be.

May Your Business Be –As You Plan it!

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Dr Greg Chapman is the Director of Empower Business Solutions and is Australia's Leading Advisor on Emerging Businesses and provides Coaching and Consulting advice to Australian Small Business Owners in Marketing & Business Strategies Planning & Systems. He is also the author of The Five Pillars of Guaranteed Business Success and Price: How You Can Charge More Without Losing Sales.

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