Considerations for prioritized lead handling
There are two factors that make up the revenue potential of a lead:
- Size of the potential deal
- Likelihood of conversion from lead to customer
How to handle the lead is dependent on the combination of these factors.
Size of the potential deal
This is primarily based on firmographic variables, like Employee size, Location (especially Country), Industry, and Annual Revenues. If one does a thorough analysis, the best way to quantify this would be by a regression analysis on ARR with all key firmographic variables of customers. This will allow us to predict potential ARR of a new lead, given the above variables.
If such thorough analysis cannot be done, one can use a simplified model with the “Number of Employees” as the independent variable that predict the ARR. In fact, many SAAS companies have created a tiered sales and marketing structure based on the number of employees for this reason. These tiers can include classifications such as large enterprises, enterprises, mid-sized businesses, and small businesses. When a new lead is created, it is forwarded to the right tier based on the number of employees in the respective company.
Likelihood of conversion
Likelihood of conversion of the lead to a customer is also dependent on firmographic variables. There are two ways to assess this likelihood. One will involve data mining analysis of past leads and which one converted to wins (or opportunities, if the number of wins is too small). This will involve a probability of conversion using firmographic variables, especially the technologies used in the company.
However, there is a short-cut to do this likelihood if the extensive modeling and prediction is beyond your reach. It is to look at Lead Sources. Do a cohort analysis of leads generated in the past and their lead sources and rank which one converted to opportunities. (The top converting lead sources tend to be inbound demo requests, referrals from partners and customers. Leads from such top lead sources should be treated as “high likelihood to convert” and be treated accordingly.
As we discussed thus far, the potential value of a lead is
(Size of the potential deal) X (Likelihood of conversion)
Ideally, handling of the leads are prioritized using the above formula and the leads are routed in the order of importance, with the top tier getting immediate attention from sales and the bottom one’s going to the email nurturing process.
In most companies, calculating the above formula for every incoming lead would be tedious. Therefore, more simplified lead handling can be used, as below:
- Sales team is tiered according to the potential size of the deal (typically using the proxy “number of employees”. The number of tiers will depend on the nature of the company. For example: Enterprise (over 1000 employees) and Mid-sized (<1000 employees).
- Leads are routed to the right tier based on the lead created.
Next item is the priority by which each lead is handled. Within each tier, the urgency of responding to the lead is differentiated as follows
- Highest priority leads are sent directly to Sales Development Reps (even to Account Execs at some companies)
- Medium priority leads are sent to SDR calling queues
- Lower priority leads are input to email nurturing program. Leads are nurtured till they attain certain lead score, and at this point, it is routed to SDR’s
The above framework provides a lot of flexibility to meet the unique needs of your business. However, the fundamental building blocks, such as the size of the potential deal and likelihood of conversion, must be considered while creating a prioritized handling system of leads.