Background/Introduction

When it comes to the economics of B2B marketing and lead generation, it's not the "cost-per-hour" that counts, or even your "cost-per-click," "cost-per-exposure" or "cost-per-demo" that matters. When measuring the performance of your B2B marketing program, what matters most is your cost-per-appointment for the initial sales appointment with a qualified prospect, along with your eventual cost-per-sale, your revenue and your profitability. The sad reality is that if you choose a marketing strategy on the basis of its having the lowest cost-per-hour, or even the lowest cost-per-lead and you don't differentiate between a qualified lead and an unqualified lead, you're begging for trouble.

The Fundamental Problem: The Definition of a "Qualified" Sales Lead

The problem with calculating your Marketing ROI starts with the definition of a sales lead. This is because over the past few years the term "sales lead" has become so mis-used and diluted that it has practically lost all its meaning. List vendors will try to tell you that a name on a mailing list, or an email address, is a sales lead. Search engines will tell you that a click is a lead. The content people will tell you that someone who agrees to receive a White Paper or attend a Webinar is a sales lead. And the consultants will tell you that someone with budget, authority, need and timing is a lead. As you'll see in a moment, though, while these are all interesting outputs from promotional programs, they do not by themselves identify opportunities that actually result in more sales. In fact, most aren't even good interim steps in the process, no less are they true sales leads. And thus they are of questionable value in a marketing program.

But here are some of the different definitions of a sales lead that you may run into today, along with what you're actually getting:

Type of Lead	Proponent	What You Really Get
Contact Names	List Vendors	Suspects
Email Addresses	Spammers	Bounce-backs, blacklisting
Clicks	Ad Aggregators	Traffic
Business Cards	Trade Shows	Tire kickers
Exposures	Media Companies	Eyeballs
Webinar Attendees	Content Consultants	Students
Inbound Traffic	SMM Companies	Solicitations
BANT	Consultants	Disinterest
BRCs	Mail Houses	Catalog Collectors
Page Views	SEO Companies	Page Ranking

The problem, of course, is that none of these so-called "sales leads" are of any use whatsoever to your sales people if the prospect doesn't have a need for your product or service, and a real interest in talking with you about how you can help. That's the real definition of a sales lead: Someone who has a qualifeid need, and who wants to talk with you about it. And so anytime you try to use one of these other definitions of a sales lead in the calculation of a performance metric (e.g. your marketing ROI, a KPI, etc.) or, more importantly, try to pass one off as a qualified sales lead to your sales people, you're going to run into problems.

To cut to the chase, marketing must result in the production of "qualified sales leads," whether it does so as a direct output of the promotional process, or because it includes a separate lead qualification step. Otherwise, it can't be credited with producing a useful result. Nor can a lead produced by one marketing program be compared in a valid manner to a lead produced by another.

In other words, for the purposes of calculating or comparing your cost-per-lead (CPL), anytime you're talking about a sales lead that's not an actual appointment with a decision maker who has need and a desire to talk, you have to factor into your calculation the cost (as well as the time-to-convert and the qualification rate) of converting it into an appointment. That's the key to calculating your true cost-per-lead. And it is also the key to comparing the ROI of different marketing techniques on an "apples-to-apples" basis.

As you would expect, it is generally less expensive to produce qualified sales leads in the first place, rather than to produce unqualified leads that must then be qualified. But one way or another a lead must be "qualified" in order to be worthwhile to Sales.

And you can only compare the ROI of different marketing strategies if you use a fixed definition of a qualified sales lead that works regardless of the technique used to generate it.

Comparing Marketing Techniques

If you want to calculate or compare your cost-per-lead or ROI for different marketing tactics or methodologies, therefore, you need to start with a standardized definition of a sales lead. The one we recommend, based on over 30 years of experience, training and research, is:

A qualified lead is an appointment with a decision-maker (or strong decision influencer) who has a need for your company's products or services, and who wants with talk with you about how you can help.

That is, you must start by using a standard deliverable (i.e. an appointment) that can be a valid outcome of any of the techniques (SEO, SMM, telemarketing, direct mail, inbound, email marketing, advertising, PR, trade shows, etc.,) in order to make a valid comparison. If it requires additional work in order to convert what you have (e.g. a click, an attendee, a business card, a download, a response, etc.,) into an initial appointment, then you must also include in your analysis the cost of doing that conversion work. Otherwise you're misrepresenting the cost of the program. You can't compare them. And you can't calculate a meaningful ROI.

To be sure, some people will argue that it is the salesperson's responsibility to convert these various so-called "leads" into appointments. But that doesn't change the basic calculation: Someone has to convert it. And that conversion, or qualification process, has a cost - which will necessarily vary by promotional method. Shifting that cost to the sales person doesn't eliminate it; it merely moves it onto someone else's budget line. You still have to compare marketing costs on an apples-to-apples basis to come up with an ROI; and the initial appointment is the best, if not the only, common denominator available for the B2B marketer.

(This approach applies equally well in the B2C world, by the way. In the case of brick-and-mortar stores, the common denominator for qualifying as a lead is foot traffic. And in the online world it's hits to a dedicated e-commerce landing page.)

In any event, if you don't compare marketing techniques on the basis of a common deliverable, and use a standard definition of a sales lead, there are a number of significant, and potentially fatal problems (insofar as your program - and probably your career - is concerned) that can occur. For example:

• If you (as the marketing professional) deliver unqualified leads to your sales force, they will feel that you've wasted their time. And at some point they will push back on you and your programs, rejecting both.
  
  
• If you produce unqualified sales leads, the company will at some point incur additional costs for qualifying the leads, or for regenerating them.
  
  
• And even if neither of these things occurs, then you may simply produce an asset that can't be monetized, wasting the original investment.

In short, anything less than a qualified lead (i.e. an appointment with a decision maker who has a need and who wants to talk to a sales person) will result in excessive costs, waste and failure.