The archetypal question our account managers are asked is: “What is the conversion rate of your leads?”
This is a tricky question to deal with. A refusal to answer it gives the impression that we either don’t know, or have poor conversion rates and are unwilling to share them. On the other hand, providing an answer immediately creates the expectation of a ‘floor conversion rate’ which, notwithstanding actual return on investment figures, creates a feeling of negativity with the partner should their actual conversion rate ever fall below this.
This situation leaves us in somewhat of a paradox. A lead campaign rarely shows the same conversion metrics when compared across a number of different sales teams. This isn’t simply because one sales team is better or worse than the other. This may have an influence, but it’s not unusual for the same type of lead to go to two companies with completely different service provisions, commercial models and sales approaches.
An obvious example of this in action is mortgage brokers. From a high level viewpoint we have two quite distinctive models in this market: face-to-face and telesales. Although there are exceptions to the rule, face- to-face advisers make more sales per lead and experience higher conversion rates than telesales-based operations. That said, telesales operations, per adviser, generally have a lower cost base and can work more leads, so overall they make more sales per adviser at a lower cost per sale.
The variables that impact on conversion rate are numerous and varied, and I’ve hardly scratched the surface with the basic example above. The point is that conversion rate is a poor, and I’d suggest broken, variable when measuring the success of a lead generation campaign.
We’re obliged to answer this question when asked, but must also err on the side of caution to ensure that we don’t create an expectation that isn’t going to be met. This means that instead of quoting success metrics from the many companies that thrive off lead generation, we’re talking about the performance of companies who may be ill-equipped to work leads properly or, to be blunt, are simply not good at doing so.
ROI, if you ask me, is a more salient metric than conversion rate. If you have a target ROI metric for your lead generation campaign and you’re meeting this target, conversion rate becomes a superfluous metric as far as lead performance is concerned. It really doesn’t matter so far as the lead supply is concerned, whether you’re meeting this ROI metric at a 1% or 100% conversion rate. It also allows you to get away from the assumption that the highest converting campaign is the most profitable; a mistake I encounter often.
By shifting focus from conversion rate to ROI we also open up a number of exciting opportunities.
Many of the lead types we sell have become somewhat commoditised as the market has matured. There is an expectation of a certain lead costing a certain amount of money. If it costs more, it’s too expensive; if it costs less it may be no good.
This is disastrous as it means we have a fixed amount we can spend to generate a lead and have to pass on marketing opportunities where the lead would produced a higher ROI because the initial lead cost would be too high. If we were only looking at ROI, this wouldn’t be the case.
Companies regularly refuse to carry out standalone sales for products that are complementary to their businesses because they have not seen conversion rates that match their core offering. Again, focusing on conversion rates may not be telling the whole story. As a specific example, the conversion rates on our income protection leads are around 20-30% lower than our typical life insurance leads, but they produce twice the commission!
The maths isn’t difficult.
As a performance agency, we are an ROI-focused business. Our goal is to provide our customers with a return on their investment rather than a headline conversion rate. Next time you speak to a lead provider, throw them a curve ball. Instead of asking what their conversion rate is, ask how many pounds you will get back for every pound you spend with them.
Conversion rate isn’t the be-all and end-all of lead performance. The campaign with the highest conversion rate may not be the most profitable. By focusing on the actual return from a campaign rather than its conversion rate, exciting new opportunities may arise in areas that you otherwise deemed unprofitable.