“I need a salesperson that can sell. I generate leads for my team but their conversion is poor. Out of 100 leads they have converted only 3. I need a more exciting dashboard to look at. It also costs getting and converting each of these leads. That’s why I need a salesperson that can sell. I’ll fire the existing ones. This lead conversion is sales is depressing.”
Dear Business Owner, before you fire that sales person, let alone hire a new one, what are you benchmarking your lead conversion against? Did that catch you by surprise? Well, you are in good company. Many business owners, still in the infancy stages of their learning curve, tend to see matters sales activities in 1D. Yet, they are not even in 3D, but are multi-dimensional. Here are a few dimensions where one sales activity, lead conversion in sales, is concerned.
What is lead conversion and how do I measure it?
But first, what is lead conversion? A lead is a prospect. This is someone, ready willing and able to buy your product or service. Lead conversion, therefore, is the process through which you make that happen; that is, convert that lead (prospect) to a sale (customer). Typically, the steps involved are captured in the sales cycle. They start with prospecting and end with closing. Prospecting (lead generation) is the most important, and most involving (and costly) activity. Get it wrong and the following 4 activities (interview, demonstrate, validate, negotiate) are an exercise in frustration. The final one, closing, if at all it does happen, does so by sheer fluke. And, further, chances are that the customer retention will be fragile.
Conversion ratios: Are you benchmarking correctly?
Now then, Mr Business Owner, before we go to firing and hiring, what is the quality of your leads, do you have a conversion ratio, and what are you benchmarking it against? A conversion ratio measures how many of your leads convert to sales. In the opening example it’s 3%, or more appropriately, 1 in 33. Meaning out of every 33, one buys. Incidentally, a sales funnel is a useful tool in measuring your sales conversion across the steps in the sales cycle.
How to get conversion leads
Now then. When you cast your lead generation net far and wide you will catch many fish. The truth is, you don’t get to catch only the ones you want. Here’s the most stunning illustration of this point that I’ve ever come across. “Our website gets 50,000 visits a month but less than 10 convert.” If you are fishing for sharks, your net might catch tilapia, mbuta, octopus and even discarded plastic bottles. This is why it is critical to not only qualify, but also disqualify, leads. Those that are not your target audience (sharks) are called suspects. The sharks are prospects. So when you say that, “Out of 100 leads they have converted only 3,” are these 100 sharks only, or were half of them plastic bottles?
And even if they are ready, willing and able to buy, you are not guaranteed that all of them will. Depending on what you are selling, some, possibly driven by brand awareness of your organization, might do so immediately. But this is not a guarantee either. A big brand name not an automatic selling advantage. Others will buy over time. But, and this is the point, for different reasons, others simply won’t buy. Sales is a game of numbers.
Targeted prospecting: Casting your net in the right waters
Now the stunning example shared brings in yet another dimension. Where are you casting your net? This brings to question how you prospect. “I do Google and LinkedIn Ads.” Good for you. But even these are not scientifically accurate. They admit so in their small print. These aside, casting your net in shallow waters expecting to catch sharks may get you that 1 in 5,000 conversion ratio; and a depressing dashboard (a visual of a sales team performance) to look at. Two seemingly conflicting issues emerge here.
First. One of the ways to increase the sharks in your net is through targeted prospecting. For instance, the heavy-duty tyre salesperson that looks at every truck he passes in traffic that does not have his tyres and noting the name of the truck owner usually displayed on the driver’s door. Or, the salesperson that sells bid bonds that generates leads solely from Public Procurement Information Portal where all tenders are listed live. There and EPRA (and such other contractors’ associations and bodies). And why? Because, he explains “My prospects are contractors seeking tenders.” He has clearly defined his buyer, in crystal clear fashion. Have you? Depending on what you sell, you may need to be more granular in your definition of your buyer (prospect). This is what is referred to as a buyer persona. And it may include age, gender, marital status and lifestyle habits.
What is a good lead conversion in sales?
The second issue that emerges from the 1.5000 conversion ratio is this. Before you condemn it as dismal, wait. Engage other business owners. You may just discover that, that ratio is the industry average is. And this brings us to another metric. Benchmarking your lead conversion in sales to the industry’s standard. A measure is good or bad when compared to that of peers. For example, pioneers of selling imported cars had a conversion ratio of a whopping 70%. Today, twenty years later, with rapidly increasing competition and the prevalence of the Internet, those with car yards in Karen, may have a lower conversion rate than those on Ngong Road (with much higher human traffic), but for both it’s still single digit. Without this awareness you would be operating on an outdated 70%, resulting in misinformed decisions like firing your sales team because their conversion rate is dismal.
And this comparison is not just in sales. When reporting financial business performance, for instance, besides profits, you will hear CEOs sharing their organization’s financial metrics like EBITDA and Current ratio. In themselves they mean nothing. They know this That is why they, and media when reporting, compare them to that of peers in the industry. This way, the metrics get perspective.
James Mworia on selling Centum
For instance here is Dr James Mworia, on Centum Investment Company announcing plans to sell its 83.4 per cent equity holding at Sidian bank to Nigeria’s Access bank for Sh4.3billion. “Additionally, Sidian’s profitability has improved since 2019, with a record profit of over Sh486 million generated in 2021 while NPL Ratio improved from 20.6 per cent in 2017 to 11.7 per cent as of March 2022, comparing favourably to Kenya’s current national average of 14 per cent.”
So, qualify this statement: “Out of 100 leads they have converted only 3.” If the industry average is 1 in 100 then your team is doing very well. If the industry is at 9:100 may be your hire and fire thought isn’t farfetched.
Are your poor lead conversions in sales really your sales team’s fault? Rethink before you fire
The foregoing does not mean that you get contented with your lot. Far from it. It does mean, though, that you may wish to rethink your competing strategies if you are so inclined. But, in the immediate, and most definitely, continue refining your marketing efforts in a guided manner to generate targeted leads informed by your buyer persona. And when you get to that special place and your conversion ratio is 1 in 3, give yourself an A. You are doing very well. “Why can’t it be 1:1?” you ask. Well, 1 in 1 every time, all the time, means that you don’t need human intervention (a salesperson) to convert. Why? Because then, a machine can do it.
Read: How to convert leads into customers
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