About Lead Conversion Rates

April 4, 2021
About Lead Conversion Rates

Definitions

Raw Lead: A prospect that is not qualified and is typically obtained from a list. 

Sales Qualified Lead (SQL) : A prospect or company that has a motive and intent and timing to engage (Meeting setup).

Opportunity : A deal that has a probability, value, close date, account name (B2B)and account contact (B2B) or a client name (B2c)

Forecast: A calculation to predict aggregate sales ina period. For simplicity, let's assume this calculation is the sum of  opportunities that have a high probability thershold  (e.g. over 65%), within a time frame ( e.g. 90 days for a quarterly forecast)

Sales Order: A  confirmed Sales transaction with product or service sold, a customer and an order date.

Order Close Rate: The conversion ration from Opportunity to Sales Order.

 

Demand Generation

A big aspect of Demand generation is the appropriation of Marketing Qualified Leads (MQL) and their nurturing to a Sales qualification.  The basic principle of a qualification journey in a B2B scenario follows the BANT rule i.e. Budget, Authority, Need & Timing.  In a consumer scneario it's modifies to AIDT or Awareness, Interest, Decision & Timing

The job of a good marketing automation system is to progress leads from the MQL stage  to the  SQL phase. In this respect the system handles the back and forth communication with the lead to confirm the BANT ; thereby moving the pipeline to convert prospects by a Business Development Representative (BDR - the folks who are on the frontline to converse with the leads at the initial stages of interest) to a stage where they can be handed to a quota carrying Account Executive (AE). Prospects handed to an AE are called Sales Qualified Leads( SQL)

What is a typical SQL to MQL Ratio?

Needless to say this varies based on the inductry and the type and volume of product being transacted. For this discussion, we'd assume a B2B Software Product, to illustrate the concepts. 

Typically the SQL to MQL ratio (also known as MQL conversion rate) for B2B Software product companies  is about 13-25% i.e. about 1 in 5 marketing leads make the hand off to a Sales representative.  There are several reasons for this. For example, let's say you run a marketing campaign for the product on Google Ads & Social Media. It will generate enough leads to qualify as a 'marketing conversion' (Assuming its well formed targetted campaign). However 1 in 5 of those leads may have the "Need" but the "timing" may not be right or they maybe the "Timing" is right but the "Budget" is frozen. Therefore, not every marketing lead converts to a sales discussion (If they all do, then, we really need to get to know you!) .

Marketing Campaign

An effective marketing process helps offload the mundane and repetitive task of the "qualification role" (the 'Q' in MQL) from a BDR  and automates the conversion to SQL for the AE while maintaining the potency of the SQL. Therefore a good measure of automating a marketing campaign is Sales Accepted Leads (SALs) i.e. [ercentage of leads that were handed to an AE that were "accepted".

A high quality  SQL-conversion is highly conducive to improving the  opportunity to Order conversion rate. Most  benchmarks indicate that if MQL to SQL ratio can be improved by a factor of 2x that could potentially translate to doubling the Order close rate.

Marketing Outbund Campaign -Conversion Rates

Universe to SQL:This is the process that starts from the mouth of the funnel through to Sales Assignment. all the way from raw leads --> MQL-->SQL 

  • Raw --> MQL: 1%-5%
  • MQL-->SQL :13%-35%
  • SQL --> Opportunity:25%-40% 
  • Opportunity -->Order: 25%-35%  aka Win Rate
  • Opportunity -> Forecast:  40%
  • Forecast --> Order: 46%

From this we can derive the conversion from MQL to Sales Order: MQL to Order: 1%-4%