Author Dan McDade Tells “The Truth About Leads,” Shares Insights Into Defining Target Markets

Published: April 4, 2011

DemandGen Report recently caught up with McDade, the CEO of lead development firm PointClear to discuss the new book. McDade also discussed his continued push to get both marketing and sales teams to realize the value in long-term leads, how to efficiently define your target market, and become a part of the new “conversational economy.”

Leads_SoftCover_197bDemandGen Report: One of the interesting takeaways in “The Truth About Leads” is your emphasis on sales reps needing fewer leads. While we’ve all heard the “quality over quantity” mantra, the notion of fewer leads is contrary to traditional lead gen goals. Can you elaborate on this concept?

McDade: More leads don’t equal more success. In fact, sales reps actually need fewer leads—or more accurately, fewer raw, unfiltered, unqualified leads. Why? Far too many companies evaluate marketing’s success by the number of leads they hand to sales.

For example, Company A’s marketing department delivers 1,000+ leads in a month and proudly reports the cost-per-lead is still under $100. The sales rep receives a stack of leads only to discover few documented with compelling needs, decision makers, budgets and timelines. Many of the so-called “leads” are only inquiries, and others require nurturing prior to warranting rep attention.

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By contrast, Company B’s marketing department delivers two qualified leads to a specific sales rep. Each has already been contacted at least eight times, and each has graduated from unknown or long-term status to a near-term decision making mode. Each is accompanied by a complete contact history; a budget overview; the decision timeline; individuals involved in the decision; and pain points.

Which lead-generation machine would your company’s sales force prefer — the one that delivers reams of unfiltered leads, or the one that provides two sales opportunities expected to close within six months?

DGR: In the book you emphasize that long-term leads are actually more valuable than short-term leads. Can you expand?

McDade: It has always been my contention that time frame on leads should be disregarded and that long-term leads are actually more valuable than short-term leads. Yet long-term leads are mostly ignored by Sales as they are not seen as impacting the current period’s results. Research shows Sales does not follow up on more than 70% of leads provided to them. And because Marketing doesn’t have resources or skill sets to nurture long-term leads, there is no one to nurture long-term suspects into short-term prospects

In my book, I present two ROI models that contrast a “short-term only” approach with a best-practice “combined short- and long-term” approach. The models are based on an outbound lead qualification program targeting 1,000 prospect names and assume a close rate of 20%.

ROI model A illustrates revenue, cost of qualification, and gross after marketing expense when delivering 30 short-term leads. ROI model B adds in best-practice nurturing of 40 qualified long-term opportunities uncovered in the original qualification effort. This long-term approach applies the same 20% close rate to realize additional deals.

With a combined short- and long-term approach, qualified leads of both types increase as do the number of closed deals. Because long-term nurturing is tightly focused on 40 prospects, the incremental cost of nurturing is but a fraction of the cost of qualifying. The combined approach significantly improves gross revenue and reduces the cost-per-lead compared to running only a short-term qualifying effort.

DGR: You note that, in an effort to cover all grounds and capitalize on any and all opportunities, many marketers define their market as broadly as possible, and in doing so, may miss the opportunity to address the most potent prospects. How would you advise marketers to more efficiently define their market?

McDade: I recommend companies initially identify the largest but most targeted markets possible, to make sure that they have a tightly defined universe. Once the market has been defined, the next step is to segment it to identify prospects more likely to buy.

Steps in segmenting and testing include the following:

  • Identify discriminating characteristics among target companies.
  • Append data points like SIC code, revenue, employee size, and growth rate.
  • Segment the lists into small homogeneous cubes of like companies.
  • Compare cubes to your best-customer list—a higher match means a better segment.
  • Test cubes to profile and uncover opportunity rates.
  • Analyze cubes to find high-return segments and rank them as distinct sub-markets.

Once segmented lead rates have been established, a full court press should be deployed against the market segments with the highest rates—thereby improving results and maximizing marketing dollars.

DGR: The new “conversational economy” is creating an environment where prospects demand content that is relevant to them and their pain points, and you emphasize this in the book. What are some the nuances around effective, meaningful prospect communication?

McDade: Sales representatives should talk about their product or solution as little as possible. Effective reps know that good prospects sell themselves by talking about their particular business challenges and emerging issues impacting business goals. For this to happen, sales reps must have clear understandings of prospect pain points, how their solution maps to them, and how the prospect benefits from their solution.

A simple but effective way to test your company’s readiness is to ask each stakeholder to answer the following questions:

  1. Who is My Company?
  2. Who is My Company’s target audience?
  3. What problem does My Company solve?
  4. What is My Company’s category?
  5. What benefits does My Company’s product or service offer to the market?
  6. What is the competitive landscape?
  7. How is My Company different?
  8. What is the objective of this offer?
  9. What is the scope (from a dollars and time invested standpoint)?
  10. What is the timing?
  11. What is the budget?

Once that is complete, combine the answers and identify large and small discrepancies. Then the most senior executive should resolve tie-breaker issues.

Upon completion, each sales rep will be fully prepared to ask prospects the right questions and then listen carefully in order to direct further discussion around the pain points most likely to motivate purchase. When the prospect’s needs are understood and matched to your solution’s benefits, the sales nurturing process can leap-frog ahead.

 

Dan McDade founded PointClear in 1997 to provide prospect development services to BtoB companies with complex sales processes. Prior to starting PointClear, Dan served as president of UST, The Business Marketing Group, a high-tech B2B marketing services firm. Dan is chairman of the board of the Technology Association of Georgia (TAG) Education Collaborative. He also serves on the boards of TechAmerica Southeast (formerly AEA); the Business & Technology Alliance, a TAG society; and TAG Marketing. The Sales Lead Management Association named Dan one of the 50 most influential people in sales lead management in 2009 and 2010.

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