Improving Lead Conversion Rates

Last Updated May 15, 2007 12:05 AM EDT

When trying to grow a business, finding potential new customers—known as leads—is just the beginning. Before they can benefit you in any way, those leads must be turned into sales. This process can be approached systematically. First, you must ensure that the leads are suitable in the first place, which will reduce wasted time and resources. The process of comparing a lead against a set of conditions or requirements to determine its suitability, or potential for conversion to customer status, is referred to as lead qualification. This is a key step in the sales process.

What You Need to KnowCan telemarketing relieve some of the sales force workload?

Yes. Telemarketing and other marketing services can be used to handle many of the sales teams' routine functions, such as conducting initial research, qualifying prospective customers, making appointments, and maintaining regular contact. Despite these benefits, telemarketing is no substitute for face-to-face selling, which contributes to stronger customer relationships. It's important to ensure that these services are appropriate for your business. Keep in mind that, in today's climate of "do not call" lists, many individuals react unfavorably to unsolicited phone calls—and these calls can lead to significant fines if they do not fall within the laws.

How is lead conversion measured?

It's most effective to gauge results at each stage of the lead conversion process; simply calculating sales as a percentage of initial leads is too simplistic an approach. For example, perhaps only 50% of initial leads turn out to be suitable prospective customers. If these leads have been well-qualified, the sales team may be able to convert 20% of that prospect list. These two metrics are more useful than a single number reflecting 10% conversion of initial leads. Measuring results at each stage helps you focus resources in the right places, refining the process for future lead generation programs.

Is it best to generate as many leads as possible?

Not necessarily. Quality is as important and quantity when it comes to leads. Following up on a large number of unsuitable leads is a waste of resources. Acquiring even a modest number of highly-qualified leads, however, is critical for any company that wants to expand its business.

What to DoQualify Leads

Lead generation programs may supply large numbers of leads, but not all of them will convert to sales. Some contacts may be poor prospects, while other individuals may simply be information-gathering rather than planning a purchase. It is important for your organization to determine and agree upon a set of criteria for qualifying leads. While this profile will vary from business to business, in general a good prospect will have the following characteristics:

  • the financial resources to purchase your product;
  • the authority to make a purchase decision;
  • a genuine need for your product or service;
  • the desire to learn more about your product or service;
  • plans to make a purchase in the near future.

Telemarketing can be used to qualify leads. It helps to call the contact and request more details of their inquiry, in order to send information tailored to their needs. Merely sending a brochure, with no accompanying letter and no attempt to gain an understanding of the prospective customer's needs, is a waste of money. Questions for qualifying leads might include:

  • Are you the person who makes the purchasing decision?
  • If not, who does?
  • Is your company currently buying this product or service?
  • What quantities do you buy, or how much do you spend on the service?
  • When are you likely to make your next purchase?
  • What information do you need on our product and company?
Target a Suitable Sales Process

Typically, a sales process is either one-step or two-step. In a one-step process, the lead generation and sales conversion steps are combined; this is equivalent to a direct selling operation. One-step programs are not appropriate for all products and services, but they can be suitable for less expensive products such as office supplies, software, low-value financial offers, or information services such as newsletter or magazine subscriptions.

In a two-step program, the prospective customer requests initial information. You send the information and then continue following up until the prospect is ready to buy. Two-step programs are typically suitable for more costly items, such as complex technical products, professional services, or high-value financial services.

Understand the Lead Conversion Process

Converting a lead into a sale can be a long-term process, the duration of which depends on the complexity of both the product and the decision-making process. The number of people involved and the level of importance to the customer (or the customer's business) are two key factors. It is important to decide how each stage of the process will be handled, who will be involved in the sales team, and how communications with the prospect will be managed. For example, with a complex product, the lead conversion process might entail:

  • identifying key decision makers;
  • sending information to key decision makers;
  • arranging meetings with those decision makers;
  • providing sample products (or demonstrations) for evaluation by the prospect;
  • bidding for a contract against competition;
  • final negotiations;
  • purchase;
  • after-sales service and support.

Another example situation occurs when a prospective customer is reluctant to change suppliers. Converting this type of prospect into a sale can take a long time; it requires planning a program to maintain contact and move the prospect away from the existing supplier. In this case, actions might include sending personalized direct mail with product information, offering regular updates on new developments in the company, and/or making targeted special offers to encourage the prospect to try the product.

Assign Responsibility

In most companies, the marketing department generates leads and the sales department follows up on those leads. It is crucial for the two departments to coordinate their respective activities, agree on qualifying criteria, and maintain focus on high-quality prospects. Sales departments often gripe about the quantity and quality of leads generated by marketing. They want as many leads as possible, however, they are unhappy if the leads are of poor quality or do not meet the right criteria. Collecting a large number of high-quality leads can be a difficult balancing act. It is essential to discuss and carefully delineate responsibilities between sales and marketing. Some sales teams prefer to do their own qualifying, for example, while others prefer to concentrate on face-to-face meetings with prospects.

Integrate Telemarketing with Sales

Keeping a sales team on the road is expensive; this sales model can be a costly way of reaching customers. Telemarketing can be used to enhance the performance and productivity of the sales force, resulting in an overall cost savings. The telemarketing team can be responsible for following up sales leads, qualifying prospects, setting up appointments, and maintaining contact with longer-term prospects. This frees the sales force for more face-to-face meetings and focus on the most qualified prospects.

Consider Contact Management Systems

A contact management system is a database application that enables sales teams to maintain a sales diary, recording details of meetings and other follow-up activities. These applications assist in planning the conversion process and help ensure that the sales team does not miss any important contact opportunities. The same software can be used by management to monitor progress and ensure that no important contacts are overlooked. Contact management systems can store details of the prospect, their likes and dislikes, availability for meetings or telephone calls, buying limits or authorization, and even personal information that can help to maintain a relationship with them.

Monitor Progress

It is essential to track progress at each stage of the lead conversion process and modify strategies as appropriate. When a prospect is especially promising, consider allocating additional resources to win the business. If a prospect is of only minor importance but consumes undue time and resources, the efforts of the sales rep(s) involved should be refocused. A typical lead progresses through several—but not necessarily all—of the following stages:

  • raw lead: an initial inquiry from any source;
  • suspect: an inquiry that has been qualified and has the potential to result in a paying customer;
  • prospect: a lead that has been qualified in more detail;
  • inactive lead: a prospect who will not buy now but has future potential;
  • dead lead: a prospect who has little potential to become a customer;
  • customer: a prospect who has made a purchase.

Lapsed customers can also be viewed as another source of qualified leads.

Determine an Appropriate Contact Frequency

A single mailing, telephone call, or direct response advertisement may produce results, but a series of quality contacts will have greater impact and better ensure that response targets are met. Direct marketing activities raise awareness levels with each contact, so follow up with individuals who have not responded, to encourage their progress along the decision-making process.

Make Personalized Communications

Personalized, one-to-one letters can be an ideal form of communication for companies with detailed information on prospects. The letter should reflect an understanding of the individual prospect's main interests and concerns, and might offer specific information or a product solution tailored to the prospect's needs. Subsequent mailings can build an individual relationship with the prospect.

What to AvoidYou Target the Wrong Prospects

Human beings have a natural tendency to deal with friendly people and avoid the difficult ones. Sales reps are no exception. From a business perspective, however, this may not be the right choice. The qualifying process should identify prospects with the highest potential, and the sales reps should target efforts accordingly.

You Don't Manage the Process

Lead conversion can be a long, complicated process, so it is essential to monitor progress and manage the process carefully. Converting leads can consume a lot of sales force and telemarketing resources; employ careful planning to ensure that it is performed effectively.

You Overburden the Sales Force

In some organizations, the sales force is burdened with total responsibility for generating leads, qualifying them, and converting them into sales. This is not typically the best use of sales force resources, however. Telemarketing or other supporting functions can be used to supplement the sales force and take over routine tasks, so that sales reps can do what they do best—close deals.

Where to Learn MoreBook:

Jobber, David, and Geoffrey Lancaster. Selling and Sales Management. 7th ed. Upper Saddle River, NJ: FT Prentice Hall, 2005.

Web Site:

American Marketing Association: www.marketingpower.com