Benchmarking, Metrics and Reporting: How Much is Your Database Worth?
This is number nine in a series of 12 blogs covering transforming your Prospect-Experience transformation. This blog covers recommended disposition or outcome definitions, percentage estimates AND the one most important marketing and sales metric that almost no companies track.
Some Background - The Most Sophisticated Data Shop in the Country
At one time I had three PhD statisticians reporting to me who did nothing but multivariate regression analysis on a 100 million-name database. These statisticians also applied their magic to help us select prospects to market to from rented or exchanged lists. We were the best in the industry at data. We mostly sold B2C. We had four brands and mailed over 100 promotions per year to customers and prospects. The analysis we did required expensive software and staff. As a result, it was important for there to be enough prospects to rank and mail. At that time, B2B companies did not have enough prospects to cost effectively do the same level of analysis as was being done in the B2C world.
What a Difference 30 Years Makes
As time passed, even small companies could benefit from B2B data analysis (though most didn’t and still don’t.) The problem today is that over 7,500 marketing enablement solutions are available, and these solutions mostly make it possible to get more poor-quality leads to sales faster than ever before. If quality isn’t a consideration the leads will not be any good.
Prospecting is Like Drilling for Barrels of Oil
We go about selecting prospects to sell to just like oil companies decide where to drill. Oil companies desire to drill for the least expensive barrels of oil. That’s why when drilling for oil, all kinds of technology is used to increase the chances of finding more, less expensive barrels of oil rather than fewer more expensive barrels. Among other tests, core samples are taken to analyze soil porosity, permeability, fluid content, geologic age, and probable productivity of oil from the site.
Too bad relatively simple analysis is not done very often when companies prospect for new business. Prospecting in most companies is more like shooting craps; or like drilling for oil without first figuring out how to go after the least expensive barrels first.
The 9-7-5-3-1 Approach to Market Segmentation
The following is a simplified example of segmentation that illustrates how you might approach finding the less-expensive prospects.
Standard Lead Generation vs. Advanced Lead Generation
Option 1: Standard Option 2: Advanced
Option 1 (standard lead generation): This is how most marketing programs are run today. You buy a list (or pull a list from your database), decide how you are going to contact that list (mail, email, calls… or a combination) and then start with A and execute through Z. (Even when you get through the entire list you don’t know anything more than how many leads were on the list at that time.) You won’t know what you would know if you took an Advanced Lead Generation approach.
Option 2 (advanced lead generation): is an early result of taking a core sample of the prospect universe and the results. In this simplistic example (though based on real data) the core sample determined that law firms were the best targets (9% lead rate) while prospecting in architecture and engineering firms resulted in more expensive leads (3% and 1% lead rates…the most expensive “barrels of oil.”) So, the top segment in this example is nine times more responsive and productive than the bottom segment.
What is the Value of Your Database?
What I have written about so far is preparation for building a valuable database. Let’s take it to the next level and show why the most important marketing and sales metric is the value of your database. Growing that value should be your focus.
If, during every hour of every day, your team is focused on generating higher quality outcomes (leads, pipelines, nurtures and prioritized no response dispositions - we will come back to these) AND is also focused on disqualifying companies that will otherwise suck up marketing and sales dollars - then the company can be focused on growing the value of the database as a way of lowering the cost of prospecting. In other words, the focus should be on increasing the value of the database and cost-effectively growing revenue while lowering costs. The resulting predictability and the potential to scale will be extremely valuable to owners, investors and/or potential suitors.
Dispositions or Outcomes
I tell our SDRs that every disposition or outcome has value. A BAD or Not Qualified disposition reduces marketing spend because you are not wasting expensive contact cycles on them and that savings positively impacts the lifetime value model, increasing the value of the database.
The percentage of qualified dispositions such as lead, pipeline and nurture dispositions (which commonly represents 25% – 35% of the total universe at any given point in time) can be converted to how much revenue you can drive, and you can also start to determine how deeply into the universe you can invest and make money. For example, we may find, for example, that otherwise apparently qualified firms with fewer employees cost more to find than they are worth.
Professional Persistence
Even what we refer to as No Response dispositions (those that we have touched without response) have value. This portion of the list will be re-segmented and worked through additional cycles of contact over time until we reach the point of diminishing return.
An example of how we work No Response dispositions follows: Some years ago, we ran a program for a global consulting company where one of our target markets was 50 CFOs at the top 50 utilities in the U.S. On the third touch cycle - the touch cycles included calls, voicemails, emails and one direct mail package - and on the 42nd touch, the CFO of the fourth largest utility in the country called us back and left a message that said “don’t stop calling me, you are my conscience… I have been wanting to talk to you but have simply been too busy.” We connected with the CFO and closed the company as a lead for our client and five months later they closed that lead for $1 billion.
The Ultimate Marketing and Sales Metric
The ultimate marketing and sales metric is the value of your database. Very few if any companies know what their database is worth. Here is what I would recommend you do to start working on being able to estimate the value of your database (or databases):
1. Start by carefully defining what a lead is (vertical, size, location, type…)
2. Stack rank (even if just by intuition) the companies that you currently “own” that qualify (based on the lead definition)
3. Do a gap analysis so that you know how many qualified companies you don’t already “own.” Buy test quantities and add them to a touch cycle as soon as you can to compare your “owned” prospects to those you need to acquire
4. Place small bets (small investments) in high (60%) middle (30%) and low (10%) ranked targets. The number of targets should be 10 – 20% of the total addressable universe
5. Dispositions or outcomes should look like this:
a. Lead: 3 - 7% with the average being 4.1% (what percent should close)
b. Pipeline: 3 - 7% of which 20 - 30% should convert to leads on the next touch cycle
c. Nurture: 20 – 30% with 4.5 – 10.5% converting to leads on the next two touch cycles (a 50% increase over cold first-time dispositions)
d. No Response: up to 50% not reached in one touch cycle. Re-segment and re-target in 12 – 16 weeks
e. Not Qualified, BAD and Other: Eliminate from database freeing up time and money for the Qualified companies in your database.
f. Pipelines and Nurtures that do not turn into leads should be re-segmented and added to up to three additional touch-cycles. No Response dispositions or outcomes that don’t convert to another disposition should be recycled up to three times.
I took a client with a better than 10,000 prospect-universe through an analysis recently that was eye opening. The client was looking for “social” ways to reach the market. The required number of deals per year was 20. Their close rate was 30%. Here is how the math worked:
1. 20 deals divided by a 30% close rate set the requirement for 67 sales qualified leads
2. To drive 67 sales qualified leads at a 3% lead rate required 2,233 qualified prospects to be dispositioned
3. It was not cost effective to target a list of 10,000 when targeting only the top 20% of the universe would drive the desired results.
4. The company could still place smaller bets on the remainder of the list (perhaps a sample of the next 20% and a smaller sample of the following the 20% of the ranked prospects) to test the rankings and understand the impact on costs and results as prospects further down the ranked listing are worked.
5. The company agreed that it was more likely that they would be successful by identifying the top 20% of the universe and target them one-to-one; and it was less likely that mass social would pull all of the right prospects in
Because no two companies will have the same results the data model for valuing your database is unique. If you want help in the process of optimizing your database for value just let me know.
Here you will find a comprehensive overview of metrics according to HubSpot.
Next up is Cadence Management. Question? Email me at dan.mcdade@prospect-experience.com