Lead Leakage, the Often Overlooked Loss of Revenue

Maybe your last expense report looked something like this:

$15.36   Starbucks meeting with prospect
$35.02   Uber to conference venue
$72.05   Client gift – Edible Arrangements

You tracked every penny, took pictures of every receipt, and stayed within your company’s expense policy. 

Because if you didn’t, it’s a potential cause for alarm: overspending, lost revenue, and maybe even compliance issues.

The Black Hole of Lead Leakage

Hence, with all the pressure to hit sales goals and grow revenue, and considering the investment in sales and marketing, why isn’t this same vigilance applied to leads?

Leads aren’t nebulous objects out in the ether or big question marks in the sky. They’re dollars in the form of unrealized deals, and you may be losing a lot of them in the form of lead leakage.

Marketing & Sales Expenses With No Audit Trail

What’s your average cost per lead these days? 

You calculate cost per lead (CPL) by dividing the total marketing dollars spent to capture leads by the total number of new leads acquired. Naturally, this number varies per industry and marketing channel, but for software, it’s currently $595 per lead.

Would your CFO allow employees to spend $595 without some kind of audit trail? Never.

Yet this level of spending happens everyday in the form of marketing campaigns and sales outreach with no visibility into lead management processes — like lead routing and lead distribution. 

Other cost centers have massive audit trails that require transparency. Where’s the audit trail for your leads?

Common Signs of Lead Leakage

You may have a black hole in your lead routing system, leaving leads untouched and unworked without your knowledge, but how would you even know?

For example, your current tools may be assigning leads to inactive users in your CRM, sitting in queues until one of your reps on vacation becomes available, or waiting for action after their service level agreement (SLA) has timed out. 

Lead Management Break Downs

To illustrate, you’ll know your lead management processes are breaking down when Sales reps complain about:

• Regularly receiving leads outside their territory or assigned segment
  
• Wasting time re-routing a lead to the right rep
  
• Not receiving any notification to take action on a lead
  
• Uneven lead distribution
  
• Receiving leads too long after a prospective buyer submitted a request
  
• Not knowing why they received a particular lead
  
• Not having any insight into what action a lead took

And the truth is, it should not take weeks of meetings between IT, RevOps, Sales Ops, or Marketing Ops to troubleshoot lead assignment rules, make territory adjustments, or modify SLAs. 

Money Lost from Lead Leakage

Gettin’ fired up yet? Just because there’s no official compliance around lost leads doesn’t mean that it’s any less of an abomination. Let’s figure out how much money you’re losing. 

First, look at how many requests for more information or demo requests did you receive last month? This includes webform submissions, information requested at trade shows, and customers contacting you regarding upgrades. How many of these requests received proper follow up? If the number is not 100%, that’s one sign you’ve got lead leakage.

Calculate the Money You’re Losing

Prior to using LeanData, our customers report an annual number of leaked leads due to inaccurate lead routing at 10 to 30 percent. To calculate the money you’re losing, we’ll defer to Gartner’s Sales Development Metrics:

• Average conversion rate (Lead to Opportunity): 21 percent
• Average win rate (Opportunity to Closed/Won): 22 percent

For example, let’s assume your company receives 1,000 leads annually. You lose 100 to leakage (10%), and convert 21 percent of the remaining 900 leads, or 189. You then close 22 percent of those 189 leads, or 42 deals. 

Without leakage, you close 46 deals. Now, multiply those four deals by your annual contract value (ACV). That loss doesn’t even take into account future revenue in renewals or upsells.

With the decrease of inbound leads in the current economy, can you really afford to lose one lead?

It’s Time to Take a Stand

Considering all the money your company is spending on lead generation, are you really okay if your lead management processes are inherently screwed up? If a lead slips through the cracks, gets into the wrong hands, doesn’t get addressed for two weeks, or gets addressed incorrectly, that’s not okay. Without a doubt, that’s revenue lost and likely handed to your competitor.

So now the real question becomes: Are you ready to do something about this?