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SaaS Recipes: How to identify your hottest leads with laser precision

Marketing automation can provide a company with some great benefits, including better customer segmentation, lead nurturing, personalisation and improved revenues. However, using an effective marketing automation and inbound strategy can sometimes be too successful in generating leads – leaving you swamped with leads of varying degrees of quality.

 

If your top of funnel is driving even modest amounts of traffic through HubSpot or a similar marketing automation platform, a dilemma you may be grappling with is how to identify your best quality leads to ensure both sales and marketing teams are aligned on prioritising them. 

 

A business’s success is largely dependent on the combined efforts of its sales and marketing teams. If they’re in sync, this boosts overall productivity, increases revenue and reduces overheads. However, according to Forrester Research, only eight percent of companies are able to achieve this. If companies are able to neutralise internal finger-pointing, research from Marketo shows this helps generate more than 200 percent higher revenue from marketing efforts.

 

One way to do this is to identify your hottest leads, deal with them first and avoid wasting time on opportunities that aren’t qualified or ready to transact. Reducing the amount of time required to close a sale by sifting out your best prospects for immediate attention will turbo boost the performance of your sales and marketing teams and your business, impacting both the lifetime value (LTV) of your customers and the cost to acquire them in the first place.

 

Even a small efficiency increase at this stage in the funnel can result in massive gains for the overall business. Let's look at a quick example of how a 17% increase in conversion from MQL to SQL could result in boosting revenue to 150%.

  No Optimisation Laser Precision 
Funnel Stage # Contacts CR # Contacts CR
MQL  1000 30% 1000  30%
SQL  300 33% 300  50%
Opportunity 100 40% 150 40%
Customers  40 60 
LTV $300 $300 
Net Revenue $12,000 $18,000

 

Check it out! Your laser focused targeting that allows sales to spend more time on the right leads, boosting their conversion rates just lead to a whopping 50% revenue increase. And the best bit? Once you've built out the data and the tools necessary that increase continues to deliver month on month, it's not a one hit campaign.

First-Five-Eight-Lead-Scoring-Marketing-Automation-Consultant

So, what is the best way of measuring how successful your marketing and sales activities are if you’re in the Software as a Service (Saas) business? And how do you make sure that you’re identifying your highest value converters and honing in on the statistically significant key data points?

 

Serial entrepreneur and Saas guru, David Skok, explains that SaaS and other recurring revenue businesses are different from other industries because the revenue for the services is delivered over an extended period of time, known as the customer lifetime.

 

If a customer is happy with your service, they will stick around for a long time, and the profit that can be made from that customer will increase considerably. On the other hand, if a customer is unhappy, they will churn quickly, and the business is likely to lose money on the investment they made to acquire that customer.


This creates a different dynamic to a traditional software business, as there are now two sales that must be accomplished.

  • Acquire your customer.
  • Keep your customer (i.e. maximise their lifetime value).

A good way to ensure success in the ‘winner takes all’ SaaS industry is to constantly evaluate whether you’re making more profit from your customers than it costs to acquire them. This can be quantified by using two key metrics: Lifetime Value (LTV – lifetime value of a typical customer) and Customer Acquisition Cost (CAC – the cost to acquire a typical customer).

 

Skok suggests the following formulae to calculate these two metrics:

 

  • LTV = ARPA (Average Monthly Recurring Revenue (MRR) per account) x Customer Lifetime
  • CAC = Sum of all Sales & Marketing expenses / No. of new customers added

 

Wasting-Money-With-Bad-Marketing-Automation

 

We’ve seen some clients losing, quite literally losing millions of dollars per year due to the fact they haven’t fully understood their churn rate and as a consequence can’t calculate the all important LTV… but that’s a story for another day.


Coming back to the point on having marketing and sales alignment, your CAC is directly linked to your conversion rate and the time it takes for your sales team to close a lead. So, if you’re wasting time on opportunities that are not yet ready or qualified, your sales and marketing expenses will increase, giving you a higher CAC than more efficient competitors.

 

Your success depends on you making more profit from your customers than it costs you to acquire them. Hint: if your LTV to CAC is less than a 3:1 on average, you’re probably performing poorly.

 

6 types of data essential for effective lead scoring

 

The two key levers in understanding your customer base and identifying your hottest leads are lead scoring and persona segmentation. Both of these processes need to be in place and operating effectively before any leads are raised to your sales team.

 

So, what exactly is lead scoring and how is it helpful in identifying your most valuable potential customers? Lead scoring is a methodology that allows you to assign a value (reflected as a number of points) to potential customers, based on their behaviour and interest in your product or service.

 

Hubspot suggests six types of data which help with effective lead scoring:


  1. Demographic information. Ask questions and use your leads’ answers to see how well they fit with your target audience. The better the fit, the more points you assign.
  2. Company information. Are you interested in selling to organisations of a certain size, type or industry? The closer your lead fits your criteria, the higher their score.
  3. Online behavior. Evaluate how a lead interacts with your website; this will give insight into how interested they are in buying from you.
  4. Email engagement. Open and click-through email rates will indicate interest levels.
  5. Social engagement. Interaction with your tweets and Facebook posts will also show their level of interest.
  6. Spam detection. Consider giving negative scores to leads who filled out landing page forms in ways that could indicate they’re spam. And if you’re selling to businesses, consider taking points away from leads who use Gmail or Yahoo! email addresses.

 

This is not an exhaustive list; it’s important to talk to your sales team, interview customers and interrogate your analytics to work out which data is most important and what scores to assign to each data source.

 

Picking exactly which data to pivot your lead score strategy against can be tricky, as this depends on what data you have available. For example, you may not be not collecting enough data to identify key customer lead scoring questions, or you’ve got so much data that you’re struggling to isolate the key drivers.

 

A good approach is to start by analysing the behaviour of your highest value converters and use this to help you pinpoint the key data points that have statistical significance. If you have the resources, consider automating this process so the lead score criteria are updated automatically as new data points of significance emerge over time.

 

Paired t-test models can also help, by allowing you to compare the average difference between two groups. This will give you both a significance level and the average difference between your highest and lowest performing metrics. We also highly recommend creating a dashboard of all your key lead score metrics so they are easily accessible. This allows you to monitor them in real-time.

 

First-Five-Eight-market-Segmentation 

3 steps to map personas to market segments

The second lever in identifying your best quality leads is to segment your market and map personas to these segments. Segmentation allows you to divide your market of potential customers into groups based on specific characteristics. The idea is that these consumers –  who share common traits such as interests, needs or location – will respond similarly to your marketing strategies. Personas are specific representations of particular individuals that fall within these segments.

 

Marketing Insights expert, Andrea Fryrear, says that market segments are useful for high level strategic planning and personas will guide your approach when it comes to tactical daily operations. For this reason, personas will be most accurate and most useful when they are based on clearly defined and well-researched market segments.

 

Persona creation should come only after you have identified specific features of your target demographic through market segmentation. These biographies are highly detailed, imaginary representations of particular people from your target audience, which you should use to guide equally specific marketing and product choices. You’ll need to play around with exactly what kind of data you want and need in your personas, but they should directly relate to the kinds of marketing you’re trying to do.

 

The challenge with persona creation is that adding more form fields during sign-up to gather the detailed information you need can often decrease your conversion rate. One way of getting around this is to add in poll questions after sign-up using smart form fields, as part of a welcome tour.

 

Another way of addressing this is to take your prospects’ browsing behaviour and combine it with a third-party data service, such as segment.io. This can deliver an extraordinary amount of additional data and insights. It’s also critical to make use of HubSpot’s business intelligence tool.

 

Once you have established your segments and personas, you then need to apply the personas to your segmentation. Marketing automation experts, Marketo, suggest the following three steps:

 

  1. Map personas to segments. To target personas and make them actionable, you need to map them to the data you have in your engagement platform. Here are some examples of important attributes of your personas and the corresponding data field you can reference:
  2. Score segments based on attributes. Once you know how to identify the personas in your database, the next step is to develop a scoring methodology. It’s crucial to consider not only demographic, but also behavioural, attributes. Here are some commonly used attributes:
  • Demographic: Industry, company size, geography and seniority level.
  • Behavioral: Website engagement, event attendance and webinar registrations.
  1. Apply your segments and scoring to marketing programs. It’s time to start targeting and engaging your customers and prospects with relevant information. Here are some channels that you can tailor your messaging to reach your target audiences:
  • Email marketing.
  • Content syndication.
  • Display advertising.

 

You will notice when you start combining the high volume of data this process has created that there may be a lot of overlap. For example, the prospect who visited your bank and airline’s vertical page may also have visited your hospitality page by mistake.

 

To resolve this, it’s important to think of your personas in a hierarchy and rank the most important to the least important elements. For example, a .edu address most likely means your lead is from the education sector, so it doesn’t really matter what the rest of your data concludes.

 

If you’re not already, you should be reporting on all of your marketing campaigns, strategies and tactics at a persona level. This will help you identify your most profitable personas and allow your sales team to focus on those before moving on.

 

Combining your market and persona segmentation datasets is like cooking a delicious meal. The harmony allows you to identify and push your most important leads to sales on the basis of hard data and evidence. Importantly, your sales team can then communicate with them in a way that is most meaningful for their vertical or persona (this is a powerful subject for another day)!

 

A great tip is to use HubSpot sequences, or a similar tool, so your sales team can start managing their own follow up by lead nurturing emails specific to each customer. The net result of this approach is to drive down your cost per acquisition and increase your conversion rate. As a bonus, you’ll be driving sales and marketing alignment and creating a much happier and healthier relationship between your sales and marketing team.


So there we have it, two very important tools that can be combined together to leverage that all important CAC:LTV ratio which is essentially the lifeblood of the business. Make sure you subscribe for more delicious SaaS recipes that will elevate you and your marketing team to an elite echelon of marketers using data to drive profit.

 

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