Building Sales and Improving Productivity with Lead Scoring
Lead scoring is generally part of CRM software, and ranks sales leads by relative value. A successful CRM system software, therefore, takes effort to develop. It's an endeavor, though, that can pay big dividends on your bottom line. Weighing the pros and cons of open source CRM is a good starting point for companies (especially SMBs) that don’t have any kind of customer-focused software in place. This way, lead scoring can also be infused into the product feature mix.
"Lead scoring is very powerful," said George Hu, executive vice-president of marketing and products at Salesforce.com Inc. "It is being used by many of our customers, definitely by more of our advanced customers."
Steve Gershik, vice president of marketing innovation at Eloqua Corp. , a Toronto-based vendor of lead management CRM software, cited an Eloqua report that demonstrated how lead scoring can significantly increase sales results. After studying 10 companies' lead-scoring CRM systems comparisons, Eloqua found that total revenue for users rose by 30 percent, while the number of leads sent to sales decreased by 22 percent. "The other surprise was the revenue per deal went up a little over 17 percent," said Gershik. "You would suspect the number of deals would be higher, but the actual revenue per deal was up."
Gershik said the reason for these results was simple. "We realized the sales guys were spending more time with quality leads and taking more time to sell the value." As a result, they were getting more out of each sale.
Too Many Leads
One counterintuitive problem with generating leads is creating too many of them. This can overwhelm the sales force with mostly low quality leads.
With sales leads, the 80-20 rule (80 percent of the business comes from 20 percent of leads) applies with a vengeance. In fact, it's more like a 95-5 rule. That makes lead scoring a critical priority to maximizing your sales force's productivity.
The other complicating fact about leads is that not all of them are in the same stage of readiness to purchase. Though the hottest prospects want to purchase immediately, most of the leads aren't at that stage yet. Some of them will never get there. But many of these types of leads are in the early stages of the buying cycle. They're not willing to talk seriously with a sales rep yet, but they're receptive to marketing efforts that will shape their later buying behavior.
With expert customer management software, smart companies recognize this fact by practicing lead scoring. They nurture these early-stage leads with a marketing-directed effort involving information and name recognition until leads are "ripe" before turning them over to sales.
Reading the Buying Signals
While comparing CRM systems, you will find that like so much CRM system software, the essence of lead scoring isn't in the software. The software CRM lets you organize, categorize and weigh information about your leads, but ultimately it's only as good as your ability to pick up on the strength of the leads.
People signal their level of interest in your company's products by their behavior. You can also validate this with CRM tools, CRM reviews, and CRM tool comparisons. Someone who visits your website is a lead. Someone who spends 20 minutes visiting half a dozen pages, downloads a white paper, and ends by checking out your price list is a much better prospect. Clearly, it pays to distinguish between these two types - and lead scoring can help your team do just that.
Lead Management Software
According to Hu, there are two ways to get into lead scoring. You can either integrate several CRM categories, CRM tools, or CRM system software from companies such as Eloqua and Leads360 into your existing CRM solution, or you can develop your own lead scoring module using features built into CRM packages or Microsoft Excel.
Obviously, after comparing CRM systems and categories, with CRM software reviews, rolling your own CRM solution is cheaper. But the products you purchase are easier to implement and will typically include lesser-known features. In this case, it is important to check whether lead scoring is available as a feature, as well.
If you want to learn more about doing lead scoring yourself, the Salesforce.com community blog has a very simple guide using Salesforce's calculated field feature about the management system software using the best CRM software comparisons. While the example is quite limited, its basic technique can be used with much more elaborate lead scoring formulas. Since most software CRM applications allow custom calculated fields, the technique will work with any of them.
And knowledge of Excel will certainly help you create a lead scoring CRM solution." If you can use Excel, you can implement lead scoring," said Hu.
Developing the System
Fundamentally, the mechanics of lead scoring aren't difficult. Pick the factors you think are important and assign weights to them. Then designate numbers for each lead and add them up.
The mathematics may be simple, but developing the criteria takes some time and effort. A good lead scoring system is well worth spending some time developing. Some criteria will be included in a lead generation module, and some, such as Dunn & Bradstreet Inc. reports, will come from outside sources. The most fruitful source of information on lead scoring, however, comes from within. Your marketing and especially your sales employees will have a lot of experience evaluating potential customers, so you should use that knowledge to help develop company-specific criteria.
Gershik noted that it is critically important to involve your sales force in developing your lead scoring formulas. Not only will they know what they want to see, he said, but they will also be more likely to use the best CRM solution according to the various CRM reviews and CRM ratings.
However, no matter how firmly everyone is convinced they know what makes a good lead, a lead scoring system needs to be monitored and modified according to results. "Lead scoring isn't just based on gut instinct or anecdotes from the sales force," said Hu. "It's based on historical data."
Comparing the results with lead scoring data reveals what is actually working and what just seemed like a good idea. Since businesses change over time, this must be an ongoing policy. "It's a completely recursive process," said Gershik. "You can't just set lead scoring up and forget it like irrigation on a lawn. You have to set up a process where sales and marketing sit down every month and evaluate it. Are there too many leads? Not enough leads? Are we using the right criteria?"
Making Up the Score
There are two schools of thought on how to express lead scoring data. You can either use a numerical score or a very broad (hot, moderate, cold) classification. This seems like a minor point, especially since most CRM system software will let you do it either way. But how you express lead scores generates a surprising amount of discussion.
Those in favor of broad, general lead scoring data point out that the process of ranking leads is imprecise anyway. Apply all the science and marketing data you will, you're never going to get an exact result.
That may be true, alleging the people who favor numerical scores, but numerical lead scoring has important psychological advantages. Assigning a prospect a numerical score like 150 on a scale where anything above 100 is considered hot motivates the salesperson to move quickly on the lead. Proponents of this approach also claim that assigning a number lets you apply weights and calculations to the score. That's significant, they argue, because lead scoring is often a composite of many indicators that have varying degrees of importance.
Gershik said he prefers a numerical system of lead scoring. "Often, if you've got these restricted systems, you'll find marketing and sales get into arguments at the end of the quarter. Sales are getting measured in leads closing and it's in their best interest if a lead is not going to close, that it gets thrown back in the bucket. Numerical scoring eliminates these arguments."
Since most CRM software and lead management modules let you assign scores, either way, you can choose your preferred method of lead scoring after comparing your favorite CRM solutions.
Lead scoring can be a very seductive process. It's tempting to throw every factor you can possibly think of into the mix. The result is an overly complex system that's hard to use and ultimately doesn't provide as much information. "Generally, the last few percentage points [of accuracy] aren't worth the complexity," said Hu.
It's better to focus on key CRM trends and add or remove factors according to what does and doesn't work in your lead scoring strategy. Or, as Gershik put it, "Start simple and cut back the shrubbery before you try to cut down the oak tree."