Seeing a large number of leads in your pipeline may make you feel like you’re on the right track, but total number of leads is actually just a vanity metric. If a high percentage of your leads never convert, but you invest time and resources in them, you’ll see a low return on investment (ROI).
What Is a Good Return on Investment?
First of all, what kind of return on investment should you be aiming for? Until you’ve figured this out, it’s impossible to know if your lead generation efforts are close to optimized.
In the most basic terms, a good return on investment is simply a positive ROI: for every dollar you spend, you gain more than one dollar back. However, if you only make a minimal amount back, it is unlikely to be sufficient for keeping your business afloat.
Typically, a “good” ROI is considered to be 10 percent. Although large businesses often manage with slightly less, small businesses owners should strive for at least this much. A higher ROI will help you survive through rough patches — which you could face at any time.
How to Calculate Return on Investment
Return on investment is one of the easiest metrics to calculate. Since it looks at the efficiency of your investment to convert a customer, you need to compare the ultimate value of the customer with the investment you spent on gaining and nurturing the lead.
To calculate ROI, then, you need to subtract the amount you invested in a lead (the cost of your investment) from the value of the customer (value of investment) and divide the resulting number by the cost of your investment. Finally, multiply the result by 100 to receive a percentage.
As a formula, ROI is written like this:
(Value of investment – Cost of investment) / Cost of Investment
How to Maximize Return on Investment
Now you’ve measured your current ROI, you can measure your strategy going forward to confirm the changes you make are leading to better results. Whatever your business, focusing on the following areas will optimize your ROI.
1. Keep Your Database Organized
Actively maintaining your database is essential — especially as you gain more leads. You need to make sure you merge duplicate contacts, eliminate low-value leads, and generally ensure everything stays organized.
Instead of manually managing your database, it’s better to invest in lead management software. Some top choices include:
- Zoho — Along with a number of other products for small businesses, Zoho offers CRM software. This has automation features, real-time insights, and an AI sales assistant. There’s a free version available as well as paid monthly plans.
- Salesforce — If you have a large sales team, it’s worthwhile investing in a comprehensive solution like Salesforce. The tool offers automatic lead scoring and routing to ensure you follow up with leads at the right moment.
- Really Simple Systems — For startups with small teams, Really Simple Systems is the best option. The software keeps track of interactions and ensures you’re always working with current data.
2. Collect Accurate Data About Leads
You also need to make sure you’re working with accurate information that tells you as much about each individual leads as possible. Whereas you may start out with just a user’s name and email address, you should be able to learn much more about your leads as you nurture them.
To gather information, you’ll need to pay attention to leads’ behavior, including what kind of content they respond to best. This will allow you to start building a detailed profile of each lead, improving your chances of a successful conversion.
3. Evaluate Leads
Once you have information about leads, it’s necessary to evaluate them to see if they’re likely to be a good fit for your business. This is the only way to avoid wasting time on leads that are not worth pursuing.
An effective way to evaluate leads is to compare their behavior to leads you’ve had in the past. Those who behave like leads that converted are most likely to be of high value.
Another tactic is to utilize lead scoring. This means giving each lead a score from 0 to 100 according to how well they match the profile of an ideal customer.
4. Create Segments
Just knowing that a lead is qualified is insufficient. To determine how exactly you need to treat each lead, use segmentation. This means creating groups according to demographics like location or job title as well as considering behavior. You can then set up automated workflows for each segment to nurture leads appropriately.
5. Identify Bottlenecks in Your Funnel
Your ROI could decrease if you have a bottleneck in your sales funnel. Monitor your funnel to check if there are any points where a significant amount of leads drop off — you could be allowing qualified leads to slip away.
In some cases, it will be obvious how to fix the funnel. In others, you may have to use A/B testing to try various ideas and see what works.
6. Use More Channels for Lead Generation and Nurturing
Another way you may be missing out on opportunities is if you’re using only a few marketing channels. Utilizing more channels will allow you to both reach new leads and reach current leads in multiple places to enhance your nurturing efforts. There are several channels you should be using at a minimum:
- SEO — Users who are unaware of your business can find you through search. They may be interested in the kinds of products or services you offer or they may have a problem for which your business can provide the solution. Without SEO, you may as well be invisible to these potential leads.
- Content marketing — Content and SEO work hand in hand. SEO can take users to web pages, but simply being presented with an offer may be ineffective if leads require some nurturing before they’re willing to purchase. Optimized content can attract leads who are at the beginning of the funnel, including those who are not yet aware that they have a problem. Plus, content can keep the leads you’ve already generated interested, such as when you include links to blog posts in your email newsletters.
- Social media — Developing a presence on the social media platforms where your target audience is active allows you to stay in contact leads. You’re also able to deliver content they find interesting and useful. At the same time as presenting your business as a top solution, it keeps you fresh in users’ minds.
- Digital ads — Balance out your lead strategy with paid search and ads on social media. You can generate leads with offers of premium content or free trials and even convert users with special offers.
7. Make Sure Sales and Marketing Are on the Same Page
Lead nurturing sometimes falls apart because the sales and marketing teams at a company have different ideas about lead qualification. Whereas the marketing team may want to pass along as many leads as possible, sales only wants to dedicate time to leads who are sales ready.
The solution is to stop treating sales and marketing as two separate entities. You need to open up lines of communication and include both teams in things like goal setting and strategizing. In addition, each needs to be clear about what the other is doing. This will ensure they are working toward the same targets (including your desired ROI) and promoting the same offers.
8. Monitor Related Analytics
ROI doesn’t exist in isolation. There are many other metrics that relate to ROI, all of which you need to be tracking and analyzing. Engagement metrics matter most of all, such as website bounce rate, email open rate, click rate on ads, and micro conversions.
Instead of trying to squeeze data analysis into your already full schedule, request support from a professional. The virtual assistants for small businesses at MYVA360 can manage your CRM, handle KPI reporting, and carry out a variety of other tasks to improve your lead generation efforts. Contact us to find out how our experienced VAs can support your business and increase your ROI.