Why 'Sales Lead Black Holes' Leak Profits

Is your company leaking potential profits through a sales lead black hole? Recent research shows that business-to-business firms spend 65 percent of their marketing budgets on average on trade shows, product seminars, cold calling, database purchase and telemarketing activities designed to create ideas to generate leads to new customers. Yet sales reps never contact approximately 70 percent of the resulting new leads generated. Talk about a gravity suck.

The January 2013 issue of the American Marketing Association's Journal of Marketing examined data from 461 sales reps across four industries to understand why the sales lead black hole exists at some firms.

The survey discovered that as sales reps gain experience and their quote achievement improved, they spend less time following up marketing generated leads and more time on the leads they generate themselves.

But closer monitoring the sales lead follow-up behavior of more experienced sales reps' time is not the solution. Closer monitoring, in fact, can exacerbate the problem. And while providing more leads to novice sales reps does increase lead follow-up, giving more experienced sales reps more leads actually produces less follow-up.

"We found that sales reps explain their behavior by questioning the quality of the leads they are given," wrote the authors of the survey, Gaurav Sabnis , Sharmila C. Chatterjee, Rajdeep Grewal and Gary Lilien. "So the first things firms must do is to ensure that their leads are not only of high quality and but also that sales reps agree about that high quality.  We also learned that most firms evenly divide leads among their sales reps, irrespective of their experience or their past quota achievement.   Our research shows that allocating leads among sales reps based on sales reps' experience and past quota achievement can significantly help improve lead follow-up."

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While it may not always be possible to eliminate the sales lead black hole, the survey found, firms that ensure high sales lead quality, communicate that quality to their sales reps and distribute these leads differentially to less experienced sales reps will significant out perform their business-as-usual competitors.

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.