In a previous article, we talked about Sales Qualified Leads (SQLs) and Marketing Qualified Leads (MQLs). In this article, we introduce another term – High Qualified Leads (HQLs). The opposite of high quality leads is low quality leads.
If your business attracts thousands of contacts that show no desire to be contacted, they are low-quality leads. Leads can also be considered as low quality by sales teams if they don’t have any characteristics typical of SQLs.
Even so, low-quality leads are not necessarily bad. With the right amount of nurturing, these leads can be converted into high quality leads at a later date.
However, since B2B companies do not operate with infinite marketing budgets, it is important to prioritize leads that give the business a return on investment. But, there is a common mistake that marketers often make in lead generation – putting all their resources behind leads indiscriminately.
In this article, we look at how to calculate lead generation ROI and show you how to invest in each type of leads.
MQLs and HQLs: What’s the Difference?
The main difference between high quality leads and marketing qualified leads lies in the degree of sales readiness. Essentially, HQLs are known to have the following key characteristics:😉
- Power to make purchase decisions
- A good understanding of the problem and a belief that your product or service offering will solve them
- Awareness that the cost of leaving the problem unresolved is too high
- Have sufficient budgets to buy your offering
- Willingness to meet your sales reps
In B2B marketing, the fact that HQLs see your products or services as perfect fits is never a guarantee that they’ll buy from you. To convert these leads into buying customers, B2B marketers must continue nurturing them.
HQLs differ from MQLs in the sense that they are much closer to making up their mind about buying from your company compared to MQLs.
On the other hand, MQLs are those leads that:👇
- Are still researching possible solutions to their problem
- Express interest in your company by visiting your site
- Take actions like downloading content assets, clicking ads or placing items in the carts
- Complete your lead capture form
- Read your blogs and open your marketing emails
- Contact your company with questions
In terms of lead scoring, MQLs are ranked much lower than SQLs and HQLs. On the sales funnels, MQLs are found on the top-of-the funnel. Converting these leads into buying customers takes time. Even then, there are usually no guarantees that they will convert. Until they are open to hear more, you have to nurture them through marketing tactics such as content syndication.
HQLs vs MQLs: The Pros and Cons of Each
While each of these lead types has its own benefits, there are downsides for each as well. The image below summarizes the pros and cons for each lead type from a B2B stand point:
Calculating Lead Generation ROI
Every B2B marketer wants to increase the ROI from every lead generation campaign that a company runs. But for most marketers, determining ROI from digital marketing efforts is a major challenge.
Infact, statistics show that 80% of marketers experience difficulties in demonstrating the effectiveness of their marketing efforts. To address this challenge, sales and marketing teams should determine what constitutes measurable ROI and identify a framework for measuring it.
Here are three practical steps that B2B marketers can follow to calculate lead generation ROI:
Step 1: Determine Customer Lifetime Value
Customer Lifetime Value (CLV) basically refers to the average value that each customer brings you for the entire time they transact with your business. If, for instance, you have each customer generating $200 per month for 5 years, the CLV per customer will be $12,000 – which is ($200*60 months).
There are different tools available online that B2B marketers can use to calculate CLV. Kissmetrics, whose image is displayed below, is one of them. With this tool, B2B marketers can view a detailed revenue report showing estimated CLV, total revenues generated over specified periods and the average churn rate per day.
Source: Social Media Examiner
Step 2: Calculate the Cost of Customer Acquisition (CoCA).
Cost of Customer Acquisition simply refers to the price that a B2B company pays to acquire a new customer. This metric is critical in calculating lead generation ROI because it enables marketers to determine the extent to which their marketing and conversion strategy is working.
In most companies, the average allocation for customer acquisition is often pegged at 10% of the customer lifetime value. As such, the cost of acquisition based on the example discussed above would be $1200 – which is 10%*12,000. For companies that are just starting out, it is advisable to allocate a higher percentage.
Step 3: Determine How Many Customers You’ll Need to Break Even
Ideally, most companies allocate 10% of their marketing budget to lead generation. The budget typically covers all lead generation activities including content production and distribution channels.
Assuming your company’s marketing budget is $300,000 per year, the lead generation budget would be 10% – which is $30,000 per year. To get your ROI, divide the lead generation budget by the customer acquisition cost derived from step two. This would be $30,000/$1200, which is 25. This means to get a positive ROI, your company will need to acquire 25 or more new customers to break even.
Example of Lead ROI in Action
Brandon Stamschror, Senior Director of Operations for MECLABS Leads Group maintains that investing in quality leads increases the likelihood for higher returns. MECLABS conducted an experiment for one of its clients by testing and improving the quality of the contacts on its lists.
The company then compared its lowest-quality leads that had unverified names, against a list that had been verified through phone calls. Though the verified list was more expensive to buy, the cost of qualifying leads was $373, compared to $954 for the cheaper list. This was a cost of acquisition-per-lead difference of almost $600.
Some key finds from the experiment were:👇
- It took fewer calls for high quality leads to become sales ready
- A higher percentage of low-quality leads were no longer with the company
- Though high-quality leads cost more, they yielded more returns
MQLs or HQLs: Which Ones Should You Buy?
B2B marketers can use different strategies to generate leads. These include using first party intent data or third party intent data. First party intent data is basically the information that they gather from their interactions with prospects, visitors, and customers across varying digital platforms like company websites, social media, and emails.
Third-party intent data is information that is collected by other companies which include publishing networks, media exchanges and review sites. While first party data is readily available to B2B marketers, third party data is not because it is collected by third-party data providers from different websites and platforms and aggregated together.
To access this data, companies have to pay the providers. The beauty of using third-party data is that companies are able to reach prospects outside their immediate audience and hence widen their reach.
For instance, B2B marketers can use the data to reach new prospects who buy similar or complementary services and products from partner companies or competitors.
Even so, companies have to decide whether to buy MQLs or HQLs from third party data providers.🤔
Since lead generation efforts affect the B2B marketing budget, here are important factors that determine the type of leads that a company decides to buy:
- New Product Launches: New products require aggressive promotion to break into the market. When a company is launching a new product, buying MQLs allows it to have a big database of customers to nurture.
- Product Promotions: Companies offer services or products at a reduced cost, or throw in value-adds for each purchase, which helps in reducing lead nurturing time. B2B companies that run product promotion can choose to buy a mix of MQLs and HQLs then increase spending during promotions to take advantage of mounting interest.
- Changes in Key Personnel: B2B companies can buy data for HQLs and use it to inform them of changes in key personnel to ensure they don’t lose opportunities.
- Internal Budget Changes: As the business environment gets more competitive, cutting overhead costs becomes necessary. Investing money in a marketing team with capabilities to chase high-quality leads can be costly during such times. A cheaper option is to buy such leads and have salespeople close them.
- Business Seasons: Businesses don’t perform the same way throughout the year – some months are better than others. For instance, some businesses peak during the holidays. B2B marketers can prioritize purchase of HQLs during peak seasons when demand for their offerings is high. During off peak seasons, they can shift focus and buy MQLs.
- Competition: B2B marketers should keep track of competitors in order to take note of shifts in strategy. When competitors become aggressive in marketing to your audience, you could lose out on many prospects. Buying MQLs and HQLs ensures that competitors don’t steal the lion’s share of your market.
- Economic, Political and Natural Factors: These are factors that cannot be controlled. However, businesses can prepare for the curveballs that they bring by adjusting their strategies. If economic factors get out of control and affect the profitability of your business, buying both MQLs and HQLs becomes a viable option.
Every business needs HQLs and MQLs to increase sales and grow. Since they are sales ready, HQLs are easier to convert into customers while MQLs require more nurturing. The question of whether to buy MQLs or HQLs depends largely on the internal and external issues that a company is experiencing.