Calculating the value of Lead Nurturing

What is rarely taken into account in lead generation and lead qualification programs is the ultimate value of developing and building a prospect pipeline. For example, for every lead that is generated by ETI for our clients, we estimate some four to six additional prospects that require nurturing over time and of these a high percentage will develop into valid sales-ready opportunities at some point.

Few companies have the infrastructure (let alone the patience) to effectively undertake the task of nurturing future prospects. However, the rewards for those companies which accomplish this task successfully are potentially immense.

Our statistics reliably indicate that for every 100 or so prospects nurtured in the prospect pipeline, will render some 20-40 more sales-ready opportunities over time.   (Yes 20%+.)

Only you know the average value of each new customer.  And only you know the average number of years new customers will remain active purchasers. But the incremental profits from those extra sales minimize the nurturing costs and maximize the return on your overall marketing investments (ROMI).

Too few companies recognize the inherent future value of this pipeline and therefore the costs of nurturing appear to be disproportionately high.This could be a serious mistake. It is also short sighted because there has already been a substantial investment made in identifying these prospects.  So why waste and discard them?

Let’s take the following simple scenario:

Opportunities identified:

Cost per opportunity $500
Total cost $50,000
Prospect pipeline 400
Nurturing cost over 1 year $10,000
Opportunities from prospect pipeline. (Conservative first year estimate.  Result will eventually be higher.) 50
Total number of opportunities 150
Total cost $60,000
Total cost per opportunity $400
Saving on each cost per opportunity  20%

Now if you factor in some average revenues – say $20,000 with a conversion rate of 25% - the total revenues from the Opportunity Pipeline will be some $500,000. And the revenues from the prospect pipeline in the first year will therefore total $250,000.  The sum is $750k.

In the first instance the ROI (cost of sales) is 10%,

Together with the sales from the prospect pipeline, the sum is reduced to only 8%.  i.e. An incremental increase of 20%.

But it probably gets better.  Our experience shows that opportunities coming out of the prospect pipeline that have been nurtured over time enjoy great sales conversion ratios.  So ultimately the ROI may even be substantially better than in the above example.

For more information on how ETI can develop an effective and profitable lead nurturing effort and maximize your sales opportunity pipelines please call 1.800.466.4384.

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