Outsourcing Demand Generation: The Path to High-Velocity Leads

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1 I D C E X E C U T I V E B R I E F Outsourcing Demand Generation: The Path to High-Velocity Leads February 2008 Global Headquarters: 5 Speen Street Framingham, MA USA P F Adapted from Lead Management Best Practices: How High-Intensity Leads Build More Business by Lee Levitt Sponsored by BAO Inc. Introduction Driving quality opportunities to sales has never been more important for marketing organizations. Many organizations have tried to staff up and build expertise in qualifying leads, only to find that they cannot provide the required quality or volume of leads. As a result, many outsource the process of demand generation to ensure a consistent flow of quality leads for their sales organizations. Those that have outsourced demand generation find a more consistent flow of leads and can focus their inside sales and direct sales organizations on the next steps in the selling cycle the creation of customer intimacy and perceived value that ultimately leads to closed deals. But this is just the first step to driving significant revenue growth via an outsourcing strategy. The next step is to move from the initial tactical outsourcing process to a more strategic demand generation process that involves multiple aspects of customer acquisition and delivers higher ROI. Based on information and data gathered from interviews with more than 25 leading technology companies, this Executive Brief examines the best practices in outsourcing both basic and advanced demand generation activities. Justifying Outsourced Demand Generation The process of demand generation is all about measuring need and readiness, as well as motivating the prospect to engage in a telephone or face-to-face meeting. With regard to demand generation, the task of a technology company's marketing organization has become more complex in who it must reach, what drives a prospect's interest in a solution, and how to gauge the prospect's potential and level of interest. IDC_619

2 However, most sales organizations today have neither the time nor the skill to conduct the up-front work necessary to identify the buyer issues or the full complement of decision makers and influencers involved in a particular technology purchase. Additionally, the process of researching and defining target prospects and the process of reaching out to those target prospects are mutually exclusive. The first represents a broad exploratory reach into an organization, conducting "safe" discussions that don t lead to a sales discussion, and is analytical in nature. The targets for these conversations are typically lower-level to midlevel managers and individual contributors; they are different from the targets for demand generation. The second is a series of increasingly focused rifle shots, aiming to identify the single best target and to build interest with that target, leading to a specific agreement (e.g., take a phone call, meeting). Buyers have little time to "teach" salespeople. They expect in fact, demand that the vendor's sales rep be fully prepared for the first meeting with a decision maker. A CIO simply will not put up with a series of questions exploring the network topology or application architecture. If sales reps haven't done their homework, they're shown the exit. And this usually happens no later than slide 2 of the PowerPoint presentation. Furthermore, the process of disqualifying a lead is perhaps even more important than that of qualifying a lead. Most sales organizations would prefer fewer highly qualified leads rather than more unqualified leads. With the former, they can focus on the opportunities; with the latter, they must expend time and energy sorting between the "good" leads and the "bad" leads. "High Probability Selling," a qualifying methodology first popularized by Jacques Werth, is one such technique employed to weed out unqualified prospects, allowing sales reps to focus on "real" opportunities, thus substantially and, in some cases, dramatically improving sales productivity. In summary, effective lead generation involves significantly more preparation on the part of the sales organization before the rep ever talks to the prospect. The High-Intensity Lead Organizations today must focus on the "high-intensity lead" a lead that is qualified and has momentum. The momentum can be in the form of the number and spacing of appointments made and kept, clear action items committed to and carried out, or a higher degree of engagement on the part of the prospect in the process. Generally, organizations are consistent in the phases they use to describe lead management activities. Organizations that engage in what IDC calls "basic lead outsourcing" simply hire an outsourcer to "work their lists and relationships." These organizations may also pass a target list of companies to the outsourcer IDC

3 Many organizations will develop a targeted list of prospect companies, typically prioritized based on traditional demographic attributes such as industry or SIC code and company size. The targeted prospects are then contacted, interviewed, and asked a series of qualifying questions. Based on the responses to those questions, the lead is given a score. Once a lead achieves a certain threshold, it's turned over to the direct sales organization or channel partners for pursuit. We Don't Know What We Don't Know IDC recently uncovered a new practice of "advanced demand generation" that spreads the net far wider. The traditional process assumes that organizations know a lot about their target markets and target companies. In many, perhaps most, cases, this assumption is incorrect. Furthermore, with over 11 million businesses buying technology products in the United States today, it is impossible for any one vendor to have an accurate view of its opportunities. Savvy companies today are conducting exploratory investigations into likely companies. They define the broad target market with a specific set of criteria and then turn that definition over to an outsourcing provider for deeper analysis of the opportunities, organization structures, and time frames of individual companies within the target market. This process provides the foundation for more effective lead generation activities. The probing and appointment setting activities then have significantly more relevance, as the caller can probe on known issues and pain points. Then, when the sales rep connects with the prospect, he or she is not conducting a survey of what, who, and when but rather can probe consultatively on specific issues. Managing the Demand Generation Process In many organizations, marketing takes the lead role in managing the demand generation and qualification process. That management involves marketing consulting with sales as to who to target, the volume of required activity, and what criteria to use. Marketing typically funds both lead generation activities and overall demand generation efforts. In some cases, marketing will field small telemarketing teams. Additionally, sales may conduct some local or regional efforts. However, the skills necessary for efficient demand generation and lead generation do not exist in marketing or, in many cases, in sales. As a result, many organizations find outsourcing to be highly advantageous. Most organizations with up to $2 billion in annual revenue should outsource; those with over $2 billion typically outsource in specific regions, for new product/service launches, and to supplement internal activities IDC 3

4 Telesales, Inside Sales, and the Lead Qualification Challenge Who takes responsibility for the tracking, scoring, and pursuit of prospects is one aspect of marketing that varies greatly from organization to organization. For some, telesales organizations conduct the traditional outbound-calling activity as they attempt to identify the right individuals within target organizations. Those teams of often entry-level people suffer high turnover rates given the makeup of their workday and constant pressure to identify, reach, and engage the right people. Once a target is qualified at the most basic level, such as the right person to speak with, it may be turned over to an inside sales representative with deeper knowledge of the company's products and services. This individual works to qualify the opportunity and then acts as the interface to outside sales (or partners) as he or she schedules a meeting, briefs the direct (outside) sales representative or channel partner rep, and conducts additional research required for a successful first meeting. Many companies, particularly those with under $2 billion or so in annual revenue, have found the use of a telesales organization to be expensive and difficult to manage. Inside sales is often faced with less than adequately qualified opportunities coming from telesales, creating tension between themselves and the telesales organization. When inside sales hands off the opportunity, gaps often exist in understanding or information, making insides sales repeat some of the telesales work and keeping them in a position of administration versus sales-support activities that directly drive revenue. This is a key reason why organizations consider the outsourced sales option. With an outside service provider, a specific service-level agreement (SLA) can be established and measured. Only a few organizations today practice similar rigor across internal groups, and as a result, outsourcing the process can deliver higher-quality results. Outsourcing Alternatives and Expectations Often companies feel pressure from sales to increase the quality and volume of leads. Marketing executives see the frustration and want to address it by reducing their risk. When they look outside, they see an opportunity to: Reduce costs Eliminate resources Adjust lead flow to sales consumption capacity Improve the overall quality and quantity of leads Importantly, they can also find an organization better at prospecting because the outsourcer has skilled individuals who understand specific industries or companies, or both IDC

5 Some companies believe that they know who they want to target and expect that coming up with a target list will be relatively easy. Some also expect that outsourcers have ready lists of prospects to call. These assumptions generally are incorrect and will lead to disappointment in outsourcing. The most difficult part of demand generation is know which prospects are the most likely buyers! Running a list by SIC code will not lead to putting a rep in front of prospects with pain and needs. What's even more difficult than knowing which prospects to call is how to approach them, engage them, and gain their interest. That is where technology companies have found that outsourced providers can add significant value. Outsourced providers have significant experience in selling and driving conversations and tailored systems and processes that allow them to track and manage pursuit effectively. When a vendor considers an outsourced provider, it should look to find one that: Has industry expertise Has people skilled in selling and experienced in the type of solution the vendor offers Is passionate about the type of solution the vendor provides Has well-defined processes that help to ensure success Best Practice: Develop Clarity on the Specific Qualifications Outsourcing clients typically retain the right to refuse an appointment, or, if it fails to match their quality expectations, they can debate whether it should count as an appointment and incur a fee. But obviously it's better for both parties to be clear up front regarding what constitutes a qualified lead to avoid aggravation and to save time especially given that the outside sales organization won't look kindly on multiple instances of appointments that, in hindsight, were not justified in the first place. Relationship Management Best Practices Relationship management best practices center on the following four areas: Communication. It's impossible to overcommunicate with the outsourced provider. Vendors use weekly status meetings and quarterly trainings sessions and often bring role-playing to the team. In many ways, this is similar to the ongoing training of a channel partner. But none of those activities match the importance of the ongoing interaction between the outside salesperson who gets the appointment or qualified lead and their counterpart outsourced representative IDC 5

6 Relationships. Best-practice leaders tell IDC that they work to have as close to a one-to-one relationship with the outsourcer as possible, and they try to maintain that relationship as long as possible. They strive to have the two individuals build a rapport because much of the insight is transferred during those conversations. In fact, many vendors feel that this interaction is the best training of all. Expectations. While some marketing or sales organizations can turn on or turn off the outsourcing relationship in the short term, others find that success requires an investment in time. It may take three to six months, or longer, for the outsourcer to deliver results an issue that is entirely acceptable for a new direct sales recruit but not always expected when outsourcing. The time is well spent in building the expertise and in fine-tuning the target audience. Reporting. While some firms are able to synch their salestracking systems, typically rudimentary methods such as spreadsheet exchange are used. Vendors should look closely at the compatibility between their sales automation systems and those of the outsourced provider to ensure that information transfer is both simple and comprehensive. It's All About Results Best-practice organizations have a handle on the value and impact of the lead management process. Organizations that outsource the targeting, recruitment, and setting of meetings report that almost all of the appointments arranged are turned over to outside sales. Of those, an average of 25 50% lead to additional discussions (see Table 1). Of those that don t, almost 75% are nurtured further, either by the vendor s inside sales team or by outside salespeople who might feel that despite poor timing, they must get to know and keep in contact with these individuals. For companies that conduct specific target market analysis and then execute campaigns against that target market, the results are even better, as can be seen in Table IDC

7 Table 1 Lead Management Process Measurement Area Historical Results of Peers Results with Well-Defined Target Markets Percentage of appointments given to sales Percentage of initial meetings that lead to additional discussions Percentage of discussions that lead to proposals Percentage of proposals won Percentage of unsuccessful initial meetings that are further nurtured Percentage of set meetings that are discarded Estimated return on outsourced demand generation 2 times cost to 10 times cost 2 times cost to 15 times cost Source: IDC, 2008 For companies that outsource the generation of high-velocity leads, the tracking of appointments to closed revenue is sometimes difficult, not because of a lack of desire but often because of system limitations. Best-practice companies are able to track the results of the 25 50% that make it to additional conversations, 50% that lead to proposals, and between 30% and 50% of those proposals that close. The return on investment of outsourcing ranges from 2 times to 10 times the cost of the program. Expectations around results hinge on the complexity of the offering, the length of the sales cycle, the price point of the offering, and the degree to which the offering requires a consultative sale. Of course, success is also dependent upon the skills of the field sales team. It is interesting to note that the more complex the sale, the better it seems to lend itself to a lead management program that emphasizes qualification and building velocity. This is due to the additional consultative aspects of the sales process, where awareness of need is best turned into understanding through conversation, engagement, and the degree of prospect participation. Essential Guidance and Conclusion Today, success is all about building the velocity for each new sales opportunity. Many organizations outsource the nurturing of opportunities to turn them into appointments, so their own salespeople can focus on taking the opportunities from being qualified to being closed. Those organizations that use the outsource option feel that communication is critical and point to the pay-forperformance option as one that reduces risk significantly IDC 7

8 The following action steps are essential for success: Develop a good target market strategy with marketing, sales, and the outsourcer working together to define the parameters. Then test those assumptions by conducting advanced demand generation research outside the primary focus area. Many companies are quite surprised at both the quality and quantity of opportunities that surface. Conduct an integrated research and qualification (or more importantly disqualification) process prior to and separate from the demand generation process. Build better sophistication about the scoring of leads around the weight given to certain activities and requests for content. Prioritize opportunities based upon a scoring system and ensure that the age of the request or participation affects the score. A look at the aging of the lead tells a lot about the opportunity's true velocity. Have lead qualification and outside sales be as close to a one-to-one ratio as possible. The best training comes from the dialogue that takes place on a daily basis, not on rules and responsibilities. Build appreciation around lead velocity by taking those highly qualified leads and piloting their use by a core group from outside sales. Take the initial success and help word of mouth spread adoption rather than avoidance. Be clear on the guidelines for qualification, what is considered qualified and what is not. From each instance of a phone call that is set up or a meeting that is held, when it fails, study and learn from it to adjust scripts used to qualify, the criteria, and the handoff process. Managing high-velocity leads requires the ability to adjust quickly as needed. Find and hire people or outsourced partners who have people who are inquisitive and who can balance the need to drive transactions with the need to understand the requirements. Often, best-practice leaders lament that they wish their people, direct or otherwise, would simply ask the extra questions that would truly qualify an opportunity. Measure the results carefully and reinforce success. Many best-practice leaders put broad visibility on how individual teams are doing with the appointments or qualified opportunities they receive. Use the positive results in inbound communication to continually reinforce why the support of a high-velocity lead program not only is critical but also generates better results IDC

9 Executive Guidance The world of selling continues to change. With it, the idea of a lead has also changed to where now the context that surrounds the lead, the research that goes into finding the right person with the right degree of need and pain, and the level of measurable engagement with context or activities can tell the story about how truly qualified a lead is and the potential it holds. Many midsize and smaller companies lack the internal resources to efficiently and effectively generate demand and provide a steady stream of accurate and actionable prospect contact information. These companies benefit greatly from a relationship with an outsourcer, allowing them to efficiently increase the flow of qualified leads to their sales organizations. Even larger companies can benefit from an outsourced provider that offers faster ramp-up times for establishing a position in new markets or territories. Lead management is no longer about the numbers it's about efficiency the right person at the right time, who, as a member of a buying team, can facilitate the dialogue and truly cares about the outcome. More than ever, it is about the process that gets the lead to the first meeting, as well as about the targeting, tailoring, and insight gained along the way that will tell the true story of turning a highvelocity lead into revenue. COPYRIGHT NOTICE The analyst opinion, analysis, and research results presented in this IDC Executive Brief are drawn directly from the more detailed studies published in IDC Continuous Intelligence Services. Any IDC information that is to be used in advertising, press releases, or promotional materials requires prior written approval from IDC. Contact IDC Go-to-Market Services at gms@idc.com or the GMS information line at to request permission to quote or source IDC or for more information on IDC Executive Briefs. Visit to learn more about IDC subscription and consulting services or to learn more about IDC Go-to-Market Services. Copyright 2008 IDC. Reproduction is forbidden unless authorized IDC 9