To generate more money for your business, you need customers who will buy and use your products and services. It’s crucial to have long-term, loyal customers as well as a steady stream of new ones. Before you can have a customer, you need a lead—someone who could benefit from your products and has shown interest in them.
But lead generation doesn’t automatically give you a customer; a lead is a potential customer who has made an inquiry about your company and what you sell. It’s someone to whom you will give a sales pitch. The percentage of qualifying leads that become your customers is called your conversion rate. You need this number to be as high as possible to increase your revenue. Your lead conversion rate indicates how effective your sales and marketing strategy and techniques have been.
Fortunately, in your business, there are resources available to help you in your lead conversion efforts. Podium, a leading software company that helps businesses manage their customer service, has several products to assist you. One of its foremost products is Lead Drive. This tool is essential if you need help with optimization for your lead conversion rates.
Lead Drive collects all your customer inquiries and places them in one convenient inbox that you can easily access and organize your leads. Thanks to Lead Drive, you won’t have to worry about overlooking any inquiries and risk losing leads to competitors. The inbox consolidates your leads and automatically replies to them in a personalized way. To improve your lead conversion rate and have more paying customers going forward, you need Podium and Lead Drive and its automation tool.
Also, speed to lead is critical in today’s fast-paced market, and Podium offers an unparalleled advantage by ensuring businesses engage with leads within a couple of minutes—guaranteed. Podium’s conversational AI is outcome-driven – it doesn’t just respond to inbound leads it guides conversations toward a specific goal, such as a sale or booking. Unlike other AI systems that focus on providing correct responses, Podium aims to drive specific customer actions to grow your business. Transform your business with Podium’s AI Employee. Get a Demo Today.
What Is Lead Conversion Rate?
Regardless of the type of business you have and what you offer, it’s vital to get leads and turn them into customers. You need to do this quickly and efficiently before the competition does.
Lead conversion metrics not only show you where your numbers are when it comes to lead generation and lead nurturing efforts, but these allow you to see where you need to make improvements and optimize your website, landing page, CTAs or calls to action, and other marketing aspects. These metrics may also give you insights into factors such as pricing.
Many businesses are not satisfied with their lead-to-sales conversion rates. Low rates mean you are not getting enough new customers. In turn, this will mean your sales numbers are not where they should be for your company to grow or even survive. Improving conversion from lead to customer is crucial for your company to stay ahead of the competition and be viable.
Even if your conversion rate is good or desirable, consistently improving it will help to ensure your company does not become stagnant. Optimization and improving the rate will also offset customers who may drop out.
How to Calculate Lead Conversion Rate?
You need to understand lead conversion metrics so you know where your company stands in its efforts to turn leads into paying customers. You can also use these figures to gauge the performance of your marketing teams and sales reps.
Figuring out the conversion rate is simple. To calculate the lead conversion rate, divide the total number of your new customers by the total number of leads you have. Then, multiply that figure by 100. You can factor in the number of visitors to your site, too. For example, if you had 1,000 website visitors last month, and 150 of those visitors purchased something from your company, your lead conversion rate would be 15%.
You can also look at this rate from a different standpoint. If you received an inquiry about your company’s products and services through an email, phone call, or message on your website from 500 members of your target audience, and 100 of these leads end up buying your product, your rate would be 20%
What Is a Good Lead Conversion Rate?
You may be asking yourself, “What is a good lead conversion rate?” First, understand that no two businesses are identical. You will have different needs and goals from the next company, even competitors. Rates will vary from industry to industry, too. Still, there are important baselines to keep in mind. Generally speaking, an average lead conversion rate is around 7%. If your company has a rate of more than 10%, you are sitting in a good position. Anything under 3% is a poor rate.
Customer Acquisition Cost and Customer Lifetime Value are other useful concepts to consider in this scenario. The customer acquisition cost is how much money you will spend in your sales and marketing campaign to get a single customer. You can’t afford to spend too much money on the conversion process of just one customer. However, not spending enough can cause you to lose out on a potential loyal customer. This can affect your company’s growth and vitality.
The customer lifetime value (LTV) is a related concept. This is how much money a customer will spend, on average, during the entire time that person uses your products and services. Take the total amount of money any customer spends before that individual stops being your customer, and you have the LTV.
You should aim to spend less money to acquire that customer than you project that customer to spend during their time using your products and services. If you are spending more than the LTV for each customer, you will lose a significant amount of money over time, which can have drastic effects on your business. Spending less to get customers than they will pay for your offerings will equal growth and increased revenue now and in the future.
4 Lead Conversion Metrics to Keep an Eye On
In your efforts to improve lead generation campaigns and lead conversion rates, there are various metrics or KPIs to explore and keep in mind. Each metric and all benchmarks have value and give you different insights into how your lead conversion is performing and where you need to make changes and improvements. Leads-to-sales conversion rates can also reveal where you are excelling and where you should be devoting your resources and planning.
1. Lead-to-Customer Conversion Rate
Converting leads to sales does not happen by accident. Your sales and marketing efforts need to be focused, dedicated, consistent, and effective. The lead-to-customer conversion rate confirms you’re either doing well or need to go a different direction with the sales and marketing campaigns you’re using. This rate tells you how many of your leads directly become sales and increased revenue for your company.
To determine the lead-to-customer conversion rate, look at the number of total converted leads versus the total volume from these leads. So, simply divide the number of conversions by the total lead volume, and then multiply this figure by 100%.
Let’s say your company generates 1,500 leads through an inquiry form on your website. Of these, imagine 50 become customers who pay for your goods and services. Performing the calculations, you get a rate of 3.3% (1,500 / 50 x 100).
2. Sales Cycle Length
The process of converting a lead to a customer can be different from business to business and from customer to customer. It can even be different for marketing-qualified leads (MQLs) and sales-qualified leads (SQLs). Depending on the industry and the types of customers and products involved, the sales cycle can be relatively short or long.
The sales cycle refers to the amount of time you spend with a customer from first contact until the person purchases something from you. This is an important metric because it can help you forecast future sales and future revenue. You can evaluate bottlenecks in the sales pipeline or why sales reps might be falling short. Looking at the sales cycle length enables you to improve future sales.
To calculate the sales cycle length, you will take the total number of days it took to make a sale and then divide it by the number of deals you closed. If you spend 100 days to make 10 sales, your rate is 10, meaning it takes an average of 10 days for the sales team to close a deal.
Spending too much time in the sales cycle length may be inefficient. Spending too little time may not be sustainable and realistic.
3. Cost Per Conversion
The cost per conversion rate is simple. This is how much money you will spend to do lead conversion over a certain period. Your costs should include those in sales and marketing as well as the salaries, commissions, and bonuses you pay employees to make the sales. Other overhead costs involved should also be factored in. Add these costs and divide the sum by the number of leads you converted.
4. Abandonment Rate
When a lead does not take the desired action and is no longer a potential customer, this is known as abandonment. This could happen when a lead hangs up the phone before the deal is closed, when the lead finds a product or service with another company instead, or when the lead is unable to receive a satisfactory answer to a question or concern.
The abandonment rate is the total number of abandoned contacts divided by the total contacts. You want this number to be as low as possible. High abandonment rates can slow sales and revenue.
How to Improve Lead Conversion Rate?
If your lead generation conversion rates are low and the other metrics are not where you want them to be, help is available. Fortunately, there are ways you can regain momentum and improve your conversion strategy.
1. Improve your speed to lead.
One of the best ways you can bump your lead conversion rate numbers is to respond quickly to leads. When someone asks on your website or through an email or phone call about your business and products, you don’t want to leave them waiting. The inquiries may come through sources such as Angie’s or Thumbtack, too.
The longer it takes for you to follow-up with your leads, the less likely they are to become customers. Your conversion rates can improve when you are more organized and can streamline your processes. This is where Podium comes in.
Through Lead Drive, you can always respond to leads before they leave for your competitors. No matter how leads contact you, all the inquiries come to one place, so you can easily and quickly respond. The responses are automatic, too, so you won’t miss anything. Nothing will get lost among your many other messages from customers.
Speed to lead wins; Podium’s AI Employee boosts lead conversion by 45%. Podium’s AI Employee guarantees your business engages with leads within a couple of minutes; during peak hours, off hours, and every hour in between.
2. Centralize your lead communication channels.
In the marketing and sales process and in working with leads and customers, communication is vital. Your customers will use a wide range of methods to reach out to you and connect. These platforms may include text messages, email, Facebook, LinkedIn, and other social media messages, website chats, and old-fashioned phone calls.
While you welcome this stream of communication, it’s easy for things to get lost in the shuffle. However, if you streamline your communication by bringing everything into one inbox, you won’t feel overwhelmed, and your leads will get the interaction they want and need. As a result, you are more likely to convert them into paying customers.
Podium can help your business simplify communication and make it more effective. By bringing everything into one centralized location, you can review and respond to all your messages, regardless of where they come from. You’ll be able to give your leads personalized service by responding promptly.
Podium’s solution even lets you send out surveys and other communications such as payment requests and appointment reminders. There is no need to sift through multiple channels and sales funnels just to find important lead data.
3. Improve response times with AI and a chatbot.
When customers ask about your business and what you sell and offer, they want a quick response. Waiting too long puts you at risk of losing the lead and an eventual customer. Thanks to Podium’s tools and solutions, you can respond within a few minutes by using an automatic message.
First, Podium’s webchat function makes it easy to communicate with customers who visit your site and request information. When a customer is on your site, you can make fast contact and be available to assist them with all their needs. If you want to automatically generate replies in seconds via text messaging, Podium’s AI chatbot is a good option to improve communication and response times.
Beat your competition faster than ever with Podium’s AI Employee. Watch a demo today.
