Lead to Sale Conversion Rate is a metric that measures how effective the sales team is at converting a prospective customer, called a lead, into a paying customer. The generation of leads is the responsibility of marketing, and the conversion of these leads into customers is the responsibility of sales.
Knowing your conversion rate is critical to understanding how your sales team is performing, and to establishing which marketing channels are most impactful.
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Why Does it Matter?
Every lead represents a potential monetary value to your business. If you understand the value of every lead, coupled with the percent of leads that will convert into customers, you can establish how many leads need to be generated in order to sustain and grow your business.
The lead to sale conversion rate creates built-in benchmarks of success for marketing (are your marketing efforts successful in generating leads?) and for sales (is the sales team effective in converting leads into customers?).
How Do you Measure Lead to Sale Conversion Rate?
A simple formula to determine your lead to sale conversion ratio is:
Total Number of Sales
_____________________ x 100
Total Number of Leads
What Data Sources Would You Use to Measure the KPI?
A CRM, like Salesforce, Adobe, or SAP will track all sales activities, from the first touch through the lifetime of a customer. Here is a sales dashboard example displaying the important sales metrics that can be tracked as a part of a sales pipeline.
In combination with a CRM, online-based marketing tools, such as Google Ads, provide insights into the effectiveness of your various web-based marketing channels. By segmenting out leads, you can understand which advertisements create the highest conversion rate , and how this can be optimized to increase your lead to sale ratio.
Give me an example…
Let's say you are an entrepreneur in the ice-cream industry. You have invented a slow melt ice-cream cone which you have been marketing to food retailers through a combination of ice cream giveaways, and online advertising.
In September, your marketing team generated four leads through the ice cream socials, and six leads from the targeted ads.
Of the 10 total leads, your sales team is able to convert three of them into customers with annual contracts. This means your lead to sales conversion rate is 30%. With this number in mind, you can now determine the amount of leads required to hit your future revenue goals.
You can further leverage this rate to optimize your marketing efforts.
Let's pretend that of your three new customers, two of them were generated through your ice-cream giveaways. This means your lead to sale conversion rate for leads generated in person is 50%, whereas online marketing is at 33%. This information helps determine your marketing strategy going forward.
What Benchmarks/Indicators Should I Use?
A healthy lead to sales conversion rate will vary greatly by industry. B2B businesses have a more complex sales cycle than B2C businesses. A healthy lead to sales conversion rate should be determined by your industry benchmarks, as well as your historical performance.
This chart below reveals B2B sales conversion rates by industry based on data by MarketSherpa:
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