The number that looked good was the one nobody could use
One company we worked with this spring illustrated this perfectly. The CEO's question was simple: What would doubling the number of qualified opportunities in his pipeline cost in advertising and personnel?
Before answering, as we always do, we asked what they already had.
Channel 1 was a paid listing on a software comparison site that costed about £12,000 across the year. This had produced sixteen enquiries, of which the team had qualified 12 as real. Channel 2 was organic search, costing nothing extra, which had brought 86 enquiries over the same twelve months.
"We have cracked Organic Search, and now want to add paid acquisition to the mix", the CEO said.
We asked if we doubled the number of opportunities, could his team absorb the additional 86 meetings, or if he was doubling headcount too?
He said he wouldn't need to, because "only one or two inbound queries are actually real enough for the team to work with"
And we saw his demeanour changed as he said it out loud. It dawned on him, as it does on most CEOs when they reflect on this, that the revenue problem wasn't a volume problem. And if he did try to solve it with more volume, the actual bill he'd run wouldn't just be the ad spend, but the cost of finding, hiring, ramping and managing two additional sellers. Or the cost of churning employees, if he refused to create the headcount.
Start with the one number this turns on
Take your last 40 first meetings, in date order. Mark each one yes or no on whether it became a real opportunity. Divide.
That is your meetings-to-opportunity rate. It takes an afternoon.
If your CRM stages are too messy to give it to you, leave the CRM alone. Forty meetings will tell you roughly where you are, and roughly is enough to make the next decision.
Then do the harder half, which is asking why.
Sit with the ones that died. Was it the wrong company? The wrong person inside it? Or the right person, with no problem worth a budget this year?
A rate on its own tells you the funnel leaks. It does not tell you where. And a leak you cannot locate cannot be priced against the alternatives.
Then treat what you find as a reading, not a ceiling.
One in four is what your current positioning and your current message produce, against the people you are currently reaching. It is not what the system could do.
Everything else here follows from that difference. A company that treats its conversion rate as a fact of nature will always conclude it needs more leads, because the only number it believes it can move is the one at the top.
Four routes to the same revenue number
Here is the arithmetic we ran on that call. With your own figures it takes ten minutes.
Start at the end. They wanted £500,000 of new revenue against an average contract of £30,000.
That is 17 deals.
This team wanted three times pipeline cover before they would call the plan safe. So 17 deals needed about 50 live opportunities.
One opportunity came out of roughly every four first meetings. So 50 opportunities needed 200 meetings across the year. About 17 a month.
Then price a meeting. Take last quarter's demand spend and divide it by the meetings it produced. That is the marketing cost of putting one qualified person in front of a salesperson.
Theirs came to £250.
At £250, those 200 meetings cost £50,000 across the year. A bit over £4,000 a month.
It answers the question the meeting was called to settle.
It is not the only answer to £500,000.
| The input you move | What it takes | Meetings needed | Cost at £250 |
|---|---|---|---|
| Volume, at today's conversion | More budget, every month, at the market rate | 200 | £50,000 |
| Conversion, one in three instead of one in four | Targeting and message aimed at a problem somebody owns | 150 | £37,500 |
| Contract value, £35,000 instead of £30,000 | 15 deals rather than 17, so 45 opportunities | 180 | £45,000 |
One step of conversion is worth £12,500 a year here. A quarter of the budget.
And unlike the budget, you do not buy it again next year.
One step means one extra meeting in twelve becomes a real opportunity. It happens when the people arriving sit closer to the people who buy.
The awkward part is that volume is the only row a team can act on by Friday. Raise a budget, loosen the targeting, ask the agency for more, report back next month.
So it wins the meeting.
The conversion row asks harder questions. Who is arriving? What problem do they have? Does your message name it? Is anyone there able to spend money fixing it?
Those are not marketing questions. They are revenue questions, and they take longer than a month.
The lower your contract value, the sooner the volume route runs out of road.
Swap the £30,000 contract for a £3,000 one. The same £500,000 now needs 167 deals, about 500 opportunities, and about 2,000 meetings.
At £250 each, that is £500,000 of marketing to earn £500,000 of revenue.
Why more leads makes the leads worse
The volume route has a second cost the arithmetic does not show.
To get materially more leads out of the same market, you widen the targeting or you lower the bar on what counts. Sometimes both.
Either way you reach further from the people who fit.
So the average arrival gets worse as the count goes up. The damage shows up two stages later, as a conversion rate nobody can account for.
You bought volume and paid for it in the number you were already failing to measure.
One business owner had already run the experiment, and wrote it up: "We don't really need more leads for the sake of having more leads. I'd much rather have fewer enquiries but from people who actually value what we do and are comfortable spending £3k+."
The volume brought people who wanted a different product at a different price. Each of those conversations cost him the hour a real one would have.
Ad platforms do it faster.
Ask a paid search practitioner why accounts drift and you get this: "Google is already pretty good at finding more of whatever you tell it is valuable."
The accounts in trouble, he says, are the ones "still telling Google that every form submission is equally valuable". Then: "people wonder why Smart Bidding keeps finding cheap leads that never buy."
The platform is not confused. It is obeying.
Tell a system to produce arrivals and it gets better at producing arrivals every quarter. Nothing in that instruction asks whether the person has a problem, whether anyone owns it, or whether they can buy this year.
The two numbers that lie to you about this
When a business goes looking for the fault, it reaches for one of two metrics. Both measure the stage before the one that matters.
The marketing qualified lead.
A marketer writing up a bad quarter reports that his head of sales told him "it's because MQLs aren't converting to SQLs". Then the detail that explains the fight: "When we set our goals, he expected a 20% conversion rate from MQL to SQL and the actual rate is way below that mark."
Two teams agreed a rate before either had measured one. They missed it. Then they argued about whose fault the miss was.
Nothing in that conversation was about a buyer.
A rate set as a target cannot be diagnosed when reality comes in underneath it. There is no finding to make, only somebody to blame. That seam is where marketing and sales stop being one system, and we have written about it in marketing and sales alignment.
The deeper fault is what the qualification is built from. Pages viewed, emails opened, a job title matched against a list.
None of that establishes that a problem exists inside that company, or that somebody there is accountable for fixing it.
A lead score built on your own telemetry predicts your own telemetry.
Cost per lead.
It has a denominator. It falls when you do well. It lets two channels sit on one line of a report.
It will also point you at the wrong channel with total confidence.
An advertiser in the US, comparing his spend against an agency's on the same account, described their leads at "roughly $350, which is fine in the solar world if we could actually get some to convert". His own came in at "a cost per lead of approximately $27".
At the stage he measured, $27 wins.
He asks whether the expensive leads convert. He never asks it of the cheap ones.
Go back to the two channels on that call. The listing cost £750 an enquiry and three quarters of its enquiries were real. Organic cost nothing, and what happened to its 86 was the thing nobody in the room could answer.
Cost per lead picks organic. It picks it because the stage where cost per lead is calculated is the only stage organic was ever measured at.
The price of a lead and the quality of a lead rose together there, which is the reverse of what the metric assumes.
The number to hold yourself against is cost per customer, by channel.
Reach everyone. Count only what converts.
There is a serious case against narrow targeting, and it deserves an answer rather than a dodge.
Byron Sharp and the Ehrenberg-Bass Institute for Marketing Science argue in How Brands Grow that brands grow chiefly by acquiring more customers, and that narrow targeting is a mistake rather than a discipline.
Alongside it sits the finding most quoted in B2B. Only about 5% of business buyers are in the market at any given moment, because firms replace things like banking, software and telecoms on cycles measured in years. That is the 95:5 rule, from John Dawes at Ehrenberg-Bass.
None of it is an argument for lead targets. It is an argument against them.
If 95 of every 100 people you reach cannot buy this quarter, reach them anyway. You want to be remembered when they can.
The damage starts when a lead target asks those 95 to behave like buyers today. They get written down as though they could buy, because the counting demanded it. That is where the junk enters.
Sharp counts customers acquired. Dawes tells you to spend on being remembered by people who will fill in no forms today.
Neither counts forms.
Reach as wide as the budget allows. Hold the counting to what converts.
Count the number you are paid for
You do not need to dismantle your reporting.
You need one conversion rate you have measured rather than agreed. An account of why it is what it is. And the nerve to make it the number the demand budget answers to.
Lead volume then becomes an input to a forecast instead of the point of the exercise.
Where this sits in our own model is the first gate, Position: who the buyer is, what the message aims at, which channels carry it. It fails in one characteristic way, which is volume poured through a definition of the buyer nobody ever settled. The gate after it is Activate, where interest hardens into conviction somebody will stake a budget on. A lead count sits between the two and measures the output of neither. Both are defined in the Demand Architecture Glossary.
The company on that call did not need more leads.
It needed to know what happened to 86 of them.
The arithmetic is the easy half
Everything above is a spreadsheet. You can build it in an afternoon and most of you should, before you spend another pound.
The hard half is what you do with what it tells you.
Your conversion rate will tell you that something is wrong. It will not tell you that your positioning is the problem, that the segment you built the company on has moved, or that the message you have defended for two years is aimed at somebody who does not sign.
Those findings are expensive to reach alone, because you are the person who made the decisions they overturn.
When you are close to something, and you do not know what good looks like, you are not the best person to deal with it. It is why doctors are told not to treat their own families. It is not a question of skill. An award-winning cardiologist is still the wrong person to diagnose his own child.
You need a degree of objectivity to be honest about the finding and about the fix.