At a recent pitch, we were asked if there were any figures to help better understand ROI (Return on Investment). Lots of different anecdotal figures immediately sprung to mind: It takes seven interactions to win a piece of work. We win one out of three pitches. Our proposal rate is one in three. This information is nice to know but not substantial so we decided to give it some further thought.
What do we mean by conversion rates?
Conversion rates are measures of conversion marketing activities, usually the number of percentage of a group who follow a desired action. For example, when running a direct marketing campaign, one in ten targets will meet with us, and of those ten, we are likely to get one or two pieces of work.
We can also look at pipeline management as whole by looking at the image below. Starting from the right hand side, if Barry has a target of £500k and the average value of projects is £100k then he needs to win five projects per year. If conversion rates average at two to one, then he needs to propose ten jobs to win five. And so it goes.
Good pipeline management helps to avoid peaks and troughs in workflow because it ensures marketing and business development activity is ongoing, rather than just when a job is finished. We can look at different touchpoints along the sales funnel or pipeline to improve conversion and adjust tactics as needed.
In our experience, conversion figures vary from firm to firm, practice group to practice group, and from service to service. It gets a bit easier when it comes to digital marketing as you can easily compare page visits, cost-per-click, impressions, bounce rates, undertake split testing and so on. These figures are very useful to help paint a picture but for us, conversion rates are most important.
How do we measure conversion rates?
The formulas are straightforward. Here are some examples:
- Conversion rate = Number of Leads / Number of Sales x 100
- Website Lead Generation Rate = Number of Leads Collected / Total Traffic to Site x 100
- Direct Marketing Lead Generation =Number of meetings / Number of targets x 100
If possible, you should compare your conversion rates against previous data. If you don’t have previous data, set your own benchmark and start from there.
Conversion rates will help you understand what marketing activities work better than others and provide you with data that will help you to improve your Return on Investment (ROI) for the long-term. They provide valuable information about the best way to spend your marketing budget. Conversion rates will help you decide whether a campaign is worth repeating or changing.
Why CRM’s are essential for measuring conversion rates.
For many firms the idea of implementing a CRM (Client Relationship Management System) seems excessive. A good CRM will provide you with an excellent overview of your clients, provide you with data about leads and contacts, and ensure one of your most valuable assets, your data, is up-to-date. Spreadsheets are useful but cumbersome in measuring activity. Even the smallest firm needs a CRM to be able to effectively measure conversion rates efficiently – how many leads did you get. How many meetings, and how much new business?
You can look at which type of client is more likely to convert and what the elements of your marketing strategy are most effective. For example, once you have recorded the source of the lead, you can look at what marketing communications and activities have to push that particular client through the sales funnel.
If you are looking to get a better result for the amount of effort or money that you put into your marketing activities then it may be time to explore how you can do this. Look at your conversion rates and start to understand what is working well and what isn’t. Think about introducing a CRM system; many are free so there is simply no excuse. Simple measurement and benchmarking will massively improve your ROI giving you more time to spend with family and friends.
Contact us to find out more about conversion rates and how you can implement a CRM.
As a consultancy, the most important measure is conversion rates because it tells us if our activities are being successful or not.