Hitting your sales quota every month means knowing how to work smarter, not harder. Oftentimes, this means knowing which leads to chase first. Sales reps who have mastered this skill typically use lead scoring to guide their actions.
Usually calculated on a numeric scale, lead scoring helps reps identify people who are most likely to buy their product or service and weed out those who are least likely. It makes you wonder why everyone isn’t scoring their leads, right?
Like most sales wizardry, lead scoring is a blend of instinct and data. But the better your data, the more accurate your scores. And the more accurate your scores, the smarter you can work.
5 steps to lead scoring
Assuming you have enough leads in your sales pipeline to warrant scoring each one, start by choosing what, exactly, to score. The process of lead scoring will not only help you close more deals, but it will also help you better understand who you’re attracting and the types of leads you should be attracting more of.
1. Choose the best variables to score
The first step to scoring your leads is identifying the common traits of your customers. Do they all run businesses or work for others? Are they in fashion, design, or retail? Do they generally complete a free trial before purchasing? Consider, too, the attributes shared by leads who most often do not convert to sales.
The following four attributes are commonly scored:
Does your product or service cater to customers in a variety of industries? If so, take a look at all the leads who have converted and sort them by industry.
Do SMBs typically have a high conversion rate? Or do enterprise companies yield a greater value?
Who ultimately pulled the trigger on recently closed sales? Was this person a C-level executive, a mid-level manager, or something entirely different?
Work with your marketing team to identify common pre-purchase activity, such as free trial sign-ups or visits to the pricing page.
The typical characteristics of your highest-converting customers are called “variables” or “segments” in lead scoring. We’ll reference each term throughout the rest of the article, but keep in mind, they are interchangeable.
Once you’ve identified the specific variables your customers have in common, the next step is determining their value and, ultimately, the value of your leads.
2. Calculate the average conversion rate or lead yield for your variable
There are two common ways to calculate the value of a variable (or segment): conversion rate and lead yield.
Conversion rate calculates the number of deals won compared to total leads attained. The formula for calculating the conversion rate is as follows:
Lead yield is the total amount of revenue made from closed deals. It’s calculated by dividing total win revenue by the number of leads generated, as shown below:
The metric you prioritize depends on your company’s overall business goals and pricing model. For example, conversion rate is a useful metric for B2B SaaS companies with long lifetime-value customers. In this type of subscription-based company, customers become more valuable over time. So the more customers you acquire, the more revenue you’ll accrue long-term.
For B2C companies and other organizations that sell fixed-price products, lead yield is a more useful success metric. Because at these businesses, sales are typically one-time deals. The higher the value of an individual sale, the more valuable that lead is.
Once you decide which metric is most relevant to your company’s business model, you can begin to calculate the value of leads on a more granular level. Use conversion rate or lead yield to analyze the value of specific lead variables, such as industry or company size.
3. Compare that value to the average of all customers
Keep in mind, you won’t know if a variable’s conversion rate or lead yield is actually good unless you compare it to your average customer. If you haven’t already, use the two formulas above to calculate conversion rate and yield rate for all of your customers combined. These numbers can be used as benchmarks for determining the true value of customer segments.
For example, let’s say the average close rate for all of your customers combined is 45%. Comparatively, a segment averaging around a 2% close rate has little value and should be given a low lead score.
4. Assign a score to your variable
Based on how your variable’s data compares to the average customer, assign them a score. While many organizations use a scale from 1-10, this depends entirely on the number of leads and data you have. If you want to get super precise with your lead scores, you can even use a 1-100 scale.
As a tip, consider creating a key to ensure your scoring system stays consistent. For example, a 10% conversion rate could equal two points, 20% could equal four points, and so on. Remember, the larger your scoring scale, the more precise you can get.
5. Evaluate leads based on their attributes
Once you have a list of attributes and scores, they can be used to evaluate individual leads. Overall lead scores are automatically calculated with a CRM, but they can also be evaluated manually. Just add up the points of each individual attribute.
For example, let’s say you’ve ranked the media industry as a five-point attribute, CEO as a 10-point job title, and SMBs as a five-point company size. A lead that fits into that category has a total score of 20. Compare overall scores between your leads to prioritize which prospects to target now and which to tackle later.
How to improve targeting with lead scores
The insights gained by lead scoring can reveal new prospecting opportunities. For marketing, it could mean designing landing pages that target newly found lead segments with high scores. For reps, it could mean tapping into new and lucrative prospecting channels where your high-scoring customers are most active.
With Sell, sales reps can organize valuable customer segments into “smart lists”. Using smart lists, reps can create and send a customized email template to a large group of similar leads in seconds, ensuring their outreach is both personal and efficient. With the insight gained from lead scoring, both sales and marketing will be able to bring more high-quality leads into the pipeline every month.
Sell smarter with lead scoring
With the help of lead scoring, reps can more easily prioritize prospects who stand to yield the most profit, enabling them to work smarter and more productively.