Wouldn’t it be great if you could produce a certain number of MQLs and you knew that this would automatically result in achieving your revenue targets?
If only life was that simple!
The ideal MQL to SQL ratio is often debated between sales and marketing and it’s one of those areas where there needs to be some mutual agreement on the best approach. The ideal ratio is based on a number of factors and involves sales and marketing singing off the same hymn sheet and agreeing what the priorities are.
The ratio will also be slightly different for every business. Just because one ratio works for a professional services company doesn’t mean that it can be adopted for a manufacturing company because, there will be different nuances in the style of marketing and how the sales approach works. However, when you’re looking at MQL to SQL ratios it isn’t all about the numbers, it’s also about focusing on the quality and the role that sales and marketing play.
High Ratio
For example, let’s take the scenario where a high ratio of MQLs is being produced but only a handful of them are converting into SQLs. What does this tell you?
Well, it could be one of two things. Either the qualification process for the marketing leads being produced is not sufficient or the sales team are not following up the marketing leads quick enough or with enough depth.
Either way you know there’s an issue to be addressed and the best way to do this is through sales and marketing having an open and honest dialog about how the approach should work. This is where service level agreements come into play. If sales and marketing can agree (and formalise in writing) what a good MQL looks like and how quickly they need to be followed up, then you have a decent framework for how to achieve your targets.
It doesn’t mean that this service level agreement is set in stone and can’t be revisited. On the contrary, as a campaign develops and more intelligence is gained about the best approach, this needs to be fed back into the agreement so that best practice can be captured. It’s also a good idea to put this in writing because if you don’t, nobody will commit to it.
Low Ratio
Okay, so let’s take a quick look at the scenario where a low ratio of MQLs is being produced. On the face of it, this would suggest that more focus is being placed on the quality and surely that’s a good thing. However, there is a caveat in this. If you’re not generating enough leads then you’re putting more pressure on your sales teams to deliver.
You may also be spending too much time and money on generating MQLs where generating slightly less qualified leads might be a better option. This may seem to fly in the face of previous advice about it not being all about the numbers, but sometimes to achieve sales campaigns you have to be more pragmatic. You will never create the perfect sales lead and sometimes organisations focus too long and too hard on trying to generate leads that tick all the boxes.
Taking a pragmatic approach will allow you to examine how long it is taking to generate an MQL and then analysing the roles and responsibilities of your sales and marketing teams. Could the sales approach be refined more? Are marketing being too pedantic on generating the leads? Is there a more cost effective way of doing things? These are all questions that need to be tabled and then an approach agreed.
So what is the minimum number of MQLs required?
Well, a straightforward way of doing this on a campaign by campaign basis is simply by working backwards:
- What are your revenue targets?
- What is the average customer order?
- How many customers do you need to meet that revenue? (Target/average order)
- How many opportunities does the sales team need to get that many customers? (conversion ratio)
- How many SQLs required to generate required opportunities?
For example:
Revenue target of £100,000 for a quarter
The average customer order is £10,000
Number of customers required = £100,000/£10,000 = 10 customers
The average conversion ratio of opportunities to customers is 1 in every 2
Number of opportunities required = 10 x 2 = 20 opportunities
On average 1 in 4 SQLs have opportunities
Number of SQLs required = 20 x 4 = 80 SQLs
If you carry out this calculation then you will be able to identify the minimum number of MQLs required. The ratio from MQL to SQL will depend on how long sales can spend on each lead. If you have limited sales resources then the MQLs will need to be more highly qualified so that sales can spend less time qualifying them and only selecting the best ones to spend their limited time on. This will result in a low ratio.
Having a larger sales team will mean that they need a steady stream of leads so that they can all develop their own pipeline. This will be a higher ratio.
However you cut it, the most important thing is that sales and marketing agree a way forward that achieves the campaign objectives.
