Our capability to grow is constrained by our ability to efficiently generate the volume and quality of enquiries we need to meet our growth targets. Few firms have well-tuned lead generation processes and yet this is a fundamental objective of marketing. Optimising lead generation is a priority for a high-growth firm.
When it comes to individual or organisational purchases of expensive, complex items, the customer will normally undertake an extensive search for information and proceed only after a thorough evaluation of the alternatives and an understanding that they have a reasonable probability they will achieve the outcomes they seek.
If such a purchase occurs infrequently, it is unlikely the customer will have built up the knowledge and experience to know what to buy and which vendor to use.
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Complex items tend to evolve over time and therefore prior experience may not be very useful in a new purchase decision. Underlying technology is changing constantly, applicable regulations evolve, environmental conditions change and our own circumstances can alter over time.
Innovation alters information
For many complex items, innovations in features and functions are a matter of fact. Some products disappear and new products enter the market.
Even if the decision was similar to one made in the past, much of the prior information used will be out of date and the performance of new products is likely to be substantially different from an earlier purchase made many years before.
It is highly unlikely that the customer will be able to assess all the available information on their own without assistance or input from the vendors, especially with highly technical solutions. With many large, complex purchases, the problems being solved are often ill defined or need greater clarification.
Sometimes the customer finds that exposure to new information throws up a greater set of choices than anticipated which compels the customer to investigate further.
One of the problems customers face with large, complex purchases is that there are normally many tradeoffs to be made. Even though the basic need can be met by many vendors, as the investigation proceeds, a large number of marginal benefits are uncovered, however, not every vendor offers the same features, functions or content in their product or service offerings.
A complex evaluation process
The buy decision process then requires a much more complex evaluation than first considered and this can itself delay the purchase or involve greater interaction between the vendors and the customer while they evaluate the alternatives.
Vendors involved in selling complex expensive products or services know that most customers do not have a well-defined set of needs or an up-to-date knowledge of the choices available.
In many complex purchase decisions, the vendor anticipates they will need to provide some education and/or consulting to enable the customer to refine what they need and understand what the vendor has to offer.
During this initial interaction with the vendor, some customers will decide to defer their purchase while they consider more thoroughly what their needs are. Others will recognize that they have misunderstood the urgency of their requirements and that they do not want the item, or at least, not at this point in time. Others will see that the vendor does not offer what they are seeking.
Where the customer removes themselves from the enquiry process, we class this as a “withdrawal”. Some of these prospects will establish their needs in the future and are still worth monitoring. Such prospects need to go into a hold or monitoring status for later follow up. They might be scheduled for regular contact and/or registered for a vendor newsletter or included in future events.
There are some situations where the vendor decides they do not want to sell to a specific customer, perhaps because they suspect a bad customer experience or they don’t expect to receive the full value for their sale.
At other times, the vendor will recognize that the customer is unrealistic in their requirements in terms of specifications or price and decide not to engage with the prospect further. These prospects are “rejected” and taken off the prospect list and would not normally be monitored.
An inefficient process leads to wasted resources
This two-way evaluation is critical to the purchase and sale process but in many cases it is inefficient, resulting in the customer or vendor wasting considerable resources during the courting process. An over enthusiastic salesperson might continue to work with a prospect hoping to talk them into a sale.
Customers who find out very late in the process that they have expended significant time and effort working with a vendor only to discover the vendor cannot satisfy their needs may well blame the vendor and voice their dissatisfaction to others. The vendor as a consequence suffers a negative impact on their reputation.
A vendor who discovers, after spending considerable time and effort on a possible sale, that they cannot satisfy the need has a significant economic loss. Not only have they incurred expenses for no gain; but they have failed to devote those resources to a prospect who would have purchased. The efficiency of the entire process is thus critical to the overall productivity of the marketing and sales process.
Vendors who are in this type of sales situation have to manage their leads through a qualification process often referred to as a lead pipeline. The lead being the identified prospect that has signalled an interest in buying from the vendor. The pipeline refers to the process of moving the customer through a series of steps to assist in making the sale, often referred to as the “close” or “closing the sale”.
The pipeline has two major segments, the first part, “lead generation”, starts with a registered enquiry and then evaluates or qualifies the lead to a point where the prospect is said to be “sale ready” or a “qualified lead”. The second stage, “lead qualification”, takes the qualified sale ready lead and progresses it to a sale.
In my next feature, I will deal with lead generation and after that I will tackle the topic of lead qualification.
Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia. A series of free eBooks for entrepreneurs and angel and VC investors can be found at his site here.