In the business marketing world, a lead is simply an interested customer who might want to buy your products. It is the salesman’s job to convert the lead into an actual sale by using their convincing techniques. However, the importance of data and information is very high in a business environment, so businesses have to make sure they forecast the amount of leads that the company will generate, and then determine the average amount of customers they will have for the next quarter or year. Basically, there are two main methodologies that are used for lead forecasting: the financial plan based methodology and the sales head count based methodology. Both are actually quite different from one another, so let’s discuss them further below.
Financial Plan Based
This is the more commonly used methodology since it focuses primarily on the financial goals of the organization. This helps the marketing department get in line with the broader aims of the organization so that the company can achieve its targets. The methodology begins with the total sales goal of the organization, as well as determining the amount of total sales that need to come from new customers. Next, the company needs to determine the amount of sales that would come from new marketing leads, and then finally calculate the number of new wins from marketing leads. The number of leads will then be estimated by making use of the historical ratio of marketing leads the company is supposed to win.
The biggest advantage of this method is that it remains in line with the broader aims of the organization, especially when a company is marketing to achieve a credible reputation in the online world. However, this method of lead forecasting also has a downside, for it assumes that the leads generated by the company will be closed within the same period, which obviously has a very minute chance of happening in real life.
Sales Headcount Based Forecasting
This method is quite different and makes the assumption that each new salesperson will consume a specific amount of leads in every new period. It’s also pretty simple to calculate; you just have to look at the lead consumption for every sales rep for comparable periods in the past, and then look at the number of sales reps within the forecasting period. The figure would be multiplied by the average lead consumption amount, and you will get the lead forecast for that period.
Both of these methods have their own benefits and drawbacks. Which one you choose depends primarily on your business aims as well as its objectives. Forecasting the amount of leads your business generates is important for businesses as it can help you achieve your marketing aims and objectives. With so many different issues businesses have to face day in and day out, it’s important that they forecast their leads and expected number of customers so they are able to show informed ratios and information to the investors.
Further reading: Lead forecasting topic is covered in more depth at Funnel Metrics website