Sales Development Metrics: Assessing Low Conversion Rates
The ultimate measure for sales development success is closed won business. If SDRs are not contributing opportunities to the pipeline that result in closed business, it’s hard to justify the effort. That said, looking at other key conversion steps in the overall sales and marketing process can highlight needed improvements to sales development process and execution.
There are three primary conversion rates that we assess for sales development organizations:
MQL to SQL: the rate at which SDRs turn raw or scored leads into a “qualified lead” per the organization’s qualification criteria.
SQL to Opportunity: the rate at which “qualified leads” actually become sales pipeline.
Opportunity to Close: the rate at which SDR-generated opportunities become closed business.
Source: TOPO Sales Development Benchmark, 2016
Evaluating sales development effectiveness starts with the MQL-to-SQL conversion rate, or sales development’s ability to engage and qualify leads. For organizations that have poor MQL to SQL conversion (below the average), we see the following challenges:
- Poor scoring or prioritization of leads (SDRs can’t tell which leads are most valuable to get to first)
- Inaccurate lead routing (SDRs are wasting time reassigning leads they aren’t supposed to work)
- Inconsistent follow-up (SDRs complete too few touches per lead)
The SQL-to-Opportunity conversion rate points to the effectiveness of the organization to turn sales development SQLs into meaningful pipeline. Top-performing SDR teams convert 59% of SQLs to opportunities, on average. Organizations that fall below that average typically do so because of the following challenges:
- Poorly defined qualified lead definition (different sales reps accept qualified leads based on different criteria)
- Poorly defined handoff process (sales and SDRs are unclear on who owns next steps after a handoff call is complete)
- Lack of adherence to SLAs (sales is not accepting and taking ownership of qualified leads in a timely manner)
The more rigor applied to the sales development process, the more impact sales development will have on creating meaningful pipeline. Top-performing sales development teams are constantly realigning their resources and efforts to focus on the highest value activities, contributing to higher conversion rates. The bottom line is that SDRs should be producing quality pipeline that has a 20% or better close rate. That means that for every 5 sales development opportunities created, 1 should close. For organizations below that, first tackle the challenges above before pointing the finger at sales or marketing.
About the Author: Kristina McMillan, Director of Research.
Kristina has spent over 10 years helping organizations build and accelerate their Sales Development efforts. As a consultant, she developed the sales development programs for successful SaaS companies such Taleo, Eloqua, and Coupa, along with many others, and ran Sales Development for Five9 (IPO 2014). At TOPO, Kristina manages the research organization behind all of TOPO’s practices. She works with TOPO’s analysts to develop best practice frameworks and actionable research that help clients cultivate world-class demand generation, sales development, and sales organizations.