Lead-to-Customer Conversion Rate

All about this important KPI.
lead to customer cover photo
One of the most important metrics a startup needs to track is its lead-to-customer conversion rate - if you aren't turning your leads into paying customers, then you're losing out on huge potential revenue.

And yet, many SaaS companies overlook this significant metric and find themselves struggling with customer acquisition difficulties. Luckily for you all, I'm here today to help!

We'll be discussing how to increase your lead-to-customer conversion rate and start building those lucrative long-term relationships with your target customer once and for all.

Let's get started!

What is Lead-to-Customer Conversion Rate?

The lead-to-customer conversion rate, or known as sales conversion rate, is the percentage of qualified leads that can be turned into paying customers.

The metric is critical to assessing the performance of a company's sales funnel.

For outbound prospecting, you should use qualified leads rather than normal leads when calculating the lead-to-customer conversion rate.

A lead that has already expressed interest in buying a company's goods or services and fulfills a set of requirements is known as a qualified lead.

Since qualified leads are included in the final stage of the lead lifecycle, which occurs before the actual sales, it makes sense to use qualified leads when calculating the lead-to-customer conversion rate.

Learning the Lead-to-Customer Conversion Rate

The lead-to-customer conversion rate is a key indicator of how well a business converts qualified prospects into paying customers. The number is commonly utilized as a sales team's key performance indicator (KPI).

Many businesses determine the metric for every salesperson and the entire sales team.

Analysis of the sales conversion rate should consider historical data and data from other time frames (such as weekly, monthly, quarterly, and annual).

Most frequently, conversion rates are further divided (and should be) by campaign type, program, channel, area, and other factors.

Analyzing the development of your sales conversion rate using a well-defined sales funnel with pre-defined stages is helpful.

This frequently takes the shape of lead lifecycle stages, in which leads transition through different stages, such as marketing accepted leads, marketing qualified leads, sales qualified leads, and so on.

No single conversion rate standard applies to all businesses. For instance, A 7% conversion rate may be negative for some startups while being positive for others.

As a result, an analyst must consider the company's historical performance and industry averages when assessing lead-to-customer conversion rates.

How to Estimate Lead-To-Customer Conversion Rate?

The lead-to-sale conversion rate measures your company's effectiveness in converting a lead into a customer.

This metric focuses on how many leads turn into sales and drive revenue.

To find the lead-to-sale conversion rate, you must calculate the ratio of the number of converted leads to the total lead volume.

Use the following formula:

Lead-to-sale conversion rate = (Converted leads / Total lead amount) x 100%

You take the number of converted leads divided by the total amount of leads and then multiply it by 100%.

Example

A company generates 20 qualified leads through outbound prospecting within one month. 3 of those leads convert into customers.

The lead-to-sale conversion rate is: (3 / 20) x 100% = 15%

Now to give this ratio meaning, you should calculate (if you haven't done it before) the Lead to customer rate from the previous month and maybe even years.

This ratio gives you a good impression of your sales team's performance over a certain timeframe.

Conclusion

As we have seen, understanding and learning your Lead-to-Customer Conversion Rate is very important to grow your business. It gives you insight into how successful current tactics are, who your ideal customer profile is, and where you may be missing opportunities.

Working with an expert can help estimate or guess the conversion rate. When it comes to improving this number, being proactive is key. By involving SDRs, enhancing engagement at each stage of the process, constantly optimizing the sales process, and ensuring alignment between the sales and marketing teams, you will increase your Lead-to-Customer Conversion Rate!

Book a meeting with us to get SDRs to help with that – it will be worth it and make success a reality for your business.