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Improving Lead Management Using The Demand Waterfall

demand waterfall lead managementImproving lead management is a very important topic relevant to any SaaS company. This week, we talked to Ryan Mettee to learn more about the Demand Waterfall®, a concept developed by SiriusDecisions in 2006 to help align the goals of marketing and sales teams in B2B organizations and improve lead management. SiriusDecisions is a company founded in the early 2000’s to help B2B companies focus on their sales, marketing, and product organization and identify what works well. They created the Demand Waterfall to help their customers achieve efficiency in qualifying leads from the initial stages to closing. In order to help listeners further understand the Demand Waterfall, we discussed the basics of the concept, how early stage organizations should use it, tips and tactics, and finally, results. Below were 4 key takeaways from our chat.

1) Basics of Demand Waterfall – Typically a business’ sales and marketing teams do not work very well together. This causes loss of efficiency when it comes to taking new leads and qualifying them to the closed/won state. These inefficiencies can be resolved by utilizing the Demand Waterfall and aligning sales and marketing teams of the organization. Essentially, the Demand Waterfall is an upside down pyramid with leads funneling down the sales management process as seen here. It comes in 4 different stages that all help with improving lead management. First, there is the inquiry stage, which generates leads from any hand-raisers that have interest in learning more about your product. Lately, these have taken the form of inbound leads from digital marketing. The next stage, marketing qualification, is driven by a predetermined set of criteria that allows marketing to qualify an incoming lead or inquiry. Many use BANT (Budget, Authority, Need, and Time) for qualification, but there are many other methods if this doesn’t suit your practices. Next is sales qualification, where marketing hands the leads to sales and sales can further qualify the lead to the last stage, closed/won. Overall, the Demand Waterfall is used to increase efficiency as the organization grows.

2) Early Stage – In the early stages, Ryan recommends using the Demand Waterfall to help the organization in ways such as measuring performance, increasing efficiency, improving lead management, and forecasting revenue. When the organization is young, they are trying to find any way to find new potential customers. Often they look to internal networks and move forward, using this as a framework to decide how sales and marketing are going to function together. In general, new companies do not have a proper lead management process in place, so the Demand Waterfall is a good start. Together with this, a young organization should also use marketing automation (and maybe tele-prospecting later on) to facilitate their efforts. The Demand Waterfall helps give structure and understanding to this lead management effort.

3) Tips & Tricks – To begin, Ryan recommends you ask your team to decide on how you define a lead in a new business and what it means to you. He finds that different people in the same teams often have different ideas on what a lead is, resulting in miscommunications and more inefficiencies. It is best for both sales and marketing teams to decide early on on one definition to improve the qualification process. Also, companies will often spend a lot of money on marketing leads that are never transitioned to sales, ultimately wasting resources. In this case, you can implement service-level agreements between sales and marketing, saying that the sales teams will commit to following up with the new lead within a certain time period. This will not only improve efficiency, but also help with enhancing predictability to generate means to measure qualification statistics. Ryan suggests having constant conversation between sales and marketing to review these metrics and ensure the leads are moving through the process properly. To further improve the lead generation process, you should also consider using a process known as relative targeting. This entails generating ideal customer profiles to better understand the right organizations you should target that will also be interested in your product. See here for a ICP template from Nic on our team.

4) Results – With small organizations, it is best to completely remove existing processes and replace it with the Demand Waterfall. This ultimately will have the best effect on improving lead management. After implementation of this methodology, Ryan says he has seen increases in closed/won businesses of 100% to 700% in a period of as little as 12 months. Most people don’t trust the system, but if you accept it and go full steam into changing old for new it usually has amazing effects. For smaller companies, a large change in their processes can impact the business very quickly, as they are able to see what’s working and what’s not and adapt easily. Overall, Ryan says the best way to improve and implement this approach is to “adopt, operationalize, and optimize.”

If you want to learn more, we recommend listening to our podcast with Ryan. Thanks to Daniel Pak for the research for this post.

Michael Brown
Michael Brown

<p>Michael is the Managing Partner at Bowery Capital based in New York. Prior to Bowery Capital, Brown co-founded AOL Ventures and led investments in over 30 companies primarily focused around the next generation of CMO and CTO spend. Before AOL Ventures, Michael worked for the investment arm of Richard Branson’s Virgin Group, helping to invest capital in early stage internet startups on behalf of the British entrepreneur. He began his career at Morgan Stanley. Outside of his professional life Brown serves on the Board of Directors of the National Forest Foundation and co-chairs the Columbia College Young Leaders Council. Michael holds an undergraduate degree from Columbia University.</p>