MQLs and SQLs - Bridging the Gap Between Marketing and Sales

Why are we talking about MQLs and SQLs?

Funnel Marketing has dominated the last two episodes. First, it was the interview with Gia Laudi, author of "Forget the Funnel." Then I shared my thoughts on how the Funnel can be used effectively for start-ups and growth companies.

Marketing Qualified Leads are a layer on top of the Funnel that bridges the gap between Marketing and Sales teams. So if you've just set up a stand-alone marketing team, or your Sales and Marketing folks just don't talk to each other, MQLs and SQLs can be a great way to improve communication and reduce friction.

I explain how MQLs/SQLs work, and emphasize the importance of agreeing on definitions of each, between the teams; and I talk about the metrics to look at around the process.

I also highlight some of the time-sinks that exist around the funnel - namely, Lead Scoring and Attribution. They may make sense for Enterprise organizations with well established marketing teams. But for most companies, they just suck up precious resources.

I also mention a Generative AI session I participated in, run by Frederick Werhle and the San Francisco AMA. More info here.

Some additional reading:
Salesken.ai "Marketing Qualified Lead vs. Sales Qualified Lead vs. Sales Accepted Lead"

Salesdorado: "Why Your Lead Scoring System is Probably Useless"

Transcript

(00:36):

On the marketing mix this week I'm going to be continuing my discussion on demand generation following on from the last episode where I talked about the marketing funnel. Before I dive into that though, there's a couple of things I want to highlight. Firstly, I'll be going back to the interview format for the next couple of episodes, starting with Joan McGeough next week, who is the CMO of the DAK Group, and we'll be talking about a recent branding project she's worked on, in particular, how they've used market research to inform their decisions. 

I also want to mention a really interesting discussion I took part in last week around generative ai, and it's used to build marketing personas. It was organized by the San Francisco chapter of the AMA is led by Frederick Wehrle of UC Berkeley and Frederick had gone through this really interesting process of using two different AI bots, so ChatGPT, and Bard to help him write marketing personas for a particular project.

(01:34):

And he used the same prompts on both, and then he shared the results of them side by side. And there was a couple of things that it really flagged up for me. One is there was a very clear difference in the style of the output. So you could see how over time, as more of these models come out, there'll be some personal preference into it as to which one you may want to use for particular tasks. The other is, even though he used the same prompts for both, they came out with different answers. I would say both of those answers were valid, but they were both different and they would lead you and your marketing project in a very different direction. It highlighted the fact that these models, they're trained on different data sets, they're trained in different ways, they are going to provide different outputs.

(02:24):

So just as in real life, if we're doing this ourselves with our own brain power, there is no single perfect answer from these AI models. And so it just reinforces this idea of the value is going to be understanding how to interact and how to work with these models. Anyway, if you want to know more, I'm going to put a link in the show notes to an article that Frederick put out and I think it's worth checking out.

Today I really wanted to continue some thoughts on the demand generation process. So in the last episode I talked about the marketing funnel, how it can be used, some of the pros and cons, and one of the things I talked about briefly was MQLs and SQLs, marketing qualified lead and sales qualified leads. And this week I want to dig into those in more detail.

(03:16):

So what is an MQL and SQL? It's an approach that is often used once you've established the marketing funnel. It's how you start to move people through the funnel and how you build the marketing processes and the sales processes around it. I think there's a couple of situations where it is particularly useful. 

The first is for startups and growing companies when they're starting to separate their marketing efforts. So early days, typically marketing is just a function reporting into sales, or actually in a lot of cases, it's something that the sales team do as part of their overall duties. And then as you start to grow and you start to get some success, you hire dedicated marketers. Maybe they no longer report into sales, and so now you have effectively a gap between sales and marketing. And so you need some kind of a process or a model to bridge that gap. 

The other time that I think it's really effective, and it's happened to me when I've come into companies a number of times where there is a lot of friction between sales and marketing. I mean I've even seen it where there is effectively zero communication between marketing and sales. So in either of those cases, bringing in this concept of marketing qualified leads and sales qualified leads, it's a great way to improve those relationships, to build those bridges, to fill that gap between sales and marketing.

(04:42):

A couple of caveats before we dive into it. As with many of these things, there is not one exact completely agreed upon, completely accepted definition or version of this. So I'm going to talk through the approach that I take, but understand that people will use it slightly differently and I'll try and highlight some of those as we go through. 

The other thing is to look at what type of organization is using this. So most of the things you will see written about MQl, SQL is really intended for enterprise organizations that have a large sales team, a large marketing team. Maybe you have dedicated SDRs and BDRs or, or sales development reps, business development reps; maybe you have a marketing operations or a rev ops team. If you get to that size, there's two considerations. One is you can afford to invest time and resources in the tools and putting the processes and the automation in place. The second is, when you get to that size, you actually need the automation to be able to enable it to scale. So both of those are valid in that situation. 

My focus is working with startups and growth businesses though. So the reality there is very different. Not only do you have to rely on sort of the human intervention, but you really want to be building and encouraging that human interaction. And you don't want automation to get in the way at these types of companies. The marketing folks know the sales folks. Ideally they're sitting in the same room if you have a physical office. And so that human interaction is a feature, not a bug in in the process. Again, a lot of the stuff you'll read is talking about the automation of it. What I want to focus here on is the process and the reasons behind it.

(06:37):

Let's talk about how MQL and SQLs impact the funnel. So if you remember from the last episode, I defined the five states of the marketing funnel as awareness, interest, consideration, conversion and loyalty. The idea being at the awareness phase, you're trying to talk to a very broad group of prospects. Basically anybody who may one day be interested in your product or service, you have a percentage of those that become more interested in your product, then they start to consider buying it, which means you are trying to get put on the shortlist for them to say, okay this company is one of the two or three that I'm going to seriously consider. And then you work with the sales team to convert them into customers. And then once they're customers, you spend time trying to increase that attachment to your brand, make them loyal customers and get them to refer.

(07:27):

So those are the five stages of the funnel. Now let's look at how these qualified leads work within those. So at the awareness phase, all you have at the awareness phase is people who have a general interest in the type of thing you sell. So these are prospects or actually some companies even call them suspects because you suspect that one day they could become a customer. Then you move into the interest phase. So now you have people who are starting to pay more attention from a marketing perspective, they are looking to be educated. So they are probably watching videos, reading blogs probably on your newsletter. As they're getting towards the end of that interest phase and getting close to consideration, that is when we would typically refer to them as a marketing qualified lead. And that means that they have done enough things or the right type of things that make you think, okay, these people are seriously interested and are probably getting close to the point where we would want them to interact with our sales team.

(08:32):

What is those kind of activity? Well, it depends on who you are, but it could certainly be attending a webinar or some kind of an event that talks significantly about your product, not just about the industry or the problem you're trying to solve. Could be somebody who watches a demo video. People are doing the kind of things that really show that they are seriously interested. Visiting the pricing page. For a lot of companies, particularly self-service, online software companies, visiting the pricing page can be big. So at that point, a marketing qualified lead, is  saying, we as marketers believe that this person is seriously interested and we think it is worth the sales team. Now taking a closer look at this and deciding if this person is ready to enter the sales cycle. Somehow, depending on our internal systems, we flag this up or hand this over to somebody on the sales team and say, yeah, we think this person is ready to buy.

(09:37):

A lot of people think of this as the handover point from marketing to sales. I don't particularly like that because it suggests that marketing steps away at that point. And that's not really true. It's still a side by side process, but sales takes the primary role at this point, let's say. And so when sales gets an MQL, their role is to decide if it becomes a sales qualified lead or an SQL. And different companies, different sales teams have various ways of doing this. A common one is called BANT, which is budget, authority, need and timeline. So this idea of they're looking at this particular prospect, maybe talking to them, having a discovery call and trying to work out do they have money to spend on your product or service, are they authorized or are they involved in the process to make that decision?

(10:33):

Is there a definite need? Is there a problem that they are currently trying to solve? And are they looking for a solution within a reasonable timeline, which will depend on the company, but you know, let's say three to six months. And if the salesperson takes that MQL, does their research, does the discovery call and they decide yes, there's enough going on here, they will turn it into a sales qualified lead. So they effectively accept that lead from marketing. 

Now as a marketing team, it's very easy, very tempting to focus on the number of MQL as the metric and that is important cuz it talks about how good you are at getting people in through the door. But I always look probably more importantly at the conversion rate from MQL to  SQL. Now, if you are converting a high percentage of your MQL to SQLs, that may mean that actually you are holding onto the leads too long before you hand them over to sales, which means some will leak out of the funnel and you'll lose them.

(11:35):

If it's too low, it means you're going to get a lot of frustration. Sales people are just going to get fed up of qualifying these bad leads that they would say. So you’ve got to find the right number in between. It depends on your particular situation on your industry. There is a number out there that says, on average, I think this came from Salesforce on average 13% of MQs convert into SQLs. Don't use that as a specific number because you've really got to look at your own data and look at trends and what have you. But yeah, it at least gives you an idea of, of where that number could be. The most important thing here is getting marketing and sales together to agree on a definition of what is an mql, what is an SQL, so that they both understand the qualification process and at what point it crosses that line.

(12:27):

And then ideally, you know, some kind of a SLA, a service level agreement as to how quickly sales will follow up on that MQL and feed the information back. The key thing here is communication, right? If sales and market aren't talking to each other, you know, you hear two common refrains sales complain that ‘marketing, all they do is generate crap quality leads and send them to me and waste my time’ or you'll hear marketing saying, ‘well, I create all these great leads and send them over to sales and they, they're not good enough to close it, they don't understand how to sell’. I've heard both of those. The reality very rarely is true. In either case it's probably about this lack of alignment between the two.

(13:13):

I'm obviously a believer in MQL SQL in the situations I talked about before, but why do we really do this? Well, you know, the first thing is that you understand what is a good lead and sales and marketing alliance. So it  helps with that communication, but it also helps from a marketing perspective, it helps you focus your activity and your energy on the types of things that drive positive activity in the funnel. So the things that generate mql, the things that keep your conversion rate from MQL SQL in a positive mindset, I think you can also use it, it gives you sort of an early warning on shifts in the market, gives you an idea of what the competitors are up against as well. And I think it's important for growing companies because this is one of the first processes that you put in place.

(14:04):

So in some ways this is saying, ‘Hey, I'm now taking marketing seriously and I'm ensuring that we're building the right competencies in with marketing and we're ensuring that we're supporting sales correctly’. So it's a lot of good reasons for doing it. 

As with everything else, there are pitfalls, one that annoys me constantly is this idea of lead scoring. And you'll hear a lot about this in in marketing circles, the idea being that you can attach a point score to everything that a prospect does. So if they visit a particular page on a website, you get a point. If they download an ebook, you get three points. If they attend a webinar, you get five points and so on and so on. And if they hit this magic number, whatever you choose to be, let's say they hit a score of 25 points in three months, then you automatically say they're a marketing qualified lead.

(14:54):

I'm sending it over to sales. Now it sounds lovely. Couple of problems with it. One is I think, particularly for small marketing teams without much data, it's very difficult to know what are the activities that truly contribute to moving somebody through the funnel. And so you're really guessing, I also see it way over complicated where people give different point scores to different pages on the website and it just, it can become a job in itself just to manage the lead scoring process. The other part of it is you are removing a lot of that communication between sales and marketing because it becomes, if it's not automated, it at least becomes a rote of, oh, they hit 25, let me send it over to sales without really thinking about it. So I think it leads you down a, a dangerous path. One of the reasons this get pushed a lot is from the CRM companies, the CRM software, because it's very easy to automate it this way and that that's their goal in life is to automate processes.

(15:59):

And of course, once you've put all that automation in, it's very difficult for you to then transfer to another crm. So it's a good retention approach from them. So there are upsides to lead scoring. I'm not saying it's all bad, but you have to go into it with your eyes open. And for the stage of a company that we are talking about, I just think it takes you in the wrong direction. 

The other area that gets talked about in this general discussion is this idea of marketing attribution. So this is a claim that we can identify what were the important things that happened in the customer journey that got them to decide to buy. And the theory is you can determine the importance of attending a particular webinar, downloading a particular piece of information serving ads, et cetera, et cetera. The downside to this is very data intensive and most people don't have that level of data, and  stuff inevitably gets missed.

(16:58):

 It's very difficult as an example, if you're doing physical advertising billboards, how do you ever put that into an attribution model? If you spend a lot of money sponsoring a conference, do you even know somebody was at that conference? So it's not perfect. And my bigger concern with it is marketing teams will spend way too much time worrying about attribution, fine tuning the model when that time and resource could be spent on actually marketing. 

So I’m not a big fan of either lead scoring or attribution at this stage in a company's journey. It's a different argument if you're talking about enterprise organizations. But both of those I think take us in the wrong direction. 

Just to sum up, we've talked about the funnel, MQL and SQLs is a way of managing and measuring that journey through the funnel, and it's extremely useful to improve the communication between sales and marketing and to start building the marketing processes.

(17:57):

So I'm a big fan of it. It, it takes some time, it takes some heavy lifting up front but I really think it's a valuable way to start building some momentum behind marketing. I hope you found that useful. 

As I said before, the next couple of episodes are going to go back to the interview format, but I'll be running these sort of explainer discussions every so often between the interviews. So if there's a particular subject that you would like me to cover, drop me a note. And otherwise I'll see you on the next marketing mix.