One of the First SDR tools...

Sales Development Reps (SDRs) and Lead Development Reps (SDRs) are not new. But they are a hot topic right now, especially in the SaaS and Cloud marketing circles I frequent.

With all the buzz, I’m surprised how few people truly understand proper strategy and structure for these roles. Quite often, these teams underperform because the up-front thinking has not been done.

In this two part series, I present a checklist for doing it right. I’ve worked with and set up several SDR and LDR teams over the years, supporting both inside and field sales. I’ve seen it done right and done wrong. I think I finally have the formula. Here are your first four steps.

Understand Your Objective – Sounds obvious, but I’ve seen a poorly defined mandate for an SDR or LDR role cause all kinds of confusion and reduce effectiveness. So, decide on your objective. Is your aim to better qualify leads and free up rep time for calls and meetings? Or are you looking to get more meetings for reps in their assigned territories, or perhaps in their assigned account list. Be careful if you said “all of the above,” as these are very different activities that different skill sets. Another way of looking at this question is to ask whether you need better qualified leads, or more leads overall.

Decide on LDRs, SDRs, or Both – Your objective(s) will clarify your strategy, and help decide who to hire. The job of an LDR is to better qualify existing leads. Their focus is on handling the inbound – in other words, qualifying leads that are already coming in. The job of an SDR is to focus on outbound, namely prospecting: “I need a meeting with the person in charge of buying welding robots at Ford.” LDRs should work for marketing, as they are helping with the quality of leads marketing is generating. SDRs should work for sales, as they are working outbound, and are typically assigned to a rep or a territory. You may need both an LDR and SDR function in your company, as I have in my current role.

Build Consensus and Buy In – The two sticking points I’ve seen in setting up an LDR or SDR team are 1) uncertainty over the ROI, and 2) a struggle over the reporting structure. A good benchmark for ROI is Marketo, who themselves expect a 20x ROI from their SDR teams. But it will vary by company. If you can’t convince your CEO or VP of Sales using these, then I recommend running a pilot using a third party firm. There are a lot of telemarketing and sales appointment-setting firms to choose from. They will never be as efficient as your own people, but they are easy to hire for a fixed monthly amount. I did this for the LDR function in my current role and was able to prove that the lower-tier leads the reps never had time to get to were valuable, and the pilot was ROI positive after six months, at which time we decided to hire our first in-house LDR.

Regarding the reporting structure, I think once you have a clear definition of objectives and the role of the LDR and SDR, the struggle over reporting diminishes. It’s when you are not crystal clear on objectives that problems start. Think of it this way. It’s really hard for a head of sales to argue that lead qualification is not a marketing function. And this is exactly the role of an LDR. Likewise, a head of sales does not typically want anyone from marketing prospecting, as this is a sales, and hence SDR, role.

Set Your Targets – Those of you who have read my blog over the years know that I am big on numbers. Numbers are specific and irrefutable. That’s why I like funnel math. SDR and LDR goals should be tied to the funnel you use to drive your business. Here’s how to do it.

LDRs – Decide how many qualified leads you need LDRs to convert and pass to sales. What I like to do is carve out a percentage of my overall funnel for the LDR role, say 10% of marketing qualified leads (MQLs) will come from LDRs. Further, I usually have LDRs focus on the lower quality leads that need more development, like white paper downloaders or webinar attendees. I then calculate how many MQLs are needed to make up 10%, and this is their target (In part 2, we’ll get to calculating activities (calls/emails) needed to his this number.)

SDRs – Decide how many meetings your SDRs need to set to contribute the number of opportunities (sometimes called Sales Generated Leads, or SGLs) you want your SDR team to contribute. You may need to estimate a close rate, as you may have no experience with the role, and success rate will vary widely by company, as the product and buyer may be quite different. You can find some good resources, like this report from OpenView, that give industry averages you can start with.

Hire the Right Profile – Given what we’ve covered already, it’s no surprise that LDRs and SDRs can be quite different human beings. LDRs call and email people who have already expressed an interest in your product. It’s an easier (though not easy) interaction. LDRs are generally assisting and nurturing. SDRs, on the other hand, are prospecting, often cold calling. You want hunters who can handle rejection.

Trish Bertuzzi in her book, The Sales Development Playbook, also makes a great point about differences in career aspirations. SDRs are usually considered reps in training, and most want a career in Sales. LDRs may want to move into sales, though many move on to marketing specialist roles. Trish recommends building out career paths for LDRs and SDRs, and showing new hires where they can go, even going so far as to include career path in the job specs your company posts, to show potential candidates that your company cares about their progression.

You now have a strategy, and depending on your objective, a plan for an LDR or SDR team, of both. The clarity on the role informs the structure of the team, helping alignment between sales and marketing. If you have gotten this far, you are ready to either run a pilot or hire your first development reps.

Next we move on to hiring the right people and making them productive. Part 2 will cover managing and measuring LDR and SDR teams.

What do you think? Did I miss anything? Tips to share?