How much is a lead worth?
For many companies, the goal of marketing is to collect leads. But how much can you actually pay for a lead if we are going to talk numbers? In this article, we will go through exactly this.
If you are a B2B company, it is common that the purpose of your marketing to collect leads, that is to get in touch with potential customers. The same applies to many B2C companies that sell services, especially if the service is so complex that it is difficult to solve the entire sales process directly on the web.
Important for evaluation and CPA
The reason why it is important to put a value on a lead is obviously so that you can evaluate your marketing efforts. Is it profitable or not? Then the value of a lead is also central to which CPA level you choose to optimize for in your marketing.
Different ways to collect leads
There are different ways to collect leads, and as a company, you can benefit from several different ways. The important thing is to value them individually because they are rarely worth the same to you. Their different value often depends on where they are in the sales funnel.
Know what a customer is worth
The purpose of your leads is to make them customers. So in order to determine what a lead is worth, you need to know what a customer is worth to you. The answer to this is not the same as how much revenue a customer generates, but how much you are prepared to pay for a new customer.
We need to know how many submitted forms or requests are needed in order to get one new customer. If you have used forms for a while you will hopefully have statistics on the outcome. You may see that of the last 100 quotation forms, there have been 20 customers, ie you convert 20% of the forms to customers.
With this, we have the information that is required to calculate what a form can cost at the max.
If you do not have data on how your forms have converted historically, you will instead make an assumption until you have obtained actual statistics on how it performs.
You may also use the telephone to collect leads. This is a very common scenario, that potential customers call in. However, it is not always as common to measure the effect of it. Bu how much can a conversation be worth in this case?
In the same way as quotation forms, it is about how many calls it takes to get one customer.
Last but not least, your company may collect leads through a newsletter. A newsletter subscriber is further up in the sales funnel, so the value per subscriber is not as high as for a form. But since you may be getting a lot of subscribers, the total value is still interesting to take into account.
Count all leads
If you collect leads in several different ways, it is important to take into account what everyone gives together, otherwise you will not get a fair picture of what your marketing provides. It is common for a company to evaluate only its “most important” way of getting new leads but to get a correct picture, you must take into account all lead sources, including all the ones above.