What Determines Cost Per Lead

Posted by Dan McDade

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on Feb 7, 2018 6:26:43 PM

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How much should a lead cost? Understanding what goes into generating a high-quality B2B lead helps you determine whether you're getting a good deal. It takes a skilled team, a proven cadence, multiple touch points, message testing, market analysisand plenty of perseverance—to produce the leads that truly contribute to revenue generation.

While most people wouldn't quibble with the above reality, many still measure marketing success based on the cost per lead. Not only does this single-criteria measurement perpetuate the downward spiral represented by most companies’ poor sales results, it also reduces ROI on short- and long-term marketing and sales investments.

Take a look at the following cost per lead comparison. These numbers show what goes into generating a high-quality lead—and what it costs. They demonstrate the fallacy of measuring the success of lead generation programs solely on the basis of cost per lead.fallacy table.png 

Even in the best case scenario, you only have two options for reducing the cost of a lead:

  • Reduce the base salary for the individual creating the leads from $50,000 to $28,000.
  • Increase the number of leads required per individual per week from 4 to 7.

Which of these scenarios do you want to bet your company on?

Most executives agree that option 1 is unlikely. You can’t buy the labor required to accomplish this task for $28,000 per year, or $13.46 per hour.

To go with option 2, increasing the leads from 4 to 7, would require you to do one of the following:

  • Increase touches from 100 to 175 per day—a goal which in all likelihood is not possible, as conversations take time.
  • Increase lead rates from 8% to 14%well above the average lead rate of 5%.
  • Require that your folks talk to 1.14 line-of-business contacts instead of 2—another difficult goal.
  • Reduce the number of touches for each contact from 5 to 2.85also not practical. (Those who’ve ever called a close friend more than a few times to schedule lunch know why you won’t engage a busy prospect with just a couple of calls.)

The reality is that when you factor in everything—salaries, touches needed, lead rate, contacts required—good quality leads cost what they cost. The market is what it is, and it’s relatively efficient.

Lead generation companies like PointClear can no more overcharge companies for services than they can substantially reduce the cost of their services. If the leads are delivering ROI on investment, they’re worth it. If they’re not, they aren’t. It’s about value, not cost.

Those who know me or follow this blog know that talking about how much a lead costs is one of my favorite subjects. I’ve written extensively about what goes into cost per lead—and I’ve crunched (and shared) a lot of numbers that support my case.

Check out this video that explains how over-focusing on cost per lead incents lead volume over lead quality.

Take a look at this post—referencing industry statistics on what leads “should” cost—and why they’re wrong.

Your comments are welcome.

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