Why Measuring Success on Cost Per Lead is a Huge Mistake

Posted by Dan McDade

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on Feb 16, 2017 11:15:00 AM

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In the search for the holy grail of marketing KPIs, we want ones that correctly emphasize ROI over lead cost, tie lead generation to overall revenue and profits, identify the most successful marketing initiatives and deliver insights that can be leveraged to run future high-return activity.

Cost-per-lead is not the correct metric for measuring marketing initiative success for the following reasons:

  • It incorrectly incents volume over quality.
  • It incorrectly emphasizes cost over ROI value.
  • It doesn’t deliver high quality, high value, more convertible leads.
  • It adds cost and creates inaction when sales execs discover the leads don’t meet criteria.
  • It is not actionable in planning and predicting future investments.

So if not cost-per-lead, what are the right marketing KPIs?

Watch the short video and continue reading to see what KPI's you should use.   

Lead-to-Pipeline Conversions (MQLs-to-SALs)

The lead-to-pipeline conversion ratio demonstrates solid marketing and sales alignment: acceptance demonstrates sales’ confirmation that these are the qualified leads they need and expect.

Lead-to-Opportunity Conversions (SALs to SQLs)

This ratio confirms that marketing is on target with delivery of qualified leads that convert to forecastable opportunities.

Cost-Per-Opportunity (Cost-Per-SQL)

A more accurate depiction than cost-per-lead, cost-per-opportunity ties costs to outcome-based performance. Opportunities in this stage act as confirmation that leads are meeting requirements around quality, value and convertibility. Meeting these thresholds can naturally require greater investments than programs evaluated on a cost-per-lead basis.

ROI

This is where the dust settles and high level conclusions can be drawn—at both the collective and individual initiative level. It’s fairly common when all is said and done to find that leads, opportunities and sales that cost more do so for a reason: they generate greater marketing ROI.

 

The right KPIs go beyond cost-per-lead to reveal the B2B lead generation programs and investment levels needed to meet corporate growth and revenue targets, as well as investor and analyst expectations.

I might also add a comment on how much a complex sale lead should cost. More than you probably think, but a lot less than you are paying when all factors are considered. Is it possible to create high-quality, high-value and convertible leads to support a field sales force selling a $100,000-plus solution for $350 per lead? Frankly, no. Over the past 20 years, the average cost-per-opportunity for a relatively complex sale has ranged from the high triple-digit to low four-digit range—and these programs returned excellent ROI. Companies that reduce budgets, increase lead quotas and dump more poor quality leads on sales faster than ever before are shooting themselves in the foot.

Want to learn more, watch the 60-second video. Contact me if I can help.


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Topics: PowerViews


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