ViewPoint Blog

Exploring issues related to B2B sales, marketing & lead generation.

Why Measuring Success on Cost Per Lead is a Huge Mistake

Posted by Dan McDade

Find me on:
on Feb 16, 2017 11:15:00 AM

Lead Generation Featured Image

wrong way to measure success (cost per lead).png

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.


Tell us what you think!

Topics: PowerViews


Revenue - Inbound - Nurturing = The GAP. We guarantee you'll be surprised by your actual metrics. Try our Lead Revenue Calculator
Get the Calculator

search blog posts

filter blog posts

  • Search

Top 5 posts

Are Your Sales Suffering Because You've Picked The Worst Times To Contact Prospects?

In the digital age, more and more communication takes place via email and text messaging, but a person-to-person conversation..

10 Reasons Why Inside Sales Will Displace Field Sales Teams by 2015

Josiane Feigon is President of TeleSmart Communications and author of the business bestseller, Smart Selling on the Phone and..

The Cost-Per-Lead Fallacy in Measuring B2B Lead Generation Investments (Pt 3 of 3)

The introductory post in this series addressed the problems and costs of applying the cost-per-lead metric to measure the..

Is Lead Generation Slipping Away From Marketing?

James Obermayer, Executive Director and CEO of the Sales Lead Management Association and President of Sales Leakage Consulting

What is the Minimum Acceptable Close Rate on Leads Provided to Sales?

I posted a question on LinkedIn's Sales and Marketing VP's Group and the results have been fascinating. First, here is the..