Something I don’t see talked about very oftenis how much a company shouldpay per lead. If you are a well-funded startup, you can afford to lose some money per acquisition as you figure out the best model that works for you, but if you’re bootstrapped, you don’t have that luxury.
If you’re in the latter category, this post is for you.
For Lead Generation
To start, let’s assume that you sell custom-designed logos online with a website that gets 10,000 visitors a month.
For the sake of simplicity, let’s say your customer lifetime value is $1,000.
Then let’s say you convert 1% of your 10,000 visitors into e-mail subscribers per month. That’s 100 e-mail leads.
Then let’s say of those 100 e-mail leads, 15% are qualified. So 15 qualified leads.
Of the 15 qualified leads, maybe you’ll close 20% of them. That means you’ll close 3 per month.
Here’s how much you can pay per e-mail subscriber:
$1,000 x 1% x 15% x 20% = $.30
Each of your e-mails is worth$.30. Ideally you would give yourself some margin and aim to pay $.05 to $.10 per e-mail lead.
David Skok recommendskeeping customer acquisition cost (CAC) at least 3x less than customer lifetime value (CLTV):
Not too sure about your numbers? Add some more margin by making your CAC 6x to account for additional variables.
This is why it’s important to continue to look at your funnel metrics the whole way and figure out what you can optimize because every percentage point matters.
Now you’re probably wondering, how in the world can I get e-mail leads for $.05 to $.10? Great question.
While it’s very tough to get leads in that range in today’s world, it’s still possible to get close byrunning contestsor even renting e-mail lists. And yes, renting e-mail lists still works (depending on the niche that you’re in).
Like anything else in marketing, your offer has to be compelling and your targeting has to be precise.
But that’sthe hard way.
The easier waywould be tooptimizewhat you currently already have instead of trying to bang your head against the wall on something foreign. Most startups suck at optimizing what is already working and instead try to add additional custom acquisition channels without first 10x/100xing what they have.
Let’s organize the funnel metrics again (based on what we described above):
- CLTV (customer lifetime value) = $1,000
- 10,000 visitors a month
- 1% e-mail conversion rate = 100 e-mail leads per month
- 15% qualified leads = 15 qualified leads per month
- 20% close rate = 3 closed deals per month(10,000 x 1% x 15% x 20%)
- Worth of an e-mail lead = $1,000 x 1% x 15% x 20% = $.30
- Target e-mail CPA/CAC (cost per acquisition/customer acquisition cost) = $.05 to $.10
First, we’ll see if we can do some conversion rate optimization on the site and in our e-mail sequence:
- CLTV = $1,000
- 10,000 visitors a month
- 3% e-mail conversion rate = 300 e-mail leads per month
- 20% qualified leads = 60 qualified leads per month
- 20% close rate =12 closed deals per month (10,000 x 3% x 20% x 20%)
- Worth of an e-mail lead = $1,000 x 3% x 20% x 20% =$1.20
- Target e-mail CPA/CAC (cost per acquisition/customer acquisition cost) =$.20 to $.40
Just by making a few quick changes in our funnel, we’veincreased our worth of an e-mail by 4xand as a result, we can now pay 4x more per e-mail. That’s A LOT moremanageable.
But ‘manageable’ isn’t good enough. We want more.
Price is something to generally revisit because you’re constantly improving your product/service. It makes sense to think about increasing your pricing every quarter due to increased demand, overhead, and other variables.
Let’s continue to build off our previous example of conversion rate optimization success. This time, we’ll be doubling our prices because business is great and we feel that we were undercharging in the past:
- CLTV = $2,000
- 10,000 visitors a month
- 3% e-mail conversion rate = 300 e-mail leads per month
- 20% qualified leads = 60 qualified leads per month
- 20% close rate = 12 closed deals per month(10,000 x 3% x 20% x 20%)
- Worth of an e-mail lead =$2,000x 3% x 20% x 20% =$2.40
- Target e-mail CPA/CAC (cost per acquisition/customer acquisition cost) =$.40 to $.80
We have even more wiggle room now that we have adjusted CLTV. If we can just make other minor tweaks to get our conversion rates higher and perhaps bump the price up a little more, we’ll be able to get more aggressive with our advertising initiatives.
Read more: TheUltimate Recipe for Effective Customer Lead Generation
Free Bonus Download:Enjoy thishandy checklist of 15 ways to increase your lead flows! Click here to download it free.
Here are 15 things you can do to increase your numbers in your funnel:
- Increase the price –As discussed above, increasing the price is naturally going to provide more room in terms of customer acquisition costs. Check out our podcastinterview (with show notes!) with the CEO of Price Intelligently on how to think about increasing prices.
- Increase conversion rates –Use a tool like Google Experiments, Optimizely or Visual Website Optimizer to increase conversion rates across your funnel. Here are a few things you can do:
- Add content upgrades to each blog post –Content upgradesare downloadable bonuses for readers. If someone is reading a great post on SEO, an example would be includinga downloadable SEO checklist within the post. To access the checklist, the reader would provide their e-mail address. For us, we’ve sometimes seen our conversion rates jump from 2% to 20% on a post (10x increase!). The more relevant a content upgrade is to the content that someone is reading, the higher the conversion rate. Here’s an example of a content upgrade:
- Add testimonials – Voices.com reported a400% boostin conversion rate after doing this. HubSpot curated some strong examples of testimonial pageshere.
- Add live chat –Abt Electronics reported that adding live chat added20% in sales. You can tryZoipmorOlark.
- Use a single page checkout– The Vancouver 2010 Olympic store increased its conversion rates by animpressive 21.8%justby switching from a multi-step checkout to a single-page checkout.
- Add a pop-up– Yes,pop-ups still convertreally well today. Tough to argue with the numbers:
- SEO/content marketing
- Don’t just create content, create resource guides –Qualaroo does a good job of creating a guide on‘What is Conversion Rate Optimization’. If you search Google for‘conversion rate optimization’, you’ll find that they are #1. The page is a comprehensive resource complete with 12 chapters and a downloadable PDF. Google wants to serve the best results and those that deliver get rewarded.
- Create 10x content– Did you know that the average content length of the top 3 results in Google is around 2,000 words? Brian Dean from Backlinko did a study on over1 million SEO resultsand found that to be the case. This means that content marketing is now table stakes. If you want to win at the long game with content marketing, it’s time to focus on creating in-depth content that provides utility. But it can’t just be fluffy longform content; it has to add VALUE. For inspiration, here are 21examples of 10x content marketing.
- Bonus:Neil Patel has a great guide called the‘Definitive Guide to Conversion Rate Optimization’ that you can gethere.
- Tools – You can use a tool likeHello BarorSumoMeto collect more e-mails.
- Paid advertising – When it comes to paid advertising, it’s all about putting the right offer in front of the right target audience. Figuring out the targeting is up to you, but followingare some ideas on where you can drive traffic to. From there, you can see what converts best and continue to double down on that.
- Drive traffic directly to content– If you’ve invested a good amount of your time producing content, it’s worth your while to promote it. In fact, Derek Halpern says80% of your time should be spent on promoting content. If your content is compelling and has a content upgrade, you’ll naturally get the engagement you want (social shares, e-mail subscribers, etc.). Icing on the cake is the ability to retarget these individuals after they’ve visited your site. Here are some platforms that might work for content promotion:
- Facebook Ads
- Gmail Ads
- Outbrain/Taboola
- Webinars– Driving traffic to webinars is a great way to not only get leads, but to convert them as well. If someone has invested one hour of their time with you, they’ve started to build a relationship. And if you’ve given them one hour of knowledge, it’s much easier to ask for the sale. Once you’ve perfected your webinar, you can start to runautomated webinars.
- Lead magnets –If you’ve invested in creating case studies, e-books orwhite papers, you can use a tool like LeadPages to create landing pages so that people can download the resource after entering in their e-mail. For us, this has converted as high as 50%.
- Copywriting– Take a look at all thee-mail copy in your autoresponder sequence. Does it seem compelling to you? Does it make you want to convert? If the answer is not a resounding ‘hell yeah!’, then you have work to do. Chances are that you’re not a very good copywriter and that’s fine because you have better things to do. But it’s still your responsibility to find someone whocan create copy that converts. It’d also be helpful for you to understand how copywriting can increase your conversion rates. Take a look at this epic post by Joanna Wiebe oncopywriting formulasfor some inspiration.
- Social Media:Create better images–Better images drive higher clickthrough rates(CTR) and will ultimately lead to increased referral traffic. This is low-hanging fruit that just requires a simple process to nail down.
- Add a customer success team– If you want to increase retention rates, acustomer success teamwill help ensure that the customer stays happy. Remember, a happy customer sticks around for longer which meanshigher CLTV!
Free Bonus Download:Enjoy thishandy checklist of 15 ways to increase your lead flows! Click here to download it free.
Conclusion
It’s VERY important to know your conversion numbers at each step of the funnel. When you have these numbers buttoned up, all you need to do is tweak and test each step of the funnel until you have a well-oiled machine. Using an Excel Spreadsheet or Google Spreadsheet will suffice for tracking, but be sure to track your numbers on a daily basis.
From there, it all becomes a simple game of driving the numbers to a satisfactory level at each stage of the funnel and then pouring gasoline onto the fire.
What are some smart ways you know of to increase numbers in your funnel? Let us know in the comments below!
FAQs
What is average cost per lead? ›
Cost Per Lead (CPL) is defined as the gross marketing cost expended to acquire a lead for your business. It can be calculated by dividing your total marketing spend by your total number of new leads acquired from a specific channel or group of channels.
How do I charge for a lead? ›The formula for cost per lead is simple. Just take your total marketing spend and divide it by the total number of new leads. This will give you your cost per lead (CPL). You need to be sure to calculate your number of leads and marketing spend within the same timeframe to ensure your result is accurate.
What is a good cost per lead on Facebook? ›...
Facebook ads cost per lead by industry.
Business-to-business (B2B) lead generation pricing ranges from $2500 to $12,000 per month. B2B lead gen costs depend on several factors, including your lead generation strategies, marketing budget, and industry. Keep reading to learn more about B2B lead generation pricing!
What is an example of cost per lead? ›The cost per lead is one of the two numbers you need to calculate your marketing cost of sale. For example, if your cost per lead is $100, and you need five leads to make a sale, your cost per sale will be $100 x 5, or $500. If your marketing team generated 5 leads, you would expect to make 1 sale.
What is the cost per lead in marketing? ›Definition: Cost-Per-Lead, or CPL, is a digital marketing pricing model whereby the advertiser pays a pre-established price for each lead generated. In ecommerce, CPL is often utilized by businesses who sell subscription services or high-value products.
What is a good cost per lead for SaaS? ›According to the data, Software/SaaS companies spend on average $344 to generate a lead.
Can you make money with lead generation? ›The lead gen business model can be lucrative, but it can also be very passive if you are using organic traffic sources, especially similar to those found with AdSense or Amazon affiliate sites.
Should you pay for leads? ›Most marketing experts and company owners, including myself, would agree that paying for leads is an excellent way to drain your time, energy, and finances. The kind of customer you get from a lead service is the kind of person who is shopping around to get the best deal.
Should cost per lead be high or low? ›The higher the CPL compared to other businesses in your industry, the less effective the marketing campaign is. Naturally, a lower CPL is considered ideal. CPL is only one of many metrics that digital marketers often look at.
How much should I charge for a lead sheet? ›
If it's not such a simple job (i.e. you have to figure out and transcribe the melody line and the accompaniment), then it's probably wiser to charge by the hour (I've seen rates between $30 and $100 per). I guess it would also depend on whether these are simpler tunes, or more complex changes/melody.
Why is my cost per lead so high? ›Meanwhile, a high cost per lead means you may be overspending on your existing campaigns to generate the number of leads your company gets from advertising. In case you were wondering, this is not a good marketing strategy.
Why is cost per lead important? ›Why Does it Matter? Cost per leads enables sales and marketing teams to set their sales goals, calculate potential ROI, and determine advertising budgets. CPLs are determined by the total cost of generating one lead, which is an important part of the lead generation process.
What is the average cost per lead on LinkedIn? ›| Marketing Channel | Low | Average |
|---|---|---|
| LinkedIn Advertising | $51 | $75 |
| Webinars | $45 | $72 |
| Display Advertising (Premium) | $43 | $63 |
| Content Marketing | $43 | $92 |
Around $150 to $200 is the optimal price, but for that amount, an MQL should be World Class. It should include a comprehensive prospect survey and LinkedIn profile analysis with three scores: a Profile Score, a Survey Score, and an Overall Prospect Score.
Is cost per lead a KPI? ›Cost per lead, or CPL, is an important KPI that measures the cost-effectiveness of marketing campaigns that generate new leads. The CPL provides businesses with critical data to determine whether they are acquiring new customers in a cost-effective way.
How do you forecast cost per lead? ›Cost per Lead Formula
Here are the steps: Find out how much you are spending on a given campaign, and divide that by the number of leads you generated. So if you are spending $1500 for an advertising campaign, and I get 10 leads, your CPA would be $1500/10 = $150 per lead. Cost / Number of leads = Cost per lead.
It's the return on investment (ROI) that marketing quantifies to justify how marketing programs and campaigns generate revenue for the business. ROI is short for return on investment. And in this case, it is measuring the money your company spends on marketing campaigns against the revenue those campaigns generate.
What does low cost per lead mean? ›Cost per Lead Definition
The Cost per Lead metric measures how cost-effective your marketing campaigns are when it comes to generating new leads for your sales team. A lead is an individual that has expressed interest in your product or service by completing a goal.
- Work out the Average Order Value (AOV) of the customer. E.g. a converted lead could be worth $3,000 in a particular industry.
- Divide the AOV by 3. ($3,000/3 = $1,000)
- Figure out the 5% conversion rate (5/100 x $1,000 = $50)
How do you sell B2B leads? ›
- Get in as many conversations as possible. ...
- Generate a targeted list of business contacts. ...
- Send cold emails. ...
- Make warm calls. ...
- Use Marketing Automation to nurture your leads. ...
- Set up a live chat on your website. ...
- Update your email signature with an embedded promotion.
Lead Aggregators/Wholesale Buyers: Lead aggregators (also known as wholesale buyers) purchase leads with the intention of re-selling those leads to their own network of buyers. Although lead aggregators pay less than end service/retail lead buyers, they can still be very valuable clients.
What is lead flipping? ›Lead flipping in marketing is similar to real estate flipping as it's essentially buying lists of pre-qualified leads and then reselling them at a higher price once they have been filtered through the lead generation system.
What is the best lead generation company? ›- Belkins. Drive Your Growth With Belkins. ...
- CIENCE Technologies. Human-driven & Machine-powered Lead Gen Services. ...
- Martal Group. N. ...
- Strategic Sales & Marketing. MAJOR ACCOUNT LEAD GEN SINCE 1989 - US BASED. ...
- Callbox. LEAD MANAGEMENT SOLUTIONS. ...
- UAM. ...
- SocialBloom. ...
- Cleverly.
- Map your ideal buyer profile (lead characterization) Who should you target? ...
- Determine ideal content types and channels that convert. ...
- Tap into buyer intent data to improve lead quality (lead scoring) ...
- Establish continuous collaboration between sales and marketing. ...
- Measure the effectiveness of quality-based lead generation.
Yes, most brokers do not provide leads. All the leads are usually generated by agents themselves. Some of the larger firms with a bigger footprint the broker will give leads to the top producers in the office. You should look for a bigger firm to work for with a few big producers in the office.
What does it mean to buy leads? ›A lead, Big Commerce says, is a person or company that shows an interest in doing business with you. There are several ways this can happen: They subscribe to your blog or newsletter, share their contact information with your company, browse your website or interact with your Facebook page or Twitter feed.
Do Realtors pay for leads? ›The majority of successful real estate businesses have some form of paid leads as a part of their marketing strategy. The most successful agents and teams actually scale up their lead buying once they identify a successful lead source.
How does Google ad calculate cost per lead? ›You can calculate Cost Per Lead with this formula CPC / CR = CPL. So for example if your cost is $0.50 per click and you have a conversion rate of 10% (50 / . 1 = $5.00) your CPL is $5.00.
How much should I charge to play a gig? ›The longer you would like a solo musician to perform, the higher the likely overall cost, but longer performances may also provide an opportunity for savings. For example, Tucker Dale of Redondo Beach, California, charges an average of $200 for up to two hours and $50 per hour thereafter.
What should I charge per song? ›
Song producers make anywhere from $750 up to around $35000 per song or more. Experience, recognition of the produced artist, and negotiation skills affect the paid fee the most. A producer's fee is composed of the front-end fee or advance, publishing royalties, and production points.
How much should my band charge for a gig? ›$200 per musician for the first hour and $50 per musician for each additional hour. $750–$1,500 for a DJ, including pre-event consultation, lighting and PA system.
What is a good CPL for Facebook ads? ›The cost per lead of your Facebook Ads show how much you're paying to acquire each lead. Databox found the average CPL for a Facebook campaign falls between the $0 and $25 mark.
How is cost per click calculated? ›Average cost-per-click (avg. CPC) is calculated by dividing the total cost of your clicks by the total number of clicks. Your average CPC is based on your actual cost-per-click (actual CPC), which is the actual amount you're charged for a click on your ad.
How much do companies spend on Instagram advertising? ›...
Instagram Ads compared to Facebook Ads.
| Social Network | CPC | CPM (cost per thousand impressions) |
|---|---|---|
| $0.97 | $7.19 |
According to LinkedIn, the average conversion rate is around 6.1%.
What is a good cost per result on LinkedIn? ›While LinkedIn advertising costs vary by the advertiser, LinkedIn does require companies to bid a minimum of $2 for cost-per-click (CPC) and cost-per-impression (CPM) campaigns. On average, however, businesses pay $5.26 per click and $6.59 per 1000 impressions, as well as $0.80 per send for Sponsored InMail campaigns.
What's a good engagement rate on LinkedIn 2022? ›A good engagement rate for Linkedin is about 2%, however, this can climb all the way up to 5 or 6%, depending on the type of content you are sharing from your content marketing calendar.
How do you reduce cost per lead? ›- Segment Your Audience By Behavior.
- Target Long-Tail Keywords With Specific User Intent.
- Run Remarketing Campaigns.
- Run A/B Tests.
- Personalize Your Ad Campaigns.
Low Range Pay Per Lead Telemarketing - £20-£80 Per Lead.
What is the difference between CPA and CPL? ›
CPA stands for Cost Per Action. It is a model where leads are only paid if they complete an action, such as buying a product. CPL stands for Cost Per Lead. It is a model where leads are qualified into genuine prospects being sold.
Should cost per lead be high or low? ›The higher the CPL compared to other businesses in your industry, the less effective the marketing campaign is. Naturally, a lower CPL is considered ideal. CPL is only one of many metrics that digital marketers often look at.
Why is my cost per lead high? ›If you have a high CTR, you'll pay less per click, but a low CTR will mean a higher cost per lead. By using video, you'll capture more leads and increase your CTR, which will lead to a lower CPL. If you ran just a photo ad, you might have to run multiple ads to engage your audience.
What is a good CAC? ›What is a good customer acquisition cost? Most commonly, businesses will benchmark their customer acquisition cost against customer lifetime value. A CAC:LTV ratio of 1:3 is generally considered a good ratio, though it will vary greatly for different businesses.
What is Cost Per Lead in digital marketing? ›Definition: Cost-Per-Lead, or CPL, is a digital marketing pricing model whereby the advertiser pays a pre-established price for each lead generated. In ecommerce, CPL is often utilized by businesses who sell subscription services or high-value products.
How are estimated leads calculated? ›You can calculate the close rate by dividing the total number of leads you generated in a period of time over the number of customers that came from those leads. Then simply divide the number of customers you need by the close rate to calculate the number of leads you need to generate.
Can you make money with lead generation? ›The lead gen business model can be lucrative, but it can also be very passive if you are using organic traffic sources, especially similar to those found with AdSense or Amazon affiliate sites.
What is the cost of lead per kg? ›| Conversion | Lead Price | Price |
|---|---|---|
| 1 Ton = 1,000 Kilograms | Lead Price Per 1 Kilogram | 1.97 USD |
Why Does it Matter? Cost per leads enables sales and marketing teams to set their sales goals, calculate potential ROI, and determine advertising budgets. CPLs are determined by the total cost of generating one lead, which is an important part of the lead generation process.
Is CPA better than CPC? ›CPA is a step further from CPC because you only pay when someone takes your desired action. If a person sees and clicks your ad, but doesn't convert, you don't pay.
Is Facebook CPC or CPM? ›
If your ad campaign focuses on impressions, the average cost of Facebook advertising is $12.07. This amount refers to the cost per thousand impressions (CPM), which is what your company pays when 1000 users see your ad on Facebook.
What is CPA formula? ›Average cost per action (CPA) is calculated by dividing the total cost of conversions by the total number of conversions. For example, if your ad receives 2 conversions, one costing $2.00 and one costing $4.00, your average CPA for those conversions is $3.00.