How Much Should Leads Cost?
When asked how much a lead should cost, marketers will respond in wildly varying ways, and part of that has to do with the type of business they are in. B2B and B2C companies often have very different standards for how much leads cost, Dave Walters, a product evangelist at Silverpop said from the conference stage.
In fact, 36% of marketers said leads should cost US$ 20, 25% said US$ 150 or more, 23% said US$ 51- US$ 150, and 16% said US$ 21- US$ 50, according to a 2011 Marketing Sherpa B2B marketing benchmark survey. So even within the B2B category, marketers don't agree what those costs should be.
But, getting down to a more basic level, there doesn't appear to be much agreement on what a lead even is.
"Leads are something we spend money on to help define, and things we spend time on getting to that point," Walters said.
"It's not just a hand raiser."
In other words, just because marketers have a name and a person's contact information, that doesn't make them a lead.
"There needs to be an agreed upon definition on how exactly a company defines a lead," Tom Reid, executive director at Hacker Group said.
This is especially important when it comes to the all important sales team hand off, Reid said. Once that happens, all the money spent on that lead will come from sales, and they will be on the hook whether that lead converts or not. In order for sales and marketing teams to work best together then, there must be an agreed upon definition in place.
One way companies can narrow down this definition is that they are only leads once they get handed over to sales, for example, Reid said. Once leads have a proper definition, they can more properly assigned a hard cost.
Lead costs have to include the entire cost of turning a prospect into lifelong clients.
Even with a lead definition agreed upon, not every lead is the same. Qualified leads are more expensive, and inbound generated leads are generally cheaper than outbound ones. Additionally, leads can vary in cost by vertical, Erik Matlick, CEO of Madison Logic, a lead generation firm said. Average costs per lead for HR might be US$ 45, but for healthcare it might be US$ 65, 2012 data from Madison Logic showed.
In order to adequately track lead costs, marketers should track number of inquires, number of leads, number of opportunities and number of sales. When those metrics are known, it then becomes possible to track inquiry to lead ratio, lead to opportunity ratio, lead to pipeline ratio, and lead to sale ratio.
Pitfalls in this type of undertaking might include poorly capturing data that causes an inability to attribute cause and effect. Another common mistake could be poor capacity planning, something that could lead to abandoned calls or deluged sites.
Reid suggested marketers start with a sale and work backwards to determine lead costs. Find out how many leads were needed to make that sale, for example, and go down the food chain to see what it really took, he said.