How Much Does Lead Generation Cost?
Lead generation cost is as essential as collecting leads.
Therefore, knowing how to calculate and the related terms matters in the sense of expanding the reaching area.
The related topics can include:
- the definition of lead generation,
- learning how to calculate cost per lead (CPL),
- examining which type of costs need to be included in the calculation,
- learning what the average cost per lead is,
- studying which factors influence the total lead cost,
- seeing how many leads you need to hit your revenue goal,
- determining the best lead providers and their prices.
Since the average spending on digital advertisement gets higher year by year, you will want to know whether your money is well spent or wasted?
Though adding new customers within your sales funnel is crucial for sustainable growth, it is also necessary to focus on the efforts and the means you will use.
What is Lead Generation?
The number of how many people have engaged with your business to decide on whether to make a purchase or not is lead generation.
It does not necessarily mean that there must be a conversion.
Even a visitor coming to your website and not taking the desired action counts as a lead.
The vital thing to know here is that there are two types of leads because the terms of marketing and sales carry different characteristics within themselves:
- The first type of lead is Marketing Qualified Leads (MQLs) which are the potential prospects that you were able to persuade.
- The second type of lead is Sales Qualified Leads (SQLs) which are customers who have engaged with your business. There are ways, like downloading an ebook, purchasing a product or making a reservation.
How to Calculate Cost per Lead (CPL)?
Cost per Lead or, CPL, is one of the most used metrics to evaluate the efficiency of a digital marketing campaign. And the formula of CPL is very straightforward:
CPL= Total cost spend on a digital marketing program/ Number of leads coming from the program
For instance, let’s say you have spent $1,000 on a pay-per-click (PPC) advertisement and 50 people were converted into leads.
- Cost per Lead = $1,000 / 50 = $20.
Remember that generating leads is all about a high return on investment of your customer acquisition.
The higher the ROI, the more costly a lead is; and the lower the ROI, the less likely you are to pay for obtaining leads.
Cost per Lead (CPL) Calculators
To ease your work in calculating cost per lead, here are some helping tools to consult:
- **The Online Advertising Guide***
- Lead Feeder
-
Unbounce
Types of Lead Generation Costs
Some costs occur during the lead generation process and need to be summed in the calculation, but not all are applicable to every channel for lead generation:
- Media Placement and Distribution: Cost of reaching the potential audience of a digital campaign.
- List Purchase: Cost of buying or renting a telemarketing list and a third-party address list for direct marketing.
- Agency and Labor: Cost of hiring an agency to manage some digital marketing processes like SEO.
- Campaign Creation: Cost of developing an effective digital marketing campaign.
- Incentive: Cost of immediate rewards like coupons or discounts to high-quality prospects before buying behavior.
- Other: Costs of managing a digital marketing campaign aside from the ones explained above.
Average Cost per Lead
The average cost per lead varies based on your industry, lead generation channel, company size, and company revenue.
CPL differs widely depending on
- the industry,
- the profundity of your target audience,
- the competition among your sector.
When it comes to the amounts and the cost influencing factors, it is better to explore them!
Average Cost per Lead by Industry
If the industry alters, the average cost per lead focuses on revenue and the changing elements based on the industry you belong to.
| Industry | Cost per Lead on Average |
|---|---|
| Non-Profits | $31 |
| Retail | $34 |
| Telecom | $45 |
| Education | $55 |
| Marketing | $99 |
| Consumer Products | $105 |
| Travel & Tourism | $106 |
| Media & Publishing | $108 |
| Business Services | $132 |
| Manufacturing | $136 |
| Finance | $160 |
| Healthcare | $162 |
| Technology | $208 |
Sources: Marketing Charts, Hubspot, Socedo, Survey Anyplace, Integrated Marketing Association
Average Cost per Lead by Lead Generation Channel
Lead generation channels are the means of reaching more, and the more channels, the better.
| Lead Generation Channel | Cost per Lead on Average |
|---|---|
| Online Retargeting | $31 |
| Search Engine Optimization (SEO) | $31 |
| Email Marketing | $53 |
| Social Media Advertising | $58 |
| Display Advertising | $63 |
| Webinars | $72 |
| Referrals | $73 |
| LinkedIn Advertising | $75 |
| Content Marketing | $92 |
| Search Engine Advertising | $110 |
| Video Marketing | $174 |
| Public Relations | $294 |
| Traditional Marketing (TV, Radio, Print) | $619 |
| Event & Tradeshows | $811 |
Sources: Marketing Charts, Hubspot, Socedo, Survey Anyplace, Integrated Marketing Association
Average Cost per Lead by Company Size
The company size is a determinant factor in generating lead, and the rates inevitably change.
| Company Size | Cost per Lead on Average |
|---|---|
| 1001+ Employees | $349 |
| 201-1001 Employees | $212 |
| 51-200 Employees | $180 |
| 2-50 Employees | $47 |
Source: 1st on the List Promotion
Average Cost per Lead by Company Revenue
Company revenue shifts average cost per lead, that’s how the rates shape.
| Company Revenue | Cost per Lead on Average |
|---|---|
| $500M + | $429 |
| $10M - $500M | $179 |
| $1M - $10M | $185 |
| < $1M | $166 |
Source: 1st on the List Promotion
How Many Leads Do You Need?
As the main aim of a marketer is to maximize efficiency in campaigns, you must understand how many leads you need to hit the revenue goal of your business.
This analysis requires information about your company data elements like;
-
Targeted Revenue – The amount of revenue you aim to reach at the end of a period
-
Marketing-Driven Revenue – The portion of total income that is acquired thanks to marketing efforts.
-
Average Sales Price (ASP) – Net Sales / Number of Units Sold
-
Marketing-Driven Deals – Marketing Driven Revenue / Average Sales Price
-
Opportunity-to-Sale Ratio – How close you are to turning one lead into a customer out of the total number of leads
-
Qualified Lead-to-Opportunity Ratio – How many leads it takes to turn one lead into a customer
-
Lead-to-Qualified-Lead Ratio – How much analysis is necessary to turn one lead into a converting customer.
Now, let’s evaluate one example together:
- Suppose you aim to reach $100,000 in revenue by the end of the month.
- Your marketing-driven revenue is $45,000 at the end of the month.
- The ASP is calculated at $5,000.
- Marketing Driven Deals: $45,000 / $5,000 = $9
- Opportunity to sales ratio is predicted as 3, which means you have the opportunity to turn one lead into a customer out of 3 leads.
- Number of Opportunities Needed: 3 x 9 = 27
- Qualified lead to opportunity ratio is foreseen as 6, which means you can turn one lead into a converting customer if you have at least 6 leads.
- Number of Leads Needed: 6 x 27 = 162
What you can deduce from this example is that you need to have at least 162 leads in order to obtain zero profit.
Rather than making calculations to know the lead break-even point for your digital campaign, some tools will provide you the same information automatically;
Sales Lead Calculators
These tools will help you determine how much engagement you need to convert qualified MQLs into SQLs leading to a boost in your sales.
It is also good to know the necessary amount of leads before moving to plan your digital marketing efforts.
- Sales Lead Automation
- Integrated Marketing Association
- Product Hunt
- Acquire B2B
Lead Generation Service Providers
Another option to increase leads is to pay a third-party to generate leads for your business.
In some cases, getting help from companies in the lead generation sector would be more effective than spending your money and time on obtaining leads by yourself.
Especially if you are a small business with a small database of prospects, you may let someone else develop an extensive database for you while you focus on customer retention strategies within the company.
The problem with those companies is that they offer you a temporary solution.
When you stop paying for obtaining leads, they will simultaneously stop generating leads for you.
Therefore, you need to constitute an efficient plan to keep those leads and turn them into loyal customers.
No matter which path you choose, you should;
- set clear objectives,
- start an accurate program for the job,
- track your results to find the best strategy.
Here are some of the companies that may help you generate more leads, their services, and their prices are given;
| Company | Services | Pricing |
|---|---|---|
| Popupsmart | High converting popup builder digital marketing tools | Free trial |
| Email Search Engine | LinkedIn email finder & prospecting tool | Free trial |
| LinkedIn Sales Navigator | Searching for leads and features | $64.99 |
| Mailshake | Outbound email generation | $58 |
| Vyper | Creating contents, promotions and social media buzz generation | $149 |
| ClickFunnels | Building sales funnels and webpages | $97 |
| Callpage | Engaging the user to a phone call | $25 |
| Datanyze | Searching for leads based on specific conditions | Free trial |
To Cut a Long Story Short…
To sum up, if your overall value of a lead is more than your total lead cost, it means your lead generation program is a winning one!
Now that you know the details of the cost of lead generation, you are ready to become a digital marketing hero in your workplace.
Don’t forget to apply these in your lead generation marketing strategy in your business!
If you have any questions or suggestions, please do not hesitate to share them via the comments!
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