No Lead Left Behind

What is your Cost Per Lead?

This is just a brief rant today about what marketing people are willing to pay for a lead.  I am dazed and confused by the advertising dollars I see spent on low-quality leads.  Even more befuddling is when someone is willing to spend hundreds of dollars per lead, but hesitates on spending any money to ensure that it actually reaches and is followed up on by a sales person.  

Here’s an examle of how to think about cost per lead:

• The trade show cost you $50,000 including the booth space, personnel, collateral, travel, etc.
• You generated 85 leads 
• The leads cost you $59 each 
• Your cost to traffic the lead to a sales rep should be around $6.50 each (10-15% of the lead cost)
• Knowing your lead went to a rep, it was looked at and acted upon, and getting ROI on the lead source = PRICELESS  (sorry – couldn’t resist)

How do you know if you’re paying the right amount for a lead?  Research shows that the average cost of a B2B sale can typically be computed as 2.5% of your average sale.  It makes sense to base the cost of your leads on your average sales amount as leads that result in $100,000 sales are certainly worth more than those that result in a $1,000 sale.  But don’t stop there.  You must also assume there is a cost to deliver that lead to the correct sales rep.  It’s a good idea to take 10-15% of the cost of the lead and set it aside for solid lead management processes or systems.  Marketers that plan on costs for lead management are the ones that later can focus on their real jobs versus jockeying spreadsheets of leads between various sales entities, trying to prove that the latest campaign was successful. 

If a tree falls in the forest and no one hears it, does it make a sound? If a lead is generated and no one receives it or follows up on, should you have bothered spending your time and money on it in the first place?