In a recent brainstorm about lead generation services and processes, my team mates brought up a few questions about average cost per lead. This is an ongoing debate and a quick search on Google will show you that the range of opinions is fairly wide. The range of actual cost estimates is even bigger. The reason for this is mainly because individuals and organizations have diverse definitions of a lead. With the varying criteria that exist out there, it’s inevitable that the comparison is apples to oranges rather than apples to apples.
Steve Jobs 1955-2011
Speaking of apples, I cannot continue here without paying tribute to Steve Jobs, the Visionary; the man who did not just preach “Think different”, he did. Jobs gave the world a class of innovators that most people would consider geeks who made cool electronics. The man’s unmistakable talent, however, was to filter an outstanding idea from the mediocre, polish it until it sparkled and transform it into a work of art…not a mere piece of electronic gadgetry. I tip my hat in the greatest respect for Steve. His life is an inspiration that we can hope will give the world more Apples…some day.
Coming back to my rant about cost per lead, it appears the debate is muddied by a very general approach to lead generation. So before I summarize the Q&A session that emerged in my office, let me point out here that I am talking about:
- Outbound derived leads (even though I am a big advocate of Inbound and “Pull” marketing)
- Not lists or mapped accounts, but qualified leads
Note: The true definition of a qualified lead is one that is “actionable” – a marketer can use the lead to engage a prospect into a meaningful dialogue or interaction that has a greater chance to move towards conversion and sales closure.
Photo by immrchris
Question: Is there is an accurate number or ballpark figure for the average cost per lead?
Answer: I wish! I have seen projected numbers from as low as $80 to a medium of $120 and high of $800-$1000. How is it possible to find an “average” or ballpark? No wonder it is such a confused world out there. No two lead databases are created equal; each one fulfils a different set of criteria. If I were to give you a number based on the above definition of a qualified lead, I’d say the average cost per lead in the North American market is:
- $160-$200 for a large telecommunications company
- $250-$350 for a hardware manufacturing company
- $200-$350 for a professional services company
Question: What difference does the nature of industry make to the cost per lead? Or does it?
Answer: It’s actually the type of sale that is the differentiator. A commodity sale involves (a) a shorter sales cycle (b) lesser engagement (c) fewer touchpoints. On the other hand, for structural demand generation you require (a) a longer sales cycle (b) many more touchpoints (c) higher and deeper engagement levels
Question: Doesn’t outbound marketing offer opportunities to bring in more leads for less?
Answer: It could, if you are happy to consider a list of names as leads! A B2B company could attend a trade show, come back with an overflowing fishbowl of business cards and think their investment in attending the exposition really paid off. Or the tradeshow organizers could easily give you the full list of visitors that attended the show. So now you have…what? Leads? No, only a LIST. My point is: A name is only a placeholder; CONVERSION is critical. More conversion, more ROI, more profits, i.e. lower cost per lead. It’s as simple as that.
Question: Lead generation companies vary their pricing based on the type of lead appointment. How should B2B marketers decide what is best and buy accordingly?
Answer: Yes, a face-to-face appointment costs more because there is a higher level of coordination and engagement involved than in a tele-appointment. But the difference in price is not because of the quality, it’s for the time, resources and effort involved. The quality of the lead should not be any different.
The only way to make a wise decision is to insist on a qualified lead. A qualified lead is a qualified lead whether you are paying for a telephone appointment or an in-person meeting appointment. You pay for the opportunity to engage a prospect who has shown interest in your offering. You pay for the strong chance to convert a genuine inquiry into a sale, a prospect into a customer. That is lead generation. Then the medium of interaction can be the telephone, a video conference, web conference, face-to-face meeting or opt-in email subscription; it should not make a difference to the quality of lead you are paying for.
More questions about average cost per lead? Comments? Would love to hear from you.
Best metric for any source or campaign is the actual CPLC cost per lead closed. This is the sum total of resources consumed, time and labor to close the sale based on Sales articulation (offer) and lead source. If for example the lead was trade show, your calculation is cost of lead closed in 7 days, 30 days and maybe 60 days. The objective is to lend estimating accuracy with historical metrics. I disregard branding as passive game and direct response as true sales, meaning we motivated an unnatural response in the prospect to buy now. Any sales closed after 30 days means the motivator was not strong and at 60 days the client remained in control. Over 60 days means either a mismatch or client decided on their own. My business/Myself have been making cash sales on the tradeshow floor inspite of exhibitor contract terms. We sell 3K-1.5K per person training paid by the employer never by individual. Our role model is Claude Hopkins. ONLY the CPLC by source/offer shows the real cost/profit by event or source. Otherwise yiu end up with a lot of time wasting leads that when a handful close its obvious the net cost would have been cheaper to just giveaway trips to hawaii. Direct response/on-the-spot sales is the unnatural act of true buyer motivation. You need to know the truth in order to quit wasting capital on branding or presence. Only true measure is immediate sales overcomming normal obstacles, everyone else is just giving excuses for lack lucluster performance.
“insanity is the opposite side of normal, only history decides if its genius” – me, Dave Cannon (fearless leader and chump that pays for everything).