How Much Is A Lead Worth For You?

Qualified sales leads are the lifeline of most businesses. Often, you might find it difficult to measure your marketing performance and costs. If you find yourself in this situation, figuring out what a lead is worth and setting a budget for them is a great way to track your marketing performance and measure the effectiveness of your strategies

Let’s start with the basics by breaking down what a lead means.  A lead is a potential sales contact, an individual or organization that expresses an interest in your goods or services. Based on your business goals, it can be a phone call, a form submission, or a direct walk in to your office. It is typically brought through a marketing channel such as Facebook or AdWords, before it gets turned over to a salesperson.

As I mentioned earlier, there are multiple ways to track your leads effectively. We won’t get into much details today. A key point is to ensure that you have a fully functional website and the right tracking mediums such as Google Analytics or a CRM like Salesforce. This makes it significantly easier to analyse your marketing performance, campaigns and reporting ROI.

Now that we have broken down who a lead is and why tracking marketing by leads is important, how can we calculate what a lead is worth for your business? Some of our clients are faced with the challenge of deciding how much to invest in marketing. The cost of a lead differs by industry and products. You should also bid according to the competitiveness of your industry. For example, a personal injury lawyer will be willing to pay more for an interested lead than someone who is in the business of trying to sell shoes. For your ads to generate value, you would need to bid higher that your competitors.

With the help of our Facebook Agency Manager, we were able to simplify this process. With this simple formula, you can uncover how much you should be investing for each lead.

Formula:

1. How many leads does it take to sell one item?
2. What is the profit margin of that item?

True cost per lead = (profit)*(one item) / No of leads it takes to sell one item = true cost per lead.

Example: 

1. It takes your coat store 2 leads to sell 1 coat.
2. You make $60 from 1 coat

True cost per lead= (60) * (1) / 2 = $30

This is a simplified formula that can help you determine what a lead is worth. So, instead of assigning a general amount towards marketing and advertising, you can take time to calculate the value of each lead. This way, you will run your ads based on the number of leads and ROI you are aiming towards.

If you require any help with your marketing and advertising goals and strategies. Please give us a call at 416-477-0587 ex. 101 or you can email us at [email protected]. We would be happy to help you.