Getting to the core of lead cost isn’t straightforward. With so many factors in play—from nurturing to content creation—the real cost of a lead is often far more than a single acquisition number. As the landscape of B2B lead generation has evolved, it’s crucial to look beyond traditional metrics and take a more holistic approach to understanding what leads truly cost.
Let’s dive into some expert insights on what to consider when calculating lead costs.
Tip #1: Define What Constitutes a Lead for Your Organization
“Where is a lead?” This question isn’t as simple as it seems, as what counts as a “lead” can vary greatly across teams. Atri Chatterjee, former CMO at Act-On Software, wisely said, “Just because you have a name, it doesn’t mean you have a lead.”
The first step in accurately calculating lead cost is to clearly define what a lead means for your organization. Here are some terms that teams often use when talking about leads:
- Inquiry: A contact who has shown interest but may not be ready for sales engagement.
- Hand-raiser: A lead that explicitly expresses interest in learning more.
- Shared Lead: A lead that’s been shared across marketing and sales teams for further evaluation.
- Purchased List: Contacts bought from a third-party source, not necessarily engaged yet.
- Marketing Qualified Lead (MQL): A lead vetted by marketing but may not yet be sales-ready.
- Qualified Lead: A lead that meets specific criteria set by marketing or sales.
- Sales-Ready Lead (SQL): A highly qualified lead that’s ready for direct sales engagement.
So, the first step in determining lead costs is to cut through the confusion by creating a universal lead definition that key stakeholders in your organization can agree upon. This foundational clarity helps eliminate ambiguity and align everyone on what type of prospects marketing should generate and sales should pursue.
Tip #2: Think of Lead Costs Holistically, Not Just by Acquisition Price
It’s easy to assume that a list of leads from a broker or event comes at a straightforward cost. However, consider the full scope. You might purchase a list of 2,000 contacts for a modest fee, but is that the actual cost? Not.
The real price includes everything needed to engage those leads—content development, email nurturing, and marketing campaigns. Each touchpoint, piece of content, and nurturing email adds to the cost. Viewing lead cost as an aggregate of all associated expenses gives a much more accurate picture of your true investment per lead.
“The cost of a lead is no longer buying leads on the market or a webinar attendee – it’s an aggregation of all of the costs that go into turning a prospect into a lifelong client.”
Factors to Consider When Calculating Lead Cost
To get closer to the real cost of a lead, factor in these components:
- All-In Solicit Costs: Include everything it takes to bring in a lead. This can range from creative and production costs (including media) to internal and external expenses associated with campaigns.
- Response Capture Costs: Consider the resources needed to capture and manage lead interactions, from website data entry and telemarketing setup to training costs.
- Fulfillment Costs: These could include offers, premiums, and even pick-pack-ship costs that arise when nurturing and following up with leads.
One expert recommendation is to uncover these often-overlooked factors and include them in your lead cost. “When you look at the price from an aggregated perspective, you’re probably much closer to a true lead cost.”
Erik Matlik, CEO of Madison Logic, also shared this notion, summarizing the importance of factoring in these expenses: “I would put everything literally into your cost per lead.”
Final Thoughts: A Better Path to Budgeting and ROI
Budgeting for lead generation isn’t just about requesting funds; it’s about showing the return on investment. As you build your lead generation strategy, take these costs into account to better advocate for your budget needs and set realistic expectations with finance. Remember, a clear and transparent approach to lead cost calculation can bridge the gap between marketing and finance, ultimately enabling better decisions and outcomes.
No hype. No noise. Clarity your team can actually use.