HOW MUCH IS A SALES LEAD REALLY WORTH TO YOU?
The value of a sales lead is a measure of how much would you are willing to pay for a “qualified” sales enquiry. You may correctly consider that it depends on a few things – for example:
- The size of your gross margin per sale.
- Your close rate – the rate at which you have historically converted leads of this quality into real sales.
- The definition of the word “qualified”!
Let’s dispense with ‘3’ first. Let’s define “qualified” as someone who:
- … arrived onto your website having entered a search query into, say Google, which closely matched the product or service you sell – ie. they self-qualified based on their search behaviour – and your website intercepted them, and
- … they either ‘phoned you or entered their name and email address, and perhaps a ‘phone number into a form on your website in exchange for something that they considered to be of genuine value to them.
Now let’s take ‘2’. Assuming you were dealing with the above lead quality, your ability to convert that lead into a sale is typically determined by:
A. How effective your follow-up process is.
B. How effective your person-to-person sales contact is (if an offline contact is required)
C. How good your understanding is of the buying cycle, buyer needs and purchase motivations.
These are things you do after you acquire a sales lead, so your effectiveness at converting leads into paying customers is very much within your control. PraxisNow can help with that, but that’s for another time!
What is clear is that without sales leads, there will be no sales.
Now, let’s get back to ‘1’ – your gross margin per sale. If you sell something for say, €2,000 and make a gross margin of say, €1,000 per sale, and assuming your conversion / close rate was 10% for this level of sales enquiry, you would need to generate 10 leads for every sale. So, to reach a sales target of say €10,000 per month from this channel, you would need to generate 100 leads every month. Or 50 leads per month if your target was €5,000/m – or back up to 100 leads per month if your conversion rate was only 5% and so on.
So, reverting to the original question – how much is a sales lead worth to you? If you can accept the logic thus far, then it becomes relatively easy to ascertain how much you should be investing in any individual marketing channel – digital or otherwise. If it’s purpose is lead generation, as most of the digital channels are or should be, then how that translates to (and is measured on) qualified sales leads generated, is easy – a lead is worth the gross margin you make per sale averaged out across both the leads you converted and the ones you failed to convert.
Therefore, maximising your return on investment from any marketing channel with a lead generation goal must start with being able to measure its exact performance in a lead generation context – ie. a precise monetary value.
If you would like to talk through your specific situation with us, we would welcome a call on 01-2360076.