A Guide to Understanding the Cost of Lead Generation
Lead generation is essential for your business. You cannot grow your agency without a constant supply of leads. Most agencies have limited budgets. Therefore, the cost of lead generation also becomes an important consideration. Your ROI is directly proportional to your investment in lead generation as it brings a lot of value to your enterprise.
If you want your organization to succeed, you need high-quality prospects. But, at the same time, you cannot afford highly expensive lead generation sources.
This guide will discuss the different aspects of lead generation costs and the factors that impact it. So it will also help you discover the most effective lead-generation strategies within your budget.
What Are the Factors That Affect the Cost of Lead Generation?
Agencies perform different activities to generate leads, and the most prominent ones include advertising on social media and creating landing pages. The effectiveness of your advertising campaigns on social media and search engines determines the success of your marketing campaigns. Your campaigns should generate leads that you can convert into customers with minimal effort.
The biggest factors that influence the cost of lead generation include media placement and distribution. It will also impact the cost of running ad campaigns on Facebook and LinkedIn and hiring third parties to receive or generate lists.
However, the cumulative cost may soon shoot up if you are not careful or your budget is small.
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We can divide the lead generation cost into the following elements –
A. Salaries and Fees Paid to Freelancers and Experts
These include the cost of hiring full-time employees and freelancers to run social media ads and traditional advertising campaigns. You can easily calculate ROI on this expenditure based on how many leads they generate every month.
B. Content Production, Promotion and Distribution
To run both organic and paid campaigns, you need quality content, and that comes at a cost. The content you create should offer value to your prospects and should be helpful, interesting and engaging. Agencies create blog posts, social media posts, videos, podcasts, infographics and content for webinars and ad messaging. After producing customer-centric content, you must also spend heavily on promoting and distributing it.
C. Software Programs, Apps and Tools
Agencies use different software programs and apps to succeed in today’s data-driven marketing environment. These tools allow you to scale quickly and automate numerous manual tasks that are quite tedious and time-consuming.
Pro Tip: If you use a white-label platform and fulfillment services, you’ll also get access to many apps and agency tools that will be extremely cost-effective for your agency.
DashClicks white-label platform offers the following apps:
- Contacts (A CRM software that helps you store and organize your people and business contacts)
- Inbound App (A lead management software that streamlines your leads and notifies your sales team about them)
- InstaSites: (A bulk website builder that can instantly build dozens of professional content-ready websites for your clients)
- InstaReports (A reporting tool that can create hundreds of digital marketing reports in a few seconds)
- Projects (A project management software that helps you track and manage your projects swiftly)
Apart from these, the platform also offers numerous other highly useful apps for digital agencies.
Your lead generation cost also depends on the number and types of leads you want to generate. So, if you generate bulk leads and want to target new customers, it will definitely cost more. On the other hand, if you run an up-selling campaign for your existing customers, it will cost you much less.
Types of Leads
Before we discuss various lead generation costs, let’s first discuss the types of leads most businesses generate. Marketers often generate (or wish to generate) two major types of leads.
1. Marketing Qualified Leads (MQLs)
MQLs are the potential customers you’re able to successfully target through your campaigns.
2. Sales Qualified Leads (SQLs)
SQLs are the customers already engaged with your business in some way. They are also more likely to buy your products or services. They may have signed up for your newsletter, attended your webinar, downloaded an ebook, purchased your products/services before, or booked an appointment.
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How to Calculate Cost per Lead (CPL)?
Cost per Lead, or CPL, is one of the most popular metrics to measure the performance of a digital marketing campaign. Here is the formula that marketers use to calculate CPL.
CPL = Total cost spend on a digital marketing campaign/number of leads coming from that campaign.
For example, if you spent $3,000 on a pay-per-click (PPC) ad campaign and converted 100 people into leads, the Cost per Lead will be: $3,000 / 100 = $30.
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Types of Lead Generation Cost
Here are the different types of lead generation costs that marketers need to consider.
1. Agency, Freelancers, and Labor: Many businesses either hire an agency or commission freelancers to run their digital marketing campaigns, such as SEO and paid campaigns. The cost of hiring an agency or the freelancers’ payments is included in your lead generation cost.
2. List Purchase: You can’t run a telemarketing campaign without a relevant customer database. List purchase includes the cost of buying phone numbers for telemarketing and address lists for direct marketing.
3. Campaign Creation: It involves the cost of researching keyword data to target the right audience for your organic campaigns. It also includes the cost associated with the following activities:
- Developing a campaign strategy.
- Creating marketing messages, an email or SMS/text message campaign.
- Creating keyword-optimized content for search engines to target the right audience, and the cost of editing, proofreading, adding graphics and publishing.
- Testing and tweaking your ad copy and design.
- Managing the website or landing page.
You can set up a campaign for as low as $10 per month for an email service provider alone. Your cost may go up to as high as $12,000 per month if you outsource it.
4. Ad Campaign Management: This is the cost you incur to set up an effective online marketing campaign, such as setting up ad placement on different paid channels like Facebook, Instagram, LinkedIn and Google. It also involves various activities and messaging you use at other sales funnel stages to push the lead down the funnel for conversion. Focus on one product or service at a time while doing this to reduce your costs.
5. Incentive: Businesses sometimes incentivize their high-quality prospects with discounts and coupons when they exhibit buying intent.
6. Media Placement and Distribution: It is the cost of reaching your targeted audience through online campaigns.
7. Other: Apart from that, there are some additional costs of managing a campaign, such as costs incurred on influencer marketing, buying tools and apps, event participation, etc.
Most Common Lead Generation Pricing Structures
Here are some of the most popular and trending metrics you must be familiar with.
1. Cost Per Appointment
This metric ranges between $150 – $350. It involves the number of appointments you make with potential customers. It also considers the time a website visitor spends on your website. CPA is the easiest model businesses use to calculate costs without tracking every sale they make.
This metric ranges between $3,000 – $10,000 per month. It comprises advertising and lead generation services. This cost model mainly considers lead generation while ignoring other campaign elements. It allows you to choose your budget for paid search and display ads.
3. Cost Per Lead
This metric ranges between $40 – $190 per lead. CPL reflects the cost of generating a new customer or lead. Businesses use this metric to maximize leads without investing too much time and effort.
4. CPL = Total Cost Spend / Number of Leads
For example, if you converted 50 people after spending $1,600 on an ad, your CPL would be: $1,500 / 50 = $30.
It helps you calculate your ROI and determine the types of resources you want to allocate to the activity the next time.
Many businesses employ robust lead generation processes and tools, and yet their quality of leads is dismal. You must invest time and money to generate quality leads and set up the right procedures to determine which tactics work best. You should also keep it within your budget, which you can easily achieve by consistently monitoring your cost of lead generation and tweaking your campaign accordingly.