What’s your cost per lead?

I hate this question.

[Cue soap box rant]

Reason #1: There’s not a single cost per lead. It’s like asking an airline its price per seat. Yeah, they can give you an average. But you’ll miss the nuances of first class international versus coach domestic. Say price per seat goes up. Was the airline to charge more on domestic flights, or did more people fly first class internationally?

Similarly, some leads are more expensive. I’ll pay $100+ for a tradeshow lead. And an organic inbound lead is cheap by comparison – maybe $5 depending on how many writers I have producing content, and their estimated opportunity cost of writing a blog versus their day job. Put that data on a bar chart? Bye bye tradeshows. Probably the wrong answer (see Reason #2).

Reason #2: Cost per lead tells me nothing about lead effectiveness. I’m willing to pay more for leads that are more likely to produce pipeline. What I really care about is cost per opportunity – or, if your sales cycle is short enough – cost per booking.

Say you want to plant a tree in your yard. You drive to a nursery. A mature tree costs $1,000. But you can get a sapling for $100. And you can buy seeds for $1. That’s your lead maturity spectrum. You can buy a list for 10 cents per lead. Or you can use google adwords and pay $200+ per lead (depending on your ASP/life time value, this is worth it).

Reason #3: What the hell is a lead? Is it an MQL? Is it a SQL? Can marketing really qualify leads? What is the right system of checks and balances? While we’re at it, let’s set up a tripartite government between marketing, sales, and the CEO. Some companies have a chief revenue officer for this reason. But if you have a separate sales and marketing org, then you know this pain. 

If you’re focusing on cost per lead, you’re focused on the wrong issues and likely making bad decisions.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s