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Determining the Real Costs of Lead Generation — and Making It Work

“Determining the Real Costs of Lead Generation — and Making It Work”

Keys to a successful marketing program: targeted audience, sharp appearance, valuable offer.

When you buy a newspaper or a magazine, are you really paying for the paper and the ink? If the paper and the ink are what you are really buying, it makes no difference if the newspaper is printed in Chinese. The paper and the ink are still the same.What you are really willing to pay for is the information contained in the periodical and the value you can derive from using this information. The information is provided via the paper and ink.

Lead-generation programs work in much the same manner. When you pay for an advertisement or a trade show, you’re not really investing in the ad or the booth. You’re really looking for sales leads. Your return on investment is the number of leads generated — and the sales resulting from those leads.

Penny-Wise or Cost-Foolish?

Some companies refuse to spend money on lead-generation programs because of seemingly high costs. Though good fiscal management is admirable, concentrating exclusively on the cost side of the equation can be penny-foolish.

When you judge the cost of a lead-generation program, evaluate it the same way you would a stock purchase. Consider not only the price, but also the potential return generated by the program.

Unfortunately, just as with buying stocks, you can’t guarantee the return before you buy. Likewise, there are three considerations to ponder before investing:

  1. Target audience: Choose them carefully.
  2. Appearance of the offer: Make sure you create a good impression.
  3. The offer itself: Make sure it’s one your audience will deem valuable.

If someone in the Bahamas received a direct-mail piece advertising a great sale on fur coats, the quality of the offer really wouldn’t matter. However, if people in Minneapolis received the same offer in a stained envelope with a handwritten letter done in poor penmanship, the quality of the offer wouldn’t matter either.

Evaluating Your Lead Program

If you spend $4,000 on a direct-mail campaign and receive two leads, your cost per lead generated is obviously $2,000. If, on the other hand, you spend $8,000 on a direct-mail campaign and receive 100 leads, the cost per lead generated is only $80. The $8,000 program obviously had a better return as measured by cost per lead generated. Remember: Leads are what you are really paying for.

A point to ponder: Consider the quality of leads generated. Some consumers would respond to any campaign offering free peanut-butter cookies, regardless of what’s actually being sold. So though this tactic could boost the number of leads generated, those leads may not be customers who are interested your product or service. Quantity of leads matters, but so does quality.

When you receive leads, your first step should be to qualify the leads to determine their level of importance. Important leads are potential customers who are interested in what you are selling and to whom you are interested in selling.Next time: How to determine the quality of leads.

Writer: Frank Martin is the president of Dynamic Selling Systems, Atlanta.