Lead Generation: It’s the bane of many business providers. What is the right investment ratio for generating leads? In the old days, attorneys setting up their practice would pick up the phone and call the local rep for the YELLOW PAGES and negotiate their ad. Then, they would sit back and stare at the phone and hoped to God it would ring.
It’s 2016, and it’s a new day. The old and reliable Yellow Pages, has been laid to rest next to the rotary dial telephone and classified section of the newspaper. Today, as you stand stirring your cauldron brewing up the right mix of lead sources, it is important to know your sweet spot of what to spend and where. And, knowing how to arrive at this number is not a suggestion, it’s mandatory.
As you are staring at your inbox filled up with emails from companies promising everything from a funnel loaded with prospects to improving your conversion rate 10-fold, think in terms of ROI and what that looks like.
Figuring this out starts with one thing: good data. You must have concrete numbers in order to get this right.
- The number of clients hired within a span of time, say one quarter.
- The total and individual revenue each client generated.
- The total number spend (spent on?) of each lead source.
- The total lifetime expected value of a client.
There are more reporting requirements but for today, let’s stick with these.
Let’s begin with the number of clients and their individual revenue totals.
First, take the number of clients you have had hire you in a quarter. Then, calculate the dollars you spent on marketing for that same quarter related to making the phone ring. Divide the number of clients into the total of your marketing lead generation. That dollar number is the cost to acquire each of those clients hired within that quarter.
Let’s say 30 clients hired you within that quarter and your total revenue generated by those clients is $2,000 per client or $60,0000.
If you spent $18,000 that quarter on seminars, SEO or other combined means of generating leads you would then divide the number of clients (30) into the marketing spend to arrive at $600 cost to acquire each of those clients. A good ROI for marketing dollars is 5X. So if your cost to acquire a new client is $600 we would calculate 5 X $600 which would equal $3,000.
If your average client is worth a lifetime total of $3,000 to you, you have hit the mark with your marketing dollars. You have not done too poorly because you still earned a decent return.
What tweaks may be made to get your numbers more in line with a 5X ROI? In other words, what changes could be made to improve your return on your investment?
- You can examine your appointment setting rate to determine if you can convert more of your leads to prospects by checking your appointment setting rate.
- You can examine your show rate to be sure your process is effective in getting a strong percentage of your prospects showing for their appointments. If you are having a problem with this, there are tweaks you can add to your process.
- You can examine your hire rate to determine if you are not converting your prospects to hires at a high enough rate.
Let’s break these apart.
Your Set Rate
If your set rate is not high enough, it may be time to investigate this. Pull recordings from your appointment setting calls to see if your staff is missing something. Are they “smiling” on the phone? Are they offering the prospects the right information to encourage them to set the appointment? Are they giving them directions and getting the commitment from the lead to attend?
Your Show Rate
Have you monitored your show rate to determine if there is a hole in your funnel there? Are you reminding prospects of their appointments by email, by mail and by phone? Are you sending instructions and information to wow them into attending their scheduled appointment?
Your Hire Rate
If you are not converting your prospects to hired clients, why not? If your hire rate is dropping, have you changed anything in your process? Are your prospects confused about the value you are offering? Have you hired a new consultant or is there a change in price?
If all of these pieces of the hiring puzzle are shored up, you may be spending too much on the wrong marketing. Perhaps you simply aren’t getting the right number of leads, or perhaps you are getting the “right” leads.
In most instances, one or more of these areas is where a leaky funnel can be costing you money by not offering (to the leads you are paying for) the best process to get them into the fold. Know your numbers and you will know your firm’s performance and what changes, if any, must be made to increase your success.