What is the true value of a lead?
Several times each week I have clients ask me a similar version of the same question.
“I’ve been offered this marketing service that worked for a friend and I’m wondering if I should commit to it?”
Here are the facts. Just because a marketing service, be it a Pay Per Click, lead selling company, or website SEO company, did or did not work for one firm does not mean it will or will not work for you.
There are simply too many variables that must be reviewed before making that decision.
So, my answer is always the same: “Test It”
How do you do that you might ask?
Start with the end in mind:
In order to run a proper test we must start with the end in mind. What is it that we want to actually know to make this decision? Ultimately, we want to know how much revenue was produced either directly from or as a result of a referral from this lead source. This is known as the ROI (Return On Investment) of that lead source. How do we determine the ROI? There are two fundamental ways that clients describe ROI. Neither is right or wrong, it’s simply preference. The first is by a multiple and the second is via a percentage.
Multiple: When you take the amount of revenue generated and divide it by the cost of the lead source
i.e. Lead Source=$1,000; Gross Revenue Generated=$5,000 $5,000/$1,000= 5 Times Multiple
Percentage: When you subtract the cost of the lead source from the gross revenue generated and then divide the cost of the lead source by the difference
i.e. Lead Source=$1,000; Gross Revenue Generated=$5,000 $1,000/($5,000-$1,000)=400% ROI
In order to accurately define the value of a lead source you need some information. You need to know what the lead source cost you and you need to know how much revenue was generated.
Let’s look at what the lead source cost. Sometimes this is very straight forward because you are actually charged per lead and the lead generation company sends you a report with the contact information for the leads the total amount charged. However, sometimes this is not as straight forward. Let’s take a Pay Per Click campaign as an example. Certainly you’ll know how much you are investing in Pay Per Click but do you know exactly how many leads were generated as a result of that investment? Do you forward your paid traffic to a standalone landing page with unique tracking phone numbers, form fills and chat leads? If not, how do you know what business actually came from that source? How can you tell if/when you make changes to your campaign such as key words, content or on site conversion tactics actually worked? How can you tell if the chat feature generates more revenue than your phone number?
If you think these numbers aren’t important, think again. At one Phoenix bankruptcy firm, we had over 175 ways to make the phone ring. We could tell you the Cost Per Lead and the Return On Investment for each lead source and because we had this information and our competition didn’t so we could regularly outperform them in every category. This ability was one of the contributing factors to our stellar growth and the growth of all my clients.
Let’s look at the revenue generated per lead source? The hard way to do this is to go back every month and manually review each case, the amount of money it generated and then look at the place the lead came from. This assumes your team is keeping track of where the inbound phone calls, emails and chat leads are coming from and keeping a record of them that you can easily access.
The other more proficient way to accomplish this is to automate the process. Be sure you are using a service that will do all this work for you. We call this OEBS (Order Entry and Billing System) and when you combine this feature with your CMS (Client Management System) and your MAS (Marketing Automation System) you have a powerful set of systems that will allow you end to end reporting. Here’s the way this works. When your lead comes in, it’s automatically entered into your Client Management and Marketing Automation Systems. Then when the prospect becomes a client they are entered into the Order Entry and Billing System. Now you can run a report that will show you, what each lead cost you and the ROI of that lead source. If you’d like more detail on how to create a system like this for yourself, click HERE.
The final step to any test is to be sure it’s not a long term commitment. Don’t enter into any contracts with any lead source provide until you can prove the source to have a solid ROI. When possible, have them provide you sample leads or a short term contract. Most lead good lead source providers understand the necessity to provide results rather than selling ‘swamp juice in a perfume bottle’ the bad ones don’t want to be exposed. If they do want a long term contract, make sure you build in a clause that allows you to escape if the lead source does not perform according to your expectations.
Building a better business, one ROI at a time…