B2B Lead Costs: How Much Should You Pay for Leads?
B2B lead costs is a hot topic among entrepreneurs. If you want to grow your business, you need a strategy for acquiring new customers.
Many companies address their growth challenge through inbound marketing and the sales funnel. Whether online or offline: A steady stream of high-quality leads that the company can convert into customers makes a business grow and thrive.
But what is the breakdown of the costs for leads? How can we find out if our investment is worthwhile and how can we reduce the costs of acquiring new customers?
What Are the B2B Lead Costs Comprised of?
Leads are not just any data – a lead is a contact that has an interest in your products or services. You have already gathered some information about the company and about its field of interest, thus the data, that you can use to work with the contact.
The idea is simple: the website offers useful information / an added value/product to the users in exchange for their contact information.
What is the Benefit of the Cost-Per-Lead (CPL) Model for Online Marketing?
The biggest advantage is that the CPL model allows you to better scale your advertising efforts. Knowing your costs per lead is an essential part of knowing, whether your advertising efforts are paying off.
The Application Areas of the CPL Model
Getting leads costs your money. If you look at the following table, you can see the average amounts for the B2B lead costs of some industries and segments:
| INDUSTRY | AVERAGE COSTS |
| Financial services | $160 |
| IT, computer and technical services | $208 |
| Education | $55 |
| Healthcare and medicine | $162 |
| Industrial and manufacturing | $136 |
| Tourism | $106 |
| Retail | $34 |
| Telecom | $45 |
| Marketing agencies | $99 |
| Media and publishing | $108 |
| Charitable organizations | $31 |
| Events & exhibitions | $811 |
| Public relations / media | $294 |
| Video marketing | $174 |
| LinkedIn advertising | $75 |
| Webinars | $72 |
| Display advertising (premium) | $63 |
| Content marketing | $92 |
| Traditional advertising (TV, radio, print) | $619 |
| Search engine advertising | $110 |
| Social media advertising | $58 |
| E-mail marketing | $53 |
| Online retargeting | $31 |
| Social media advertising | $47 |
| Search engine optimization | $31 |
SOURCES: HubSpot, MarketingCharts.com, Matchcraft, Prospect Marketing, Pulse Local Marketing, Survey America. Table translated from the site integratedmarketingassociation.com
The Average B2B Lead Cost
As you can see, the average B2B lead costs vary. They depend on the industry, the target customer and the competition.
But what are these costs actually comprised of? In marketing, these costs are made up of:
- Online marketing strategy development and optimization
- Concept creation
- Landing pages, sales funnels (web development)
- Content strategy (YouTube, social media, blogs, videos, graphics)
- Promoting (Facebook ads, LinkedIn ads, Instagram in-story advertising)
- Creating campaigns
- Fixed costs
- Variable costs
When you research the Internet, you often find calculations, where the costs are only a few cents per lead. These amounts are a fraction of the total costs and include only certain methods or channels. You cannot compare this with the total costs for lead generation.
Cost Per Lead Calculation – an Example
Example 1: An example of an international hair product manufacturer
The lead cost formula:
Spending on advertising for all leads / Number of leads = CPL in Euro
Suppose you work in a medium-sized company that represents professional salon hair products. You have set yourself the goal of winning 150 leads per month. Your marketing lead has determined that PR, Google advertising, and content creation (blogging and video tutorials) are most suitable for acquiring new customers.
The marketing team, therefore, develops the following strategy:
- The marketing mix is being revised. The company is now integrating PR articles and an inbound content strategy for the online channels. The branding is tailored to the buyer journey and the buyer personas.
- The marketing team creates a content plan and ensures that the content is produced in a constant manner (video tutorials, blog articles and downloadable papers)
- A sound SEO and keyword strategy
- Web development: Sales funnels and landing pages
- Google ads, LinkedIn marketing
- Introduction of a CRM system and certain software automations
- The campaign manager is responsible for the implementation and publication of the measures and monitors the lead generation
For example, the cost of implementing this type of online campaign is € 10,000 per month. The company still has to include its personnel costs.
- Therefore, add these costs.
As you can see, in this example our calculation leads to costs between 120 and 180 euros. If you compare this number to the above table, you find that the industry value is approximately in the middle.
The Quality of Leads: Consider Three Phases
You can now calculate the costs for your lead generation.
In reality, it is always a bit more complicated.
There are several factors that influence these numbers. To determine an even more accurate value for your actual B2B lead costs, you should review the different areas that arise in cost accounting. To do this, we divide the customer journey into different phases.
- Attraction phase: All the costs associated with directing a lead into your sales funnel
- Qualification: The cost of figuring out whether lead management is worthwhile or not for a given record
- Sales phase: The cost of lead conversion: Seizing opportunities and concluding a deal
These three categories are especially useful if you want to compare the success of your various advertising methods.
The number and quality of leads strongly depend on the method with which they were generated. If you buy highly qualified leads from one supplier (be careful, keyword GDPR), the initial amount is high, because you simply have to invest in the leads.
However, if you work in-house and acquire your leads with inbound/content marketing tools and tactics, these directly visible costs disappear. The costs for content management etc. are indirect. Nevertheless, you can directly compare the advertising methods in terms of their success:
This approach gives you a clear picture of which measures cost more and provide better leads.
In general, the cost of a qualified lead you generate online is quite high. However, the costs during the sales phase are lower because the leads are hotter and more willing to buy (of course, what the individual phases look like depends on your customer acquisition strategy).
Cost per Lead Per Marketing Channel
Find out which channels have low costs. Then you know how to use your marketing budget most effectively. The more evenly you can divide your marketing budget across the cheap channels, the more customers you win per fixed budget amount.
Simply try it, with a spreadsheet it is pretty easy. Record your entire marketing budget for a year, quarter, or month. Add the cost per channel:
- How much did you spend on Google AdWords and Facebook advertising? List the costs in the PPC or Pay-Per-Click column.
- How much did SEO and blogging cost? This number goes into a column called “Inbound Marketing Costs”.
For e-commerce companies that sell products, it is easy to figure out which pay-per-click ads lead to direct sales – due to conversion tracking.
You have a clear idea of how your pay-per-click campaigns will develop in relation to your remaining marketing spend.
With the right analysis tools, you can see a customer’s behavior before making his purchase. When a customer finds your product organically through a search engine, you know that SEO is responsible for customer acquisition.
A good fundamental consideration is that each marketing channel should support another:
- Pay per click ads promote your blog posts.
- Social media posts point to landing pages
- Billboards reinforce TV campaigns and radio spots, etc.
Video tutorials that show how to properly use your product and a credible blog will always support your marketing efforts – but the impact on sales is not so easily understood.
Once you know how much you spend per channel, you can apply the simple lead cost formula and calculate how successful each channel is on average.
Is Investing in an Inbound Strategy Worthwhile?
In the age of data protection sanctions, spamming and information overload, a company should be clear about the quality of its leads.
Automated programs can help you with this. One way is to use software that identifies anonymous website visitors so you can convert them into hot leads.
The advantages are obvious: you can exactly understand which steps brought the visitor to your website. The principle of lead generation is always: knowledge is power. If you know the origin of a lead, you can tailor the most appropriate advertising.
In addition, warm leads are interesting because they have already shown interest by clicking on a link.
Of course, people visit your website for a variety of reasons – and not all visitors are potential buyers. Nevertheless, the probability exists that the visitor is interested.
You should now do everything to persuade the visitor to provide you with information. Information that enables you to get in touch with the customer and to (more or less) gently work on him.
That Way You Can Sustainably Reduce Your B2B Lead Costs
- Define goals
- Find the right channels
- Retargeting
- Split testing
- Implement a customer relationship management (CRM) program
No matter which efforts you undertake, you can always make an advertising campaign more effective, further improve customer loyalty, and sell even more cross-selling and upselling offers to the willing buyer – there is no perfection in marketing.
This diversity also means that you can use different methods to reduce costs per lead.
Budgeting of the B2B lead costs is essential. Harvard Business Review reports that acquiring new customers costs five to 25 times more than servicing customers – that is a lot of money you could spend elsewhere in your funnel.
Here are some tips on how to reduce lead costs.
Define goals
Focus on the wishes of the customers. Find out what your customers like. That may be more features on the page, added value, lighter or darker colors, more prominent buttons, or call-to-action in the right places. Also, the feedback you receive from customers is very important and you should always strive to implement it.
Pro tip: Try to figure out how to make more money with existing customers.
- Get to know your customer. Specify the buyer persona of your target audience. The buyer persona is your ideal customer, or a fictitious prototype of your actual customers – it helps you to imagine how a real customer behaves in a particular scenario.
If you want to create one or more buyer persona profiles, you should focus on the details. If you already have customers, start with them. Find out about their interests, age group, career information, etc.
Find the right channels
Use the right social media and advertising channels. Make sure you create the right content and provide solutions to your customers’ problems. These are the details that show you what the customer wants. That way, you can cut costs because you know exactly which methods work.
Retargeting
Retargeting tracks the steps of those visitors who visit your website but do not buy anything. As a result, these visitors will see custom banners when browsing other websites. The customers recognize your company again and hopefully appreciate it with a new visit. This system works on a psychological level because you secure a place in the customer’s mind: every time you show ads, interesting offers are shown to the visitor, which hopefully will entice him to make a purchase.
You want to make the shopping experience as easy as possible for the users. That’s why all of your ads come with clear calls to action that encourage customers to act. Also, be careful not to show the ads too often – no one wants to feel stalked on the internet.
Split testing
Improve your conversion metrics. You can set goals in Google Analytics and perform A / B split tests on new systems. This can make the checkout easier and prevent the customer from canceling the purchase. In addition, you can optimize landing pages and the speed of the website, make your site mobile-friendly and thus improve the performance of your site.
You should also test the different elements of your campaign to find out which gets the most leads, which action customers take, and what exactly improves conversion rates.
All these factors lead to lower costs for new customer acquisition.
Some metrics you can split-test:
- Advertising e-mails
- Landing pages
- Websites: Headlines & texting
- Calls to action, so-called CTAs
Implement a customer relationship management (CRM) program
Almost all successful companies with regular customers implement some form of CRM. This can be a simple program or a complex system that uses a cloud-based sales tracking system, automated e-mail lists, blogs, loyalty programs, and/or other customer retention techniques.
Conclusion
Although the costs of acquiring new customers are easy to calculate, they depend on many factors.
It is essential for every company to know the costs of generating leads. They are the basis that determines which marketing decisions need to be made.
If you want to make sound and worthwhile decisions, you should make sure that you identify the correct values and interpret that data correctly. In the long term, this has a positive effect on the future of the company.
Knowing the cost per lead helps you understand what works and what you need to optimize in the future. Also, consider the ways to reduce the costs. Software and tools can help you.