How to Calculate What a Lead Is Worth
Lead Value can Easily be calculated using the “Lead value formula” above, or our using this free Lead Value Calculator.
Download this free lead value calculator for Excel
To calculate the value of your leads you first need to calculate you:
- Lead conversion rate,
- Number of leads received,
- Revenue per lead
Now that have calculated the above numbers, you can determine how valuable those leads are for your business.
Let’s say, you spent $2,000 on an advert in a newspaper, and you received 20 leads, your cost per lead will then be $100. ($2,000 ÷ 20 leads = $100 per lead). Let’s also assume in the same period, you brought in $30,000 in new revenue from the new leads. So, how much is a lead worth? Now determine the Lead value using the previous Lead value formula:
Lead value = Sales or Profit, from new leads ÷ Number of leads received
That means you generated $30,000 from 20 leads that equals a lead value of $1,500. Now you know that for every $100, spend on the advert you brought in $1,500 of new revenue.
Value per lead will vary from business to business, and from marketing campaign to marketing captain. Using the lead-value-calculator will help you in determining your best Lead value. Some factors that may affect the Lead value may include:
- Average Lifetime Value of Your Customer
- Average Conversion Rate of a Leads to customers
- Average Transaction value per customer.
- Gross profit margins
- Cost Per Lead depending on type of marketing methods
It is important to record and measure the specific leads and revenue that was generated from a specific marketing strategy over a specified timeline. It would be a great idea to put a simple but accurate system in place for measuring the results.
The basic formula for calculating revenue per lead is:
New revenue generated from new leads ÷ number of new leads
The cost per lead refers to the money you spend to acquire a lead. (Potential customers)
You can easily calculate the cost per lead using the “Lead cost formula” above, or our using this free Lead Cost Calculator.
Average cost per lead = Total cost to acquire leads ÷ Total leads acquired
The basic formula to calculate your cost per lead, would take the total cost spend on marketing, advertising and sales to acquire leads over a specified period of time, divided by the number of new leads that was acquired over the same period of time.
Effective marketing is clearly one way to create new customers. This is a specialized area in itself, but there are four absolutely critical things to get right:
Target your customers – never try to sell to everyone. Focus specifically on those people you know will benefit from your services. How you word your headline will be the major factor in accurately targeting your offer.
Make your offer compelling and relevant to the market you target. Don’t be cute or clever. Say it exactly as it is.
Call to action you have to give specific directions as to how you want your prospects to act. Tell them what to do and give them a deadline to do it by.
Write your copy in terms that your reader can clearly understand. It must be specific and believable. Testimonials can carry a lot of weight creating inevitability. If you have a clearly defined target market, and your offer is compelling and well stated – you’ll get a good response.
One of the world’s leading small business advertising specialists has used “split-run” tests (where one ad is run in half of a publication and a slight variation is run in the other half) to evaluate the relative performance of these four variables. From the analysis, he concluded a number of things:
Great copy will give 50% response increase
Great offer will give 300% response increase
Accurate target will give 1000% response increase!
A specific focused target (i.e. people in the market who are predisposed to buy) is 20 times more powerful than how you express your message. If you know exactly who will be interested in what you’ve got to offer, and you make an offer that is compelling, you don’t have to be a brilliant copywriter to get a cost-effective response from your ads.