Lead Generation Cost: 6 Important Types of Cost

What is Lead Generation

Before diving directly to lead generation cost, it’s essential to know what lead generation is first.

Lead generation is the method of piquing prospects’ attention in order to improve future sales.

It is the key element of many businesses’ sales processes.

Lead generation has been deemed as one of the most effective strategies for marketing.

In this digital age where literally billions of people are on the internet, there are tons of ways to acquire leads.

With that said, each method of lead generation includes lots of different types of processes with different types of approaches making it very delicate.

(Image Source: FunnelEnvy)

With all the methods, processes, tools, and time involved, how much does lead generation really cost?

It varies and the cost will be based on factors such as a number of leads, cost per lead, tools to be used, cost per day, and so on.

So, before we get an estimate, let’s get a good scope of lead generation first.

What is Cost Per Lead?

The Cost per Lead metric indicates the efficiency with which your marketing campaigns generate new leads for the marketing department.

A lead is a person who has demonstrated an interest in your service by performing.

This metric is inextricably linked to other important company metrics, such as the value of additional customer acquisition.

The goal of this statistic is to offer your sales team a concrete cash amount to help them determine how much cash to spend on lead acquisition.

Additionally, the Cost per Lead metric offers critical data for calculating your profits and revenues.

Indeed, each phase of the purchase funnel must be measured similarly, for example, cost per customer and cost per win.

Similarly, these statistics can be used to track the performance of promotional campaigns such as social ads, as well as the total amount of your marketing activities.

How to Calculate Cost Per Lead (CPL)

Understanding your cost per lead enables you to make more intelligent marketing choices.

The Cost Per Lead equation is the first in a series of marketing analytics that will assist you in determining the efficacy of your marketing efforts.

Whether you purchase a list, gather contacts at trade events, or generate leads via inbound marketing activities, knowing your Cost Per Lead will help you stay inside your budget.

Your Cost Per Lead can be computed by dividing your Marketing Spend by the total number of your New Leads.
Bear in mind that your cost per lead must never exceed your margin value. This would imply that you are operating at a loss, as leads do not convert to clients.

Additionally, you can utilize an online cost per lead calculator.

For instance, The Online Advertising Guide’s online CPL calculator enables you to determine your current cost per lead, whereas Jellop’s target CPL calculator enables you to plan your target cost per lead based on consumer lifetime value, lead to client conversion rate, and target ROI.

6 Types of Lead Generation Cost

1 Email finder tools (LeadFuze)

LeadFuze, together with the aid of Fuzebot, is an AI-powered lead generation solution.

Users simply provide basic information about their potential buyers (sector, employee size, position, and keywords, for example), and Fuzebot generates thousands of emails from new leads who fulfill those exact criteria.

LeadFuze is a computer solution that enables you to automatically generate lists of accurate leads while combining with sales outreach tools to enable you to contact those newly validated leads.

Aside from that, with the assistance of Leadfuze’s cold email integration, you can automate the emailing of agency prospects that you put to a list.

Once the funnel is configured, additional emails will be sent out. Every day.  Do you want to send 50 new leads every day via email? 1000? Perhaps more? Everything is conceivable.

Those who will not reply will receive scheduled follow-up emails from your email account, and those who do reply will be removed from any more automation.

All you have to do is communicate with those who have previously expressed interest in your company by responding.

Cold emailing is one of the most effective methods for your business to acquire leads. Click To Tweet

It’s possible that your entire marketing process will run on autopilot. Through Leadfuze, Leadfuze you can have a cost-effective way to find leads compared to ads and other channels.

2 Media & ads placement and distribution

Lead advertisements enable you to identify individuals who may be potential customers of your services and capture their contact information.

You can obtain contact details such as a person’s name, email, and mobile number using an Instant Form.

Additionally, these forms enable you to incorporate specific inquiries that can assist you in better understanding your potential consumers and achieving your business goals.

Lead advertising can be created in Ads Manager or directly from your Facebook Page.

Lead advertisements are displayed in the Social Media Feed,  Stories, Instant Articles, Videos, and even on market place.

When visitors click on your advertisement, they will be requested to complete your form.

After visitors submit your form, you may download their info directly from Ads Manager or your Facebook Page, or link it to a CRM system like Salesforce or Mailchimp.

3 List purchase

Although there are numerous organic lead generation methods, such as SEO techniques and sales funnels, obtaining a sales lead list might provide your firm with the added boost it needs to develop.

A sales lead list contains the contact details for prospective clients in your target market.

These are people or businesses who may not have discovered your company with your own marketing campaigns, so a list like this can help you increase your reach swiftly and effectively.

According to some marketers, purchasing lists is a bad practice because the validity of the list is unknown until it is received.

Purchasing lists, on the other hand, can be an excellent alternative for organizations of all sizes provided you examine the credibility of your sources for obtaining qualified leads.

If you decide to purchase a sales lead list for your organization, keep in mind that there are several providers and not all of them will supply high-quality lists.

Before you begin using your freshly acquired contact information, conduct thorough research, identify your target audience, and thoroughly evaluate your list.

4 Agency and labor

This is most frequently seen in telemarketing, where businesses pay individuals to make outbound calls on their behalf.

It may also apply if you engage a search engine management or optimization firm to help you.

5 Campaign Costs

If you’ve generated an email message or a visual advertisement to target your customer, the cost of generating those should be factored into your calculation as well.

Another important part of your business marketing strategy will be how effective your campaigns will be.

You can either work with a team or hire a freelancer for the creation of your content and it definitely won’t come cheap but you will have the assurance of having great and most importantly effective content for reeling in customers or leads.

You always have the option to do it yourself but it will take most of your time so hiring a team of experts in campaign and design is a favorable option.

Content creation will more or less cost around $50-$3000 depending on what you want to make and how many. This will be cost per content, so make sure to give all the good ideas you have for content.

88% of marketers say that content creation and marketing is one of the most effective lead generation tactics which is pretty obvious why.

88% of marketers say that content creation and marketing is one of the most effective lead generation tactics Click To Tweet

6 Incentives

Incentives are benefits offered individuals you wish to convert to leads.

A white paper is a typical inducement for obtaining someone’s contact information.

According to research, potential clients are most engaged with your business during the first 48 hours after downloading.

Additionally, you can give an incentive, such as a gift card, to eligible clients who are prepared to stay through a product demo.

In either case, this cost should be factored into the computation of your lead generation cost.

Average Cost per Lead and Benchmark 

Cost per lead will be based on a lot of factors. As of 2020, the average cost per lead is $198.

Here’s a reference on how much a lead will cost for each different industry.

(Image Source: Marketing Charts)

Cost per Lead Equation

Cost Per Lead (CPL) = Total Marketing Spend / Total Leads Generated

Take the total of how much you’ve spent on lead generation, say, on a specific campaign.

Then you divide it by the number of leads that this certain campaign has generated in the same time frame.

Let’s take into consideration the businesses that are only starting out or smaller-scale businesses.

If you’ve shelled out a sum of $1500 on a campaign for a holiday and you’ve managed to generate 80 leads during this campaign,  the computation will look something like this:

$1500 / 80 leads = $18 .75 per lead

On the other hand, the average costs for leads varies greatly depending on which industry your business falls under.

(Image Source: HubSpot)

Within social media, there are also average costs per engagement or follows.

It’s important to keep in mind that generating leads is about a higher return on investment.

The higher your ROI, the more likely you will pursue obtaining leads and your leads will be valued at a higher cost.

The lower your ROI, however, the less likely you will be willing to pay for lead capturing and generating.

Hiring outsourced lead generation industries will cost you from $24k to $240k annually, but these are experienced professionals and even specialists that will help you out.

Hiring outsourced lead generation industries will cost you from $24k to $240k annually Click To Tweet

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Average Cost per Lead by Lead Generation Channel

Aside from benchmarks per industry, we can also measure the costs per lead by which channels we use to generate leads.

1 Offline Marketing

Offline Marketing methods such as print ads, billboards, newspaper ads, TV commercials and radio features are usually the last thing on every marketer’s mind.

But despite this stigma, they are still definitely effective.

Depending on your target market, these methods have survived because of their efficiency.

On average, offline marketing methods cost somewhere between $10 (lowest), $500 (average) and $1,300(high).

2 SEO

Search Engine Optimization (SEO) is the process of optimizing your website mainly to be on the first page of search results.

You have a bigger chance of generating qualified leads organically by optimizing your website to fit Google’s criteria.

People are more likely to click on the first thing they see on the first page of the search results, it’s rare that they go the second page and the next.

The average cost per lead using SEO can range from $14 (low), $31 (average) and $47 (high).

3 Search Engine Marketing

Search Engine Marketing (SEM) is done in a similar fashion to SEO, but focuses more on paid ads and campaigns as opposed to SEO’s more organic approach.

These are paid advertisements that appear on search engine results page such as Google and Bing.

Its average cost per lead is somewhere between $38 (low), $110 (average) and $181 (high).

4 Content Marketing

Content Marketing involves the creation of content optimized for different platforms.

Blogging is a popular content-creation strategy that has been around way before social media took the entire world by storm.

With referrals, the average cost per lead in content marketing is around $92, while its lowest being somewhere around $43 and its highest being $140.

5 Social Media Marketing

Social Media Marketing is arguably the most popular and effective marketing strategy.

Modern marketers have turned to social media as the pinnacle of marketing just about anything.

Facebook, LinkedIn, Instagram and Twitter are among the most used platforms for this.

Because everyone is on social media, things tend to move a little bit faster on those platforms.

Thankfully, ads generated on these platforms won’t break the bank.

The average lead generation cost on most social media platforms is at $58. The lowest being $21, and the highest at $73.

LinkedIn is considered a social media platform but follows a different algorithm and target market.

6 Video Marketing

Video Marketing, along with social media marketing, has grown exponentially in the past few years.

It has been deemed the medium of marketing that generates the most engagements.

Because videos tend to be more interactive and informative, many people are attracted to them.

But because it takes so much effort and time to create video content, it can be costly.

(Image Source: Hubspot)

The average cost per lead in video marketing is at a high $174. Its lowest being $59, and its highest is a whopping $288!

The success of these videos is also rooted in whether or not they are put out on the more popular video websites such as YouTube.

7 Public Relations

Public Relations (PR) requires more outreach. We often see this in the form of sponsored content.

Vloggers and other forms of content creators are usually sent what we call PR packages, containing a company’s products.

This way, people who have quite a following can vouch for these products to their wide reach.

Content like this can also be informative and involve other channels like social media content creation or even sponsored videos.

This can be costly but it can rake in big leads, which is why most bigger companies tend to use this marketing strategy.

Its average cost being $294, its lowest being $108 and its highest being $480!

Stats via VisitorQueue

Kinds of Leads

1 Marketing Qualified Lead (MQL)

MQLs have met the standards you have set out to be qualified leads. These leads are the ones who might be interested in your products or services given their profile.

They are called marketing qualified leads because they’ve engaged with your marketing strategies and campaigns, but have yet to decide if they are ready to engage.

They fit the criteria of your target market and have shown interest, but they are not 100% ready to be converted into paying customers yet.

 

2 Sales Qualified Lead (SQL)

SQLs, on the other hand have shown enthusiasm and interest in your product or service and have taken action.

This means that they’ve most likely sent an email, messaged your platform, asked questions, set up a consultation or requested a demo. It’s like they’ve added to their carts and are ready to check out.

These are usually more of the higher-qualified leads because they are all ready to convert.

(Image Source: Ledgeview Partners)

 

3 Service Qualified Lead

SQLs are contacts who have shown enthusiasm and interest in your services and have shown that they are willing to become paying customers.

These leads can be active users of your services and tools who continues to upgrade their subscriptions or plans.

A good example would be Spotify. They give a 30-day trial for their first time users and when the 30 days are up, they have a choice to upgrade to a premium plan.

 (Image Source: Spotify Community)

Sure, buying leads saves you a ton of time and effort than if you waited for them to organically materialize, but they often come across as impersonal or intrusive, even.

Try to strive for leads that have a somewhat personal connection to your brand or service.

Lead scoring can also help you funnel out your leads from highly engaged to no engagements.

Highly qualified leads are closest to become customers, so you’ll want to focus on those leads.

Strategic Course of Action: Inbound or Outbound Marketing?

(Image Source: Neil Patel Blog)

 

Knowing what method you need to generate leads will help you see how much you’ll need for lead generation.

Which of your marketing strategies have generated the most leads? Ads, trade shows, webinars, eBooks, social media content?

Inbound marketing is proven to generate more leads than outbound marketing. 

This is because inbound marketing techniques cover a ton of “free” platforms.

Creating free content on websites like blogs or social media posts, or even optimizing your websites and platforms for SEO can bring in leads for little to no costs.

The main goal of inbound lead generation strategies is to be found by qualified prospects who are looking for answers.

As opposed to outbound marketing and lead generation strategies that focus a lot on baiting leads and reaching out to them directly.

Outbound marketing strategies can include trade shows, telemarketing and direct mail.

The effort you put into outbound strategies can be a little more than inbound strategies.

You are putting yourself out there and also spending more.

But some companies just prefer outbound marketing methods because they’ve been around for quite the amount of time and still prove to be effective in generating leads.

 

How Many Leads Will You Need?

Allocating a whole budget for lead generation cost and sales as a whole is driven by how many leads you bring in.

Apart from the industry average lead generation cost per lead also depend on which lead generating channel you use or invest in, the scale of your business, and how much revenue your company gets.

Your revenue is the total amount of income generated by the sale of goods or services related to the company’s primary operations.

The number of leads you’ll need will also influence how high your revenue needs to be.

The analysis of this will require prior and in-depth knowledge of your company’s revenue.

To get down to the bottom of it, you’ll need specific data on:

1. Targeted Revenue / Monthly Revenue Target is the amount of revenue your company aims to reach at the end of a given period.
2. Marketing-Driven Revenue is the part of the income that you’ve gotten based on how effective your marketing campaigns are.
3. Average Sales Price (ASP) is the average number of service sales/number of units or products that are sold.
4. Marketing-Driven Deals is the marketing-driven revenue to be divided by the average sales price.
5. The opportunity-to-Sale Ratio is the percentage of leads you convert into paying customers or the number of deals that you close.
6. The qualified Lead-to-Opportunity Ratio is the percentage of qualified leads that it takes to provide more opportunities for your business.
7. Lead-to-Qualified-Lead Ratio is how many inquiries or prospects it takes to produce a qualified lead.

Being able to determine these numbers and percentages will be helpful in pinpointing just how many leads you will need and how much your budget should be when allocating funds for your lead generation services.

Of course, this model is just an estimate or an average of our lead generation cost list above. It will still depend on your strategy and process.

(Image Source: Fusion Marketing Partners)

Conclusion

Lead generation is one of the most effective ways to help your business grow.

This is also why no matter the method or strategy you choose, it is definitely going to cost you.

While many free tools and services are available for everyone to use, most of the effective methods come with paid agencies and other service providers.

You have the option of hiring outsourced lead generation teams to do all the lead generation business for you, or you can also hire your own in-house team.

In some cases, outsourced lead generation agencies will be more efficient in generating leads, which helps take a lot off your hands.

Hiring your own in-house team of SDRs and BDRs is another convenient option, but will cost more than outsourcing agencies.

However daunting lead generation cost can be, you will find that a team of people who have dedicated their time to generating leads will be of much help to you rather than trying to gather those leads yourself.

The lead generation cost will also vary depending on the channels you choose and the industry you’re part of.