What is the Cost of a Lead?

Lead generation is consistently one of the top priorities of any B2B organization, but there is a big difference between generating leads and generating leads that actually convert to customers and revenue.

There is enormous disparity among B2B companies when it comes to lead generation practices. Many businesses waste money on unqualified leads or fail to nurture the qualified ones. And a shockingly large number have not even identified their sales funnel.

Which is why B2B brands need to benchmark themselves in their efforts at demand generation.

When it’s time to finalize the Demand Generation line item on your marketing budget, do you know what content syndication should cost?  Do you know the average CPL in your industry or vertical for benchmarking purposes? Do you know how to make the most of that budget to generate leads that translate to real revenue?

What is the Cost of a Lead?

To get leads from us in Marketing, brands will have to pay $32 (down from $35 last year).

Healthcare leads cost almost twice that at $60 (down from $65 last year).

The Technology industry has experienced the biggest declines with a cost per lead of $31 down from $43 per a year ago.

And Human Resource leads are $38, down from $45 last year.

Madison Logic used their own database to compile the average cost per lead across several verticals, and the impact that lead filters can have on price. Not surprising to learn that the more questions we ask, the higher the cost of the lead. But those additional filters may not necessarily bring in better quality leads.

Refresher Course On BANT

If you don’t know what BANT is, BANT is a common lead scoring technique of seeking to determine if a prospect has the Budget, AuthorityNeed and a specific Timeframe for making a decision to buy a solution. Some add an ‘S’ for whether there is a real project with a defined next Step. Lead scores will then be calculated based on a weighting for each of these factors.

So a really “hot lead” would be one where there is a budget to solve a defined need in a relatively short period of time and where the prospect has some authority in the decision process. This is a standard part of many mature organizations marketing demand generation process.

And in less mature organizations, it serves as the main line of questions for sales discovery. So if you want to help sales out, answer these questions for them. And deliver them leads that are truly “ready to buy.”

Inbound Marketing Leads Cost Significantly Less

Research from HubSpot claims that inbound leads cost significantly less than traditional demand generation. Their annual State of Inbound Marketing report declared that inbound leads cost 61% less than traditional outbound. The trend has remained relatively constant, shifting only a few percentage points since 2011.

The report also shows that blogging, social media and search drive the lowest cost per lead and that paid search (PPC) truly is more expensive than outbound tactics other than trade shows or events.

Though selling inbound is their primary line of business and “inbound marketing” is a term coined by their founders, there is truth to the claim. There are some significant forces at work that are driving many marketers to change the approach they take to marketing from an outbound push to more of an inbound pull approach:

  1. Buyers are tuning out of traditional push-based messages lowering response rates and increasing marketing costs per lead.
  2. Buyers are in control of their own buying process. The mobile internet and social web allow them to find the information they need, when they want it.
  3. Buyers are shifting their time spent on digital channels. Internet access, mobile browsing and social networking are all conspiring to deliver information, education and entertainment to all of us on demand – where and when we want and need it.
  4. Content is nearly ubiquitous and the expectation is often that it should be “free.” Content has become shorter, less “serious” and more informal, social and “scan-able” on a mobile device.
  5. Marketing departments are being asked to deliver higher yields – to be more efficient in delivering higher business results on a relatively flat budget in the face of buyers who are increasingly rejecting marketing messages.
  6. Marketers are acting as publishers. To respond to this, leading marketers are seeking to deliver information to buyers earlier in the buying process, with more un-gated, social, informal and educational information that is not about their products and services but that meets buyers needs in this fragmented, multi-format, always-on world.

One of the main reasons marketers are shifting their focus and their budgets away from traditional tactics is because of the theory that inbound leads costs less.  At the SiriusDecisions B2B Marketing Summit, Jay Gaines (@izjay) announced that “inbound leads cost less and convert at significantly higher rates than outbound.” He continued, “and the difference is significant and quantifiable!”

I would say that Cost Per Lead isn’t the only reason for adopting inbound marketing as a core growth strategy. The main reason to shift more marketing resources to inbound marketing tactics is simple: customers!

Michael Brenner

Michael Brenner  is a Top CMO, Content Marketing and Digital Marketing Influencer, an international keynote speaker, author of "Mean People Suck" and "The Content Formula" and he is the CEO and Founder of Marketing Insider Group, a leading Content Marketing Agency . He has worked in leadership positions in sales and marketing for global brands like SAP and Nielsen, as well as for thriving startups. Today, Michael helps build successful content marketing programs for leading brands and startups alike. Subscribe here for regular updates.

3 thoughts on “What is the Cost of a Lead?

  1. Thanks for this infographic, it’s great! I am intrigued by the statistic, that the B2B sales cycle has increased by 22% in the past five years. This rings true! I do wonder if it’s all down to more decision makers in the buying process though. Could it also be partially due to the ongoing homogenization of firms within highly fragmented industries? (In other words, lots of companies offering the same service with little differentiation can cause selection paralysis among buyers.)

    1. Thanks Jesse, I think the challenges are more complex, orgranizations are more complex, and solution ecosystems are more complex. So it’s really the whole ecosystem that has driven the increase in time and people involved.

  2. Unsurprising the lead costs are decreasing.

    I encourage CMOs at big advertisers and directors and chief executives at middle market ones to consider this a modern-day version of the computer hardware / consumer electronics industry.

    Only today the focus is on software applications.

    Economics dictates that supply of lead sources / technology increases faster than quantity demanded, price is driven downwards.

    This is why you see plenty of advertisers pleased to see the lead acquisition costs go down, however, who is to say – when that advertiser calculates costs per lead and follow-up the close / transact new business ratio is enough to net a suitable profit margin?

    In layman’s terms – more and more digital avenues keep bringing leads to the market place, thus driving their products (internet leads) down.

    A smarter, leaner solution exists for in-house sales lead generation. Especially in specialized B2B products / services at higher price points marketed to sophisticated end-users.

    Because of my experience having done lead gen and retention marketing for Merck & Company, GlaxoSmithKline, Novo Nordisk, Novartis, New York Life, John Hancock USA / Manulife and AXA Equitable Life Insurance plus over four years in consumer behavior research at Nielsen Publishing, medium-sized advertisers usually go about consulting me after they:

    1. grow disappointed with their investments in a marketing service / agency to drive sales leads / demand

    and then

    2. a marketing VP realizes how challenging / time consuming the decision to save money and manage sales lead / demand generation becomes before long.

    As the info-graphic above points out, the bigger the advertiser, the more money they want to throw at the problem.

    Many times, I assess the competitive landscape and lead acquisition cost and piece together a way to generate sales leads without writing bigger checks or abusing the client / advertiser’s Mastercard.

    It has less to do with creative ideas and brand awareness and more so with smarter, leaner lead gen programs the client / advertiser controls themselves.

    Corey Weiner, Advertiser-side demand / lead generation.
    @weinercorey (888) 913 – 1419

Comments are closed.