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Price Check: Marketing Cost per Lead

January 29, 2013 | By Mark Nadolny

How much should it cost marketing to acquire a lead? Is your cost per lead too high? Are you using the right demand creation programs? Calculating cost per lead can be challenging, but once this measurement is in place, you can start to review your marketing function’s performance and make periodic adjustments as needed.

How much should it cost marketing to acquire a lead? Is your cost per lead too high? Are you using the right demand creation programs? Calculating cost per lead can be challenging, but once this measurement is in place, you can start to review your marketing function’s performance and make periodic adjustments as needed.

SiriusDecisions defines marketing cost per lead as annual marketing campaign program cost plus internal teleprospecting staffing costs divided by the resulting number of marketing leads. Note that best-in-class organizations measure prospect leads as well as cross-sell and upsell opportunities from existing customers.

Which lead level is right for me?

The cost of a lead is highly dependent on its level of qualification, among other factors. The SiriusDecisions Lead Spectrum defines five levels of lead qualification, ranging from Level 1 (a response to a marketing tactic, or an inbound inquiry demonstrating interest) to Level 5 (full BANT qualification, where the prospect has demonstrated the budget, authority, need and timeline to purchase a solution).

So which lead level should you use? That depends on what type of demand you are looking to generate. Also, where in the buyer’s journey is your audience? Answering these questions can help you create powerful messaging and generate more leads, but can also help you understand approximately how much you should be spending per lead. As a general guide, the cost of qualifying Levels 1 through 3 typically ranges from $25 to $1,700 per lead, while the more time-intensive Levels 4 and 5 cost between $1,700 and $5,500 per qualified lead.

Here are a few scenarios:

  • If you are marketing a new concept to small and medium-sized businesses in a high-growth industry, there is likely no need to qualify leads to Levels 4 or 5, since you are simply trying to fill the top of the waterfall.
  • Or maybe marketing is only able to qualify a lead to a Level 1, 2 or 3 before passing it on to sales, where the process becomes more complex and consultative.
  • If you are marketing a product or service to enterprise accounts in an established/saturated market with little room for penetration and growth, chances are you already know who your potential buyers are. Only then would it be beneficial to qualify more-costly Level 4 or 5 leads.

Don’t forget that your marketing cost per lead will most likely vary based on your choice of tactics and other factors (e.g. product line, business unit, geographic region).

Mark Nadolny

Mark Nadolny is Manager of Benchmarking Analytics at SiriusDecisions. Mark’s expertise at quantitative and qualitative analysis has been used to identify consumer issues and to develop research solutions throughout North American and Asia. Follow Mark on Twitter @mjnadolny.