How Much?
It’s complicated…
How much should I be spending on Leads?
This is similar to asking “how much should I be spending on my business?”
CPL or Cost Per Lead, will vary based on a few things, mainly the industry and the qualification of that lead. For example, an appointment with someone who’s ready to buy a house, will cost much more than a name and email.
Another factor that will drive up the cost of leads, is the value of the end product. Leads for a $10k gutter installation will cost more than Kayak Rentals.
To put it simply, there’s a napkin math compatible formula we use here at ALC to determine how much to bid for leads.
Max CPL = Product Value * Conversion Rate
For example, let’s start with that gutter installation. The product value is $10,000 and we can assume a conversion rate of 1% for the sake of simplicity. That means that for every 100 interested leads your gutter sellers can close one job. Assuming you’ve already had a long talk with your sales team, you can then log into Google Ads knowing that you can spend up to $100 per conversion before you are likely loosing money. (Assuming filling out a lead gen form is the conversion action.)
Of course, this changes greatly as your sellers increase the percentage of leads they can close. For example, suppose the closers attend a sales training and now they can close a solid 10% of all leads they make contact with. After paying them all a healthy bonus, you can go back into Google Ads and confidently out bid everyone in your way. You know you can spend a ludicrous $500 per lead before you are in the negatives.
One last thing, leads are typically just that. Leads. They are contact information for someone that has shown interest in your product or service. Qualified leads are much more valuable. They become qualified when someone contacts the prospect and collects more information, verifies their interest, or both. Business will typically pay a premium for qualified leads, since they are far more likely to end in a sale.
Warning: Be weary of agencies that promise “qualified” leads without complete transparency into what their qualification process is. At ALC, we custom tailor our process to suit your needs, and work to build out a system that your own sales people can take over.
Ok, but how much should I be spending on leads?
Now that you know the real answer is “it depends,” it may also be helpful to see some broad benchmarks from across the US and Canada.
For illustrative purposes only, here are some benchmarks based on recent market studies.
Cost Per Lead (CPL) Range by industries
Technology $30 - $1000
Healthcare $30 - $700
Finance $50 - $150
Real Estate $35 - $100
Education $20 - $60
Legal $50 - $200
E-commerce $20 - $50
Retail $20 - $50
These figures are based on industry averages from sources like WordStream and HubSpot's marketing reports.