Leads Acquisition Cost 101: How Many do You Need?

By Dafne Orbach posted 07-03-2018 11:54

  
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How much does it cost your business to bring in a new business opportunity? How many leads do you need to reach your sales target? Calculating the lead acquisition cost is an age-old question, and its solution holds the key to the successful growth of every company.

Can you remember the last time when any of your lead generation campaigns showed a clear ROI (return on investment)? Too many businesses are put off by this calculation – not because it’s considered irrelevant, but rather because the process looks like a complex challenge. 

Analyzing the cost of acquiring new leads does require you to know, inside out, certain key performance indicators (KPIs) within your company. And without access to such data, all you can do is guess. I am sure that you don’t want to guess when it comes to understanding how much your business is investing in bringing each new opportunity, and how much that represents out of your total marketing investment.

The Information you Need so you can Calculate the Number of Leads you Require

What is your success rate for converting inquiries into opportunities? How about converting opportunities into sales? These numbers help you understand the number of leads that your company needs at each stage of the sales funnel.

Based on our experience at NicheMktg, the best practice is to segment your market not only for marketing purposes but also to understand your current performance and set up goals in that specific area.

To calculate the number of leads your business needs to reach  the sales target, you need to consider the following information:  

1. Annual Sales Target: Understand the sales target you want to reach: What is your goal? Is this number for the whole company or for a specific line of product or services? Have a clear understanding of the sources of revenue you want to measure.

2. Current Annual Sales: How much do you currently sell in this area? This is important information to consider when setting up the goals and defining promotional budgets.

3. Average Sales Price: This is the average revenue contribution from each new sale in the selected market segment. 

4. Inquiry-to-lead Ratio: How many inquiries does your business need to produce one qualified lead?

5. Qualified Lead-to-Opportunity Ratio: How many qualified leads are required to produce one opportunity?

6. Opportunity-to-Sales Ratio: This is the percentage of opportunities that get converted into sales.

What can you Expect from your Marketing Investment?

When you are setting up a B2B marketing campaign for generating leads, you’ll need to map out the path from marketing investment to the expected (and achieved) increased revenue levels. Be aware of how much you will need to invest to ensure you are generating enough marketing qualified leads (MQLs), from the top of the funnel to the final stage of revenues from that particular campaign. 

To maintain this cycle, the pipeline needs a continuous, steady flow of valuable prospects that will produce revenue at the end of each cycle. 

Lead generation is key to any successful business. Without leads, your sales team cannot thrive, as expanding to new frontiers of potential consumers is the only way forward.

If your business is not hitting the required benchmarks for lead generation, you may need to go back to the drawing board and review your marketing strategy. Defining an effective marketing campaign will not only attract quality leads but also help your business to flourish. Use our Leads Acquisition Calculator as you start planning.

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A version of this blog was first posted here.

About the Author

Dafne Orbach has 20+ years experience developing new international markets for niche solutions in the areas of information and communication technologies (ICT), cleantech, bioscience and industrial manufacturing.

Dafne is a specialist in need-based market segmentation, micro segmentation, market intelligence, definition of marketing strategies, campaigns implementation, lead generation and content marketing in niche B2B markets.

For that, she breaks down silos of expertise among management, sales and R&D departments to create strategic campaigns that identify and connect with targeted, high-quality leads in narrow technical audiences, and to feed her clients’ sales pipeline.

Some few examples of B2B niche markets she worked on: electromagnetic field analysis software for design engineers working on the development of transformers; monitoring and control of agricultural equipment through isobus, tablets and smartphones; disinfection of water supply systems in hospitals post-construction or renovation.

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To learn more about Dafne, visit her business website and subscribe to her periodic e-newsletter.  You can connect with her on LinkedIn and Twitter.

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