With HubSpot’s State of Inbound showing that a lead cost is going up for for North American B2B companies due to more competition, how do you calculate the cost of online leads and how can you possibly drive costs down?
Calculating costs In general the cost of online leads is driven from the cost of the traffic acquisition in addition to the cost of the call-to-action used split by the number of leads generated. Basically (A + B) / C where:
1. A – Cost of traffic acquisition: There are many ways to acquire your online audience but they are mainly split to organic traffic and paid traffic. Organic traffic is traffic you paid for in sweat and managed to drag to your site through your actions. Typical actions are blogging, twitting, spreading your content on social sites or content sharing sites etc. Paid traffic is the one that is much easier to scale but at a cost. Its comprised of different types of advertising medium from Google Ads to placing banners on industry specific blogs to spreading content through content networks such as Outbrain or Zemanta. For paid traffic the typical payment method is pay-per-click so you pay by the size of your audience.
2. B – Cost of call-to-action: When you acquired the traffic and its on your site, you need to get that audience to leave you their contact details. If a visitor is leaving his details in a Contact Us page that you setup in minutes, the cost of that page is negligible. However if that visitor turned into a lead by signing up to a Webinar you just hosted with a major analyst firm speaker the cost of that Webinar might as well crossed north of $10k so you need many many leads coming from that Webinar (live or recorded) to drive the average cost per lead for that call-to-action down. In the range of call-to-action costs white papers and e-books are quite cost effective as they typically only require in-house effort while calls-to-action such as an analyst report reproduction or webinar with a guest speaker are on the costly side of things.
3. C – Numbers of leads generated: So each call to action cost is known and if you know the cost of getting your audience to your site and you know the number of leads generated per call-to-action now you can calculate the average cost of lead per that action. Obviously across time and more leads per action the cost will go down for that specific action. The more reuse you can make from a specific item the higher potential ROI you can get. For example if you author a whitepaper and you can also turn it into webinar slides you just got 2 calls to action for the price of one.
Driving costs down:
1. Lowering cost of acquisition:
• The more organic activities (article posts, blog posts, FAQ's) the more you can do to acquire your audience the cheaper
• Use contributed articles and pitch your case studies and news to publications as other ways to gain organic (unpaid) exposure
• A press release can be an affordable alternative to paid traffic if that release is picked up nicely
• In addition you can look into lowering you paid traffic costs by going after cheaper/niche keywords or industry specific blogs. The smaller the niche you target the chances are the costs of advertising are lower
2. Lower cost of calls-to-action:
• Build your own, where time is the only investment
• Build to reuse: If you can build a series of blog posts and turn them into an eBook that means that eBook costs you almost nothing since you blog in any event
3. Increase conversion:
The more leads you get per activity the lower the cost is per lead
• Optimize your landing pages so they convert well
• Build specific calls to action that target specific groups. The more specific the target audience is the higher likelihood that conversion will be higher. For example targeting all WordPress site owners or targeting site owners of Cyber Security companies that are under 100 employees and are running on WordPress are two very different things
• Make some noise. Make sure to attract attention to your newest calls to action. From social media to PR there are cost effective alternatives to make sure your audience knows that action exists
Final thoughts: The cost of online leads is usually high, but not as high as event leads or outbound leads. You just need to make sure you calculate your ROI right. Obviously we didn’t touch on lead quality, which is a whole different topic. Assuming all leads are of similar quality watching your ROI will help you track and optimize your calls to action in a way that will help you drive costs down.
Sam Casey is the Managing Partner and Chief Creative Officer at Banyan Creative. He loves calculating cost-per-lead and cost-per-acquisition over a cup of strong coffee and when not in the office you can find him calculating his wattage output on the bike.
Sam Casey is the Chief Creative Officer and Managing Partner at Banyan Creative.