Measuring ROI and the Value of a Lead
When calculating your marketing ROI and making decisions on how to spend your budget, it’s crucial to understand the value of the leads you generate. If you know the monetary value of a lead, then you can quantify your content development and marketing efforts in a tangible and real way. This information helps to ensure that your marketing efforts and getting you the return on your investment that they should.
Let’s look at the following example:
You spent $5,000 on ads this month to drive traffic to your website. You know from Google Analytics that you brought in 600 website visitors, and 10 of these visitors filled out your contact form. Four of those 10 visitors became actual customers. How would you know if the leads you brought in covered the $5,000 you spent on ads?
The answer is to determine the value of a lead. If each lead is worth $9,000 to your company, then the following applies:
Potential Revenue: $90,000 ($9,000 x 10 leads through contact forms)
Actual Revenue: $36,000 ($9,000 x 4 actual customers)
ROI: 620% (Gain from Investment – Cost of Investment)/Cost of Investment, or ($36,0000 – $5,000)/$5,000 * 100 = 620%
BUT … How do You Know the Value of a Lead?
FIRST Calculate your Average Closed Lead Value:
Total Revenue Generated From Closed Leads / Total Number of Closed Leads = Average Closed Lead Value
$500,000 / 10 = $50,000 Average Closed Lead Value
SECOND Calculate your Close Rate:
Number of Leads that became customers / Number of Leads = Lead Close Rate %
10 / 100 = .10 or 10% Lead Close Rate
LAST Calculate your Per Lead Value:
Average Closed Lead Value x Lead Close Rate % = Per Lead Value
$50,000 x .10 = $5,000
The Average Lead Value for this example is $5,000
Lead Value Calculator
We’ve put together a simple lead generation calculator to help you determine both your average lead value and your lead close rate.
Want to know how to take this information to the next level? Learn how to integrate lead value with your Analytics tracking with our Analytics 101 Resources.