In this week’s episode of “Inside the Mind“, we talk about Lead Generation Costs.
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Hey what’s up guys, welcome to Inside The Mind where we talk about online marketing strategy, what it is, why it’s important, and why you should care.
In last weeks episode I shared with you the perfect lead conversion outline as taught to me by my mentor Frank Kern.
This week’s episode is brought to you by a subscriber question.
David Garcia says Talk about money. How to value a lead, how to determine the cost of a lead, how much a lead in [niche] might cost using [method] with [conversion rates], and examples of lead campaigns that would have positive/negative ROI.
Well David, this is a really meaty question, so we’re going to break it up into two episodes, this week we’re going to talk about Lead Generation Costs!
(Troll Face Guy)
Wait wait wait! This is the internet! That means I should be able to get all sorts of free leads and never ever have to pay money! Ever! Hrumph!
Well yeah, you can generate leads without paying money, but what you don’t spend in money, you’re going spend tenfold in time. Without paying, you’ll have create tons of content, build a massive email list and a strong network, and that alone can take at least a couple of years.
Now when you’re playing the long game, these things are all important, so don’t think I’m saying for a second that it’s not, because it is.
But when you’re looking for a more immediate gain, your best bet will be to buy your leads. Because when you’re smart about the way you buy your leads, you’ll be targeting people who are already pre-disposed to want your stuff.
Regardless of the way you buy your leads, through list brokers, Pay Per Click ads, or even paying someone to “borrow” their email list *and yes this does happen* the most critical thing to remember is that you want to have a good offer, to a good list.
Before you ever spend a dime to pay for your leads, you need to make sure you qualify your list to make sure your offer won’t be lost on them, and your money’s well spent.
So what do I mean by “qualifying your list?”
Well, let’s say you’re a company that sells high end studio photography lighting. Now at first, you might think, well shoot, let’s just go after all of the photographers!
Now this is a great offer, but “All photographers” is not a great list because There are so many varying degrees of photographers out there. Someone who just bought a $200 camera might call themselves a photographer, but the truth is, they probably don’t know a whole lot about why lighting is important.
So they see the offer for your high end lighting kit and ignore it, simply because they don’t know any better. Good offer. Bad list.
Put that same offer in front of someone who just purchased a $8,000 Nikon with a subscription to headshot magazine though, and they’re much more likely to understand why they need high end studio lights. Good offer, good list.
Make sense? Good, moving on.
Now, you have to set some parameters around what you consider a “lead”. Someone calling around to six other places to comparison shop, is probably not the best lead… But that’s entirely up to you. The point is once you have a definition of what a lead is, stick to that definition and do not deviate.
Next, take all of costs for advertising business cards, ppc, letterhead, etc and divide the advertising costs by the amount of leads that come in.
Get your calculators out, because it’s example time: Say you have a company that has 10 jobs in the year, and those jobs brought in $100,000, resulting in an average of $10,000 per sale. In order to get those sales, you had 50 leads, and you spent $5,000 in advertising for the year.
So to get the total cost per lead, divide $5,000 by 50 giving us a cost per lead of $100.
We also know that with selling 10 out of 50 leads is a 1 in 5 close ratio, which is important to know.
So how does this help you?
Assume you want to grow from 100,000 to 300,000. we know that we sold 10 jobs to get to 100,000 so in order to reach $300,000 we’d have to sell 30 jobs.
We also know that in order to sell the original 10 jobs, we had to have 50 leads, so assuming everything about your system stays the same, all you have to do to grow to 300,000 is increase your lead flow to 150, making your advertising budget for the year $15,000.
Now if these numbers are all too intimidating, don’t worry because the formula still remains the same.
Which again is Divide the total advertising dollars spent by the number of leads that came in and you have your cost per lead.
Now There are any number of ways to figure or refigure this math, but the bottom line is to do it.
If you don’t know what a lead is costing, then you will never know how much you need to spend to get the total sales you need in order to reach your goals.
And David, I know I only answered half of your question in this episode, so tune in next week and we’ll talk about different lead generation methods and different lead generation campaigns.
Alright, that’s all I’ve got for today’s episode of Inside The Mind, thanks so much for watching!
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