All too often, business owners and/or marketers put far to much emphasis on the cost of leads. It’s certainly an important factor, but in essence it really should be irrelevant.
The reason is simple. If you buy 10 leads for $1000 and received 1 sale, your cost per lead would be $100 and your cost per sale would be $1000. You may be deterred to buy leads from another lead provider that is double the price per lead – you receive only 5 leads for $1000, raising your cost per lead to $200. However, what if you received 2 sales from that lead provider versus just 1 sale from the other provider. In this scenario, your cost per sale would drop in half to $500 per sale. How much would you rather pay for a sale? $500 or $1000?
Before you jump to conclusions, the basis of this article is not to say that you need to go buy the most expensive leads and you will receive the most sales. The point is to re-focus your marketing dollars on what comes out of the funnel, not necessarily what goes into it. If you are currently purchasing sales leads for your company, it is critical that you have are tracking where your sales come from so you know your cost per sale per lead provider. This allows you to cut the cord quickly with n0n-performing lead providers to lessen the loss.
If you are familiar with PPC advertising, then you are probably familiar with A/B testing. In a nutshell, A/B testing is where you constantly run 2 competing ads against each other, obviously with differences between the ads. The concept is by doing so, you continually cut your low performing ad and create a new one. By following this process, you are continually improving your ad results. Similarly, you should be doing this same concept with companies you are purchasing leads from. Buy leads from 2 competing leads providers and play them against each other! Your scoreboard should always be the cost per sale. The goal is to always get more out of your marketing dollars and continue to minimize your cost per sale, further improving your profit margins.
There are a couple key points and tips to consider here. Before you begin purchasing leads, make certain you have a tracking system in place to easily calculate your cost per sale. Secondly, make sure you determine what the maximum cost per sale you are willing to pay. Are you willing to pay up to $50 per sale? $100? $1000? Know this number inside out. With the right tracking system in place, the red flags should immediately go up if your cost per sale exceeds the maximum amount you are willing to pay. You may think that a lead provider is doing great for you. Perhaps, people in your organization are buzzing about a new lead provider and all of the sales you are getting from it. Sales are only good if they mean profits. If your average profit per sale is $300, but the cost per sale was also $300, is it worth it? Believe it or not, many business owners and/or executives can tell you what their advertising/marketing expense is on a profit & loss statement, yet they are clueless as to the cost per sale.