Your marketing performance matters. But how exactly do you measure how it’s doing? In order to determine the effectiveness of your strategies, you can break down your marketing performance by leads. When you measure your lead value, it can tell you if that marketing campaign is making money. You don’t want to spend more trying to capture a lead than what they are bringing in. That’s when you know you have a problem. Measuring your lead value can also be a great indicator for optimization. You could calculate the value of traffic from different sources i.e. social, paid, etc. How do you do this? How do you calculate what a lead is worth? How do you conclude if a campaign is working or not? Let’s dive right in and find out!
To Determine What A Lead Is Worth,
Let’s Define What A Lead Is
We must understand the definition of a lead. As two business are never the same, this principle can be applied to leads. Generally a lead is a potential sale before any sales staff has intervened. A lead is a prospective consumer interested in your product or service. Here’s a more specific breakdown:
- If you own a retail store: a lead can be defined as store visits, website visits, and/or phone calls (these leads are more tricky to track)
- If you sell a product online: a lead is defined as a qualified visit or click on your website before the sale is made
- If you sell services: a lead is defined as a customer contact brought to you by a marketing strategy before it’s turned over to a salesperson
You’ll want to get in the mindset of breaking down marketing cost and return by leads. It is more effective than breaking down simple dollars and cents because you will be able to separate your marketing from your sales. This can identify successes and failures in both areas more effectively. You could have an astounding ad that generates a ton of online submissions or phone calls; however, your sales staff or product/service itself may not be selling. In that case, the marketing is not the problem. The problem very well may be your sales or product/service. It is crucial for your business growth to identify the correct problem in order to correctly identify what a lead is worth.
Develop Persistent Tracking Skills
When it comes to your leads, you must track your leads well. This is simple with a website since they’re often stored in a database. Other than that, tracking is tricky. Here are some tips we’ve found to be functional and essential:
Retail Stores
- Ask customers how they heard about you and come up with a system that works for you on how to track it
- Count your daily traffic, then compare it to the days after ads are published to days without marketing strategies applied
Phone Calls
- Ask customers how they heard about you and what urged them to call
- Have a unique call tracking number applied to your ads (Google Voice has this option as well as other services)
Formula Breakdown
This can become pretty complex, but here’s a simple formula to tell you what a lead is worth. Your average sale is the amount made on average from each purchase/sale for the month. The conversion rate is amount out of how many leads your received to how many were purchased/sold.
Average sale x Conversion rate = Lead value
Now, if you have your salesperson is making commissions, your formula will change. You’ll notice that the ability of your sales staff will directly affect your bottom line.
(Average sale x Conversion rate) x (1 – Commission rate) = Lead Value
You’ll be able to tell if it’s more worth it to run that ad in a magazine or social media ads. This formula can be easily modified to determine other information such as the cost of running a lead, hiring a part-timer to answer phone calls, or the monthly cost for maintaining your website.
Conclusion
In the end, you want to take the time to calculate what a lead is worth. It will act as a domino effect throughout your company’s finances, and you may even find ways that you are wasting money. Knowing the ins and outs of marketing can be daunting and overwhelming. If you have questions or want to know what can work for your company’s growth, call Dorian Solutions today. With our experience and training, we can create a marketing campaign that suits you and brings in revenue you didn’t realize you were missing.
