The quick answer to this question is that it differs from company to company. In this blog post, we will show you how to find out what a lead is worth to your company and also define what a lead can be.
What is a lead?
Everyone has different definitions of what a lead is, but for the vast majority of businesses, a lead is someone who has shown an interest in your company's products/services. Often a lead is the next step in a sales funnel.Since we at Contitude work in marketing, we define a lead as a "person" who has converted on a website by providing some form of contact information. This is a broad definition that focuses mostly on demonstrated interest, which also means that not all leads will be in your company's target audience.
What is the difference between Marketing Qualified Lead and Sales Qualified Lead?
There are different types of leads and you've probably heard the terms MQL (Marketing Qualified Lead) and SQL (Sales Qualified Lead).A qualified lead (-QL) simply means that they are assumed to be closer to a purchase than a general lead which can be anyone and anywhere in the buying process.MQL is often qualified by the fact that this lead has completed a series of actions on a website or in emails. For example, an MQL might be a lead who has downloaded a guide and then clicked on links to pricing pages in two emails and after that downloaded a product-specific whitepaper.
SQL is unlike an MQL when a salesperson has qualified this lead as more likely to buy than a normal lead through a personal qualification. Often, SQL is the next step in a sales funnel where a salesperson qualifies a lead that the marketing department has already qualified. This is so that salespeople can spend time on the right leads that are a little further along in the company's buying cycle.
How much is a lead worth?
When it comes to B2B or larger B2C purchases, the buying journey is longer than e.g. via e-commerce. When someone buys a shirt on an online shop, you can easily see what the deal might be worth and how much that conversion would be worth in terms of dollars and cents. It's not that easy when it comes to valuing a lead where the buying process has gone further.
As we discussed in the previous section, a lead is, in our view, when a person has converted on the website, e.g. by downloading a guide or subscribing to a newsletter (some kind of contact or interaction area). In the context of that conversion, however, there is no deal directly where you can easily work out what the conversion is actually worth.
Not all leads are equally valuable and all customers are different and the quality of all leads varies. The best way we have found, therefore, is to try to estimate what an average lead is worth by calculating what percentage of a lead moves through each stage of a sales pipeline and eventually becomes a business and how much such an average business is worth. This means that each calculation will be unique to each company depending on the steps you have in your sales funnel, but we'll go through a standard example below to further illustrate this.
Let's take a fictional example of a SaaS solution we call MerLeads. MerLeads currently gets about 100 leads per month from their website where they collect all kinds of conversions. These could be people downloading guides, registering for seminars or people entering their details in regular contact forms.
This company's sales process takes about 1 year from when someone becomes a lead to when a deal finally closes.
They know that their salespeople book about 8% of all leads on first meetings and that they close about 12% of all first meetings to becoming a deal.
MerLead's average deal is for SEK 250,000 with a margin of about 75%, so the value of each deal is about SEK 187,500.
Now we have enough basic data to estimate what an average lead is worth. Here is the calculation:We take the percentage of booked appointments by the number of leads, i.e. 8% and multiply it by the percentage of business that is made up of the number of appointments, which is then 12%, and multiply it further by the average value of each business.8% x 12% x 187 500 SEK = 1 800 SEK.
For MerLeads, the average value of a lead would then be 1 800 SEK.We have developed a calculator that you can download here where you can easily enter your own figures and find out what an average lead is worth to you and how much it is worth per year for your company.
You can find the lead calculator here
Why is it important to know what a lead is worth?
The reason why you should know how much a lead is worth is so that you can measure whether the marketing you are doing is profitable.
If you're in charge of marketing for a company, you want to be able to present figures in black and white about whether what you're doing is actually profitable for the company. Not only will this help you appear to your boss or your board as someone who knows what you're doing, but you'll also be able to ask for an increased budget if you can show that for every penny you bring in, you'll be able to bring in two cents in revenue.
Take the example of MerLeads above, where they get 100 leads per month worth 180 000 SEK per month or 2.16 million SEK per year. That's what MerLead's marketing department contributes to the company. Then the question is how much marketing budget they have today and what other activities the marketing department needs to carry out. It is then important to separate the activities and cost items that are on digital marketing in order to calculate the profitability of these activities. If it turns out that the activities are profitable for the company then this is a perfect time to just step on the gas and maybe even ask for a pay rise If it is not profitable for the company then there is a case for reviewing what you are doing to make the activities profitable. Remember that not all activities have an immediate impact. For example, if you are working on SEO in digital marketing, you will need to explain the process to your manager when you present these types of figures.
Extra goodies from leads
As mentioned earlier, not all leads are ideal matches for your business and often about 90% of these leads are not ready to be booked for an appointment once they become leads. One estimate that is often made is the "10, 20, 70" rule. It says that 10% of leads are ready to become buyers and will likely be able to be booked an appointment with. 20% of these leads are not ready right now but may be within a 3 year period and could then become potential buyers. The remaining 70% of your leads are non-buyers, i.e. leads who for one or more reasons will never buy from you but who can be ambassadors for your company and brand and refer other potential buyers of your company's products and services. These values are harder to include in a calculation of what a lead is worth but are good to bring up with a manager to highlight the value of the work you do.
This also highlights the value of Marketing Automation to the 90% who are not ready to buy today. You want to maintain a relationship with the 90% of those leads but there is no sales person who will have the time to do that right now. That's where Marketing Automation can be your best friend, helping to nurture a lead with relevant and actionable information before they finally qualify and get closer to a purchase.
It's important to keep track of how much a lead is worth and figuring it out doesn't have to be as hard as it sounds. You will need to talk to the sales department to find out how many deals on average are closed and how many appointments are booked from the leads that come in and find out the value of an average deal but then you have all the information you need.
The reason you need to find this out is because you want to be able to measure which marketing activities are working best and whether the marketing that is being done today is profitable. It will help when you're negotiating your budget, negotiating salaries and more.
So find out what a lead is worth today!
If you need help getting more leads, please get in touch with us at Contitude!