How Much Should Lead Generation Cost?

How Much Should Lead Generation Cost?



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Want to make more sales?

Then you need to generate more leads. 

But you have to figure out how to do that profitably.

Otherwise, you’ll go broke, no matter how many sales you make.

So how much money should you be spending on generating leads?

That’s exactly what we are going to discuss today.

Continue reading…

What Is a Lead Generation Funnel?

What Is a Lead Generation Funnel graphic.

Typically, when businesses are generating leads online, they are doing so via a lead generation funnel.

Here’s how it works:

  1. You create a lead magnet.
  2. You create a landing page for that lead magnet.
  3. You drive traffic to that landing page.

Once a potential customer provides an email address in order to get access to your lead magnet, they enter your sales funnel and become a lead.

In this article, we are going to focus on the costs of building an effective lead generation funnel, maintaining it, and driving traffic to it.

What Factors Affect Your Lead Generation Cost?

There are three key factors that affect your lead generation cost:

  1. Software.
  2. Lead magnet.
  3. Traffic.

Let’s take a closer look at each…

Software

What Factors Affect Your Lead Generation Cost?, software, sales page dashboard.

You will need to buy software to create a lead generation funnel.

There are several ways to go about it:

  • Funnel building software. Say, with the ClickFunnels Platinum plan that costs $297/month, you get everything that you need. This is the most expensive option but you don’t have to worry about any technical stuff.
  • Funnel building software + email marketing software. You can also go with the ClickFunnels standard plan that costs $97/month, then integrate our software with email marketing software such as ConvertKit, MailChimp, Aweber, etc. This is a less expensive option.
  • DIY solution. You can also create your own custom solution. Say, if you know how to code, you could build the landing page yourself, then use one of the previously mentioned email marketing apps to manage your email list. This is the least expensive option since it allows you to skip funnel building software entirely.

Lead Magnet

What Factors Affect Your Lead Generation Cost? Lead Magnet Example.

A lead magnet is a freebie that you offer to the potential customer in exchange for their email address.

It can be anything that they can either download to their device or access online:

  • A report.
  • An ebook.
  • A webinar.
  • A video course.
  • An email course.

…etc.

The cost of the lead magnet depends on whether you produce it yourself or outsource the entire project or aspects of it (e.g. design, writing, video editing, etc.) to someone else.

Note that your lead magnet serves as the foundation of your entire sales funnel because it:

  • Determines whether the potential customer enters your sales funnel in the first place.
  • Has a huge impact on whether that potential customer buys your front-end product.

Keep in mind that people use the quality of your lead magnet to determine what they can expect from your premium offers.

Impress them and they will want to check out your paid products. Disappoint them and you won’t get a second chance.

That’s why it’s important to make sure that your lead magnet is super valuable. Of course, this doesn’t necessarily mean that you need to outsource its production. You can create it yourself if you have the skills required.

But the point is that you shouldn’t skimp on it just to save a few bucks because a low-quality lead magnet can wreck your entire sales funnel.

Traffic

What Factors Affect Your Lead Generation Cost? Traffic graphic.

Obviously, you can’t just sit back and wait for people to start signing up to your email list, you have to actively drive traffic to the lead magnet landing page.

We believe that the most straightforward way to do that is via Facebook ads since paid traffic is immediate, targeted, and predictable.

However, if you have never run a paid advertising campaign before, then you need to be careful because when you don’t know what you’re doing it’s easy to burn through your entire marketing budget without having anything to show for it.

So begin with a small daily ad budget, figure out how to generate leads profitably, then start gradually scaling the campaign.

Also, it might take a while to get it right, so be prepared to burn some cash on trial and error.

Extra Expense: Hiring or Outsourcing

Have an established business with a proven lead generation system that enables you to bring in leads profitably?

Then you might want to consider hiring a lead generation expert or outsourcing to a lead generation agency.

The average full-time lead generation expert annual salary in the United States is $45,653.

Meanwhile, agency fees can vary wildly, plus the pricing structures differ – some agencies charge per lead, others per month.

Obviously, delegating lead generation is going to increase its cost, but it will also free up your time so that you could focus on other things.

Moreover, if you feel that you are okay at lead generation, but not necessarily great at it, delegating to an expert can help you take it to the next level.

As Russel explains in the video below, entrepreneurs often start out by doing everything themselves, which is how it should be because you need to know the ins and outs of your business.

But at some point, you need to start delegating tasks to people who are better at them than you.

Otherwise, your personal limitations will stunt the growth of your business, until you reach the point where it stops growing altogether.

How To Calculate Cost per Lead (CPL)

One of the most important lead generation metrics is the cost per lead (CPL).

Its formula is simple:

Total marketing spend divided by the number of leads generated.

“Marketing spend” includes software subscriptions, advertising spend, employee salaries or agency fees, etc. during that time period.

Also, if you are doing everything yourself, you might want to work out your approximate hourly rate, calculate the total cost of your lead generation efforts, then add it to the marketing spend metric.

Otherwise, if you treat your own work as free, your cost per lead metric will be off because there’s no such thing as free labor.

This will cause problems later on when it’s time to replace yourself – hiring someone will skyrocket cost per lead if you haven’t previously included your labor cost in the calculation.

How To Generate Leads Profitably

In order to generate leads profitably, you need to maximize your customer lifetime value (CLV) metric. But how can you do that?

Here at ClickFunnels, we believe that the best way to sell online is via sales funnels, specifically a sales funnel called the Value Ladder.

The Value Ladder has four stages:

  1. Bait. You offer the potential customer a lead magnet in exchange for their email address. This is the lead generation funnel.
  2. Frontend. You offer the potential customer your least expensive and least valuable product.
  3. Middle. You offer the customer a more expensive and more valuable product
  4. Backend. You offer the customer your most expensive and most valuable product. 
How To Generate Leads Profitably, The Value Ladder Graphic.

The Value Ladder sales funnel works so well because it allows you to:

  1. Start the relationship with that person by providing free value.
  2. Nurture that relationship by continuing to provide free value.
  3. Build trust by providing progressively more paid value at each stage.

Here’s how Russel explains it:

So if you want to increase customer lifetime value, the first thing you should do is build a Value Ladder sales funnel.

Fortunately, you don’t need to have an entire product line ready, one product is enough to get started.

Simply create a sales funnel that covers the first two stages:

  1. Bait.
  2. Frontend.

…then add the Middle and the Backend stages later.

Also, once you have a basic Value Ladder sales funnel in place, you might want to add upsells, cross sells, and downsells to maximize the CLV. Our software makes that easy!

Want Russel To Show You How To Build a Sales Funnel That Converts?

Let’s keep it real:

Building a sales funnel from scratch can seem like a daunting task.

That’s why we created our 5 Day Challenge where Russel walks you through it step-by-step.

You will learn how to:

  • Generate unlimited leads.
  • Create your first lead magnet.
  • Build your first sales funnel.
  • Create a simple 6-email follow-up sequence.
  • And launch your funnel!

…in just five days.

So don’t hesitate.

Join our 5 Day Challenge today. It’s completely free!



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