Are you noticing at the moment that the cost to acquire a lead has decreased through this pandemic time?
For many business owners that were engaged in any form of digital marketing, even offline marketing, the response rate, and the cost per lead has decreased in that time because a lot of people that were advertising have pulled out of the market.
But be really careful because if you’re only looking at cost per lead, then you’re not looking at the whole picture.
What do I mean by the whole picture? when you’re looking at your sales and marketing metrics and trying to make decisions, both with your leading and your lagging measures, it’s really important that you look at these three critical numbers.
- Cost Per Lead
- Cost Per Sale (cost per lead multiplied by your conversion percentage).
What’s it costing you to acquire a new customer? Not just a lead. Because a lead is a potential customer. We can acquire the leads cheaper, but if they never buy, then over the long run, it’s probably costing us the same or more to get a sale.
- Lifetime Value of a Customer.
The way you look at the lifetime value is often the average dollar amount they spend per transaction. And you multiply that by the average number of transactions that they have over the lifetime of being a customer of yours. This is often determined through historical data.
When you look at those three numbers, you’ve got a complete picture on the effectiveness of your marketing, but also you can start to benchmark and determine the range of investment that you’re going to make to acquire a new customer and allow the law of averages to take play here.
You can say hey, if we invest a little more upfront, we know that that’s within the range of their cost per sale, but we also understand that this is the lifetime return of a customer.
It takes a little bit of time to get this set up, but once you’ve got this information, it’s absolute gold and it really does help you determine the amount of investment you can make and to what level to acquire customers in your business.
If you need some help setting this up, please feel free to reach out. It can seem a little bit challenging at first, but once you get clear and you do the calculations, it’s like a light bulb that’ll go off in your mind and make complete sense.
These are critical numbers that every business owner needs to observe in their business to be successful.