Value of a Lead

How Can You Compute the Value of a Lead [Calculator]

Table of Contents

Do You Know Why Lead Generation is So Important?


If you take the time to design and build a business based on the numbers, then you will know that having a steady stream of leads coming into your Marketing and Sales pipeline is critical to your success


Know What a Lead is Worth


That is why you should learn how much a lead is worth to your organization. It is the only way you will know how much time and effort you need to expend on the lead at any stage in the process.  


Project Potential Revenue Generation


Without knowing this information, you really can't predict how much money you will make. Investors might like to know not only what you're projecting revenue wise, but as well, just how you determined the value of a lead.


Importance of Lead Generation Website

Your website must be designed to generate leads.  That means you have a website that offers up content, that yields a high conversion rate, from the initial lead capture stage, right on through to deal closure.  With modern CRMs, such as Hubspot's CRM, you can measure conversion rates through each stage of your sales funnel.


Offline and Online Lead Generation


In today's modern marketing environment, lead generation can occur both offline and online. But as a business owner to truly scale your operation, you're going to need to master the art of digital lead generation with a customized lead generation focused website.  You will need to come up marketing strategies take full advantage of the power of your Inbound Marketing Platform.  


Inbound Marketing Platforms


Systems such as Hubspot, which provide one of the most complete Inbound Marketing platforms available, allow you to launch marketing campaigns and to measure not just every activity of every visitor to your website, but to determine the value of a lead at any stage of your pipeline.  In this way, every marketing campaign can fully attribute revenue to each marketing campaign, a key capability in decision making and forecasting sales.


Inbound Marketing Methodology


This is not easy to do, to be frank, and requires some fairly deep and determined expertise. You will need to know not just the Inbound Marketing Methodology but most importantly, how your own sales process works. It is often surprising how little we know about how sales are actually happening within our enterprise.


Lead Generation Channels


Of course, with today's analytical tools, you can and should measure results from every marketing channel you use, including:

  • Organic Search
  • Referral
  • Social Media
  • Paid
  • E-Mail
  • Offline

Once you are able to measure your results for each of these channels, you can intelligently reallocate your efforts to the channels that pay off the best.


Lead Scoring


Of course, just knowing the results from any or all of these marketing channels is only a first step in mastering lead generation. Your system needs to help you keep score, more specifically, it needs to provide lead scoring for each and every lead in your Sales Funnel. And it needs to communicate automatically to your sales team when a lead has scored high enough, using whatever criteria you have established to indicate a certain lead quality has been reached based on total value.


Lead Score


Boost Return on Investment With High Quality Leads

Not All Leads Are Created Equal


A quality lead is the most important ingredient in the Sales Pipeline. A quality lead refers to any prospect that is ready to access your services immediately, boost your Return On Investment (ROI), and provide a high Customer Lifetime Value (CLV)


Sales Ready Leads


Of course, though we wish there was never a disagreement between marketing and sales about lead quality, the reality is, sales always believes the lead quality sucks. That's why you need to know the value of a lead in your pipeline. Without it, it is very easy for a sales manager to simply demand (read ask marketing to spend more money) more leads, of a higher quality.


Have a Lead Qualification Framework

One of the many critical task to getting to the root cause of lead quality issues is for marketing and sales to work closely together to define what a qualified lead is.  This definitional framework is an input into defining the Service Level Agreement or SLA, that must be in place between Marketing and Sales.


Increase Lead Value via Better Lead Qualification


By utilizing lead value, you can ensure your marketing budget goes toward generating more qualified leads for your marketing team to nurture through to deal closure.

Optimized Lead Forms

Lead form optimization is a critical aspect of improving lead qualification.  There is always a temptation to ask for more information than is ever actually going to used by either Marketing or Sales.  On the other hand, in order for marketing to fully qualify a lead, the form must be designed to collect, perhaps extensive information.


Enter Smart Forms


The best approach is to combine contextual marketing with smart form fields.  In our experience, most leads that go on to become deals convert multiple times on the website.  Hubspot's form tool allows you to set up forms so that it never asks for the same information twice.  This drastically reduces conversion friction and dramatically improves overall lead quality.


Listen to Sales


Any organization that wants to survive and thrive will, of course, listen to what Sales has to say about lead quality. On the other hand, once you realize what the total cost to generate a lead is and what each lead is actually worth, you may well start to treat each one with much greater respect.


Listen to Sales


Set a Realistic Marketing Budget


Once you know what it cost you to produce a lead and what the lead value is to your organization, you can then set a realistic Sales Goal.  Once you have established objective sales goals, you can now set a Marketing Budget that will support your planned sales.  Your total marketing spend should be focused enough high quality leads to feed your sales team with enough sales qualified leads,, every day.


Recycle Leads Back Into the Pipeline


Remember, even a lead you qualify out early on can and will come back into your sales pipeline, sometimes, years later. That's why remarketing is such a big deal. It just takes people a while to make a decision. This can come down to many factors, but there are 2 we have seen over and over, one, the organization isn't equipped to evaluate your solution or two, they fear losing money on their marketing investment.


Predictable Revenue Generation


Knowing what a lead is worth, at each stage of your funnel, is just one part of a more important task - sales forecasting. All companies want and need to be able to reliably predict their expected sales revenue.


Defined Marketing and Sales Processes


This is much easier to do when you have highly defined marketing and sales processes that yield a reliable flow of leads and sales. That's really why you want to know the value of a lead. By knowing this number, for each stage of your funnel, you can not only predict your future revenue, you can also work backwards and estimate how much more or less you need to spend on marketing to hit your sales targets.

It's Important to Know the Cost of a Lead

It is also a good idea to assess your Cost Per Lead and lead value quarterly.  The formula to Calculate the Cost Per Lead is simple, at least on the surface level.


Simplified Cost Per Lead Formula


Total cost to acquire leads (how much you spent on marketing in a given time period) / total leads acquired = Actual Cost Per Lead Example: If you spent $1000 on marketing and had 8 leads, this is what it would look like: 1000/8=$125 Your Cost Per Lead in this situation is $125. 

Cost Per Lead is Not the Same as Lead Value

While it is critical to understand how much you are spending to acquire a lead, lead value depends very much on what your Average Order Value is and how long it takes for a lead to turn into a customer.

So How Much Is a Lead Worth To Your Business


Once you understand the math behind determining the value of a lead to your business, you will want an easy way to calculate the value of a lead any time you want. We got tired of doing it with a spreadsheet and decided to just develop an online value of a lead calculator, which you can use yourself.


Value of Lead Calculator


Knowing your lead value can go beyond just being a number by helping your sales team stay on top of sales goals and boost your total revenue in the long run through a stronger digital marketing strategy.  Just click the button to determine your own value of a lead with 4 simple inputs. How cool is that!


Calculate How Much a Lead is Worth


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Lonnie Ayers

About the Author: Lonnie Ayers is a Hubspot Certified Inbound Marketing consultant, with additional certifications in Hubspot Content Optimization, Hubspot Contextual Marketing, and is a Hubspot Certified Partner. Specialized in demand generation and sales execution, especially in the SAP, Oracle and Microsoft Partner space, he has unique insight into the tough challenges Service Providers face with generating leads and closing sales using the latest digital tools. With 15 years of SAP Program Management experience, and dozens of complex sales engagements under his belt, he helps partners develop and communicate their unique sales proposition. Frequently sought as a public speaker in various events, he is available for both inhouse engagements and remote coaching.
Balanced Scorecard Consultant

He also recently released a book "How to Dominate Any Market - Turbocharging Your Digital Marketing and Sales Results", which is available on Amazon.

View All Articles by Lonnie Ayers

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