Many popular lead generation models can be woefully inefficient for a range of business types, especially small businesses. In fact, it’s easy to spend hundreds or thousands of dollars and countless hours on lead generation without earning any business. Let’s take a look at real lead generation costs and some strategies for making the most of your lead generation budget.
The changing lead generation landscape
Once upon a time, print ads were the centre of most brands’ lead generation mix. But with the rise of digital, print consumption dwindled and the effectiveness of print ads went with it.
Billboards and other physical forms of display advertising were likewise effective. However, since COVID-19 lockdowns have reduced our exposure to such physical ads and increased the amount of online shopping consumers do, their effectiveness into the future is now in doubt.
Here are some of the most popular lead generation channels and their typical costs for small businesses:
- Website (this is your digital business card and can be a home for many or all of your lead generation assets) — $3000-$15,000 (the average is around $5000) plus ongoing fees for hosting and maintenance etc.
- Search-engine optimisation (also called SEO, this is a tool for attracting your ideal clients/customers and increasing business profits) — $500-$2000+ per month.
- Lead generation companies (such companies will sell you a list of contacts who you can attempt to convert into leads) — $100-$1000 per month or $5 per lead (for cold leads who are in your target market but haven’t shown any interest in what you’re offering).
- Appointment setters (these service providers are similar to lead generation companies except that they’ll secure appointments for you with people who are interested in your offerings) — $50-$400 per appointment with a qualified lead.
- Social media marketing (this is a tool you can use to engage with your ideal audience where they are already gathering information and researching solutions to their problems; you can also use it to reach out directly to individuals with personalised messages) — Nearly $5000 per month made up of:
- Google Ads (this is a tool you can use to quickly reach large volumes of your ideal audience, especially when they’re actively looking to buy something) — $5000-$15,000 per month.
- Email marketing (this is a tool you can use to provide a personalised experience to your audience without them having to go anywhere) — $380-$1300 per month.
- Webinars (you can use webinars to engage with your audience in a way that enables you to tailor your message to the needs of the unique group of people who attend, and it’s more scalable than contacting people individually) — up to 20% of the marketing budget.
The lead generation landscape is constantly changing, and it’s up to brands to monitor what works for their target audience, so they can keep pace with those changes and remain relevant and viable businesses. Unfortunately, many businesses fall prey to lead generation models that others have found effective but which don’t work for their specific brand and audience.
Examples of potentially inefficient lead generation models
The quintessential example of a lead generation model that can be extremely effective, but often isn’t, is the blog. The top-earning blog worldwide, HuffPost, earns $630 million per year, so blogging can certainly be profitable. However, the vast majority of blogs are incredibly inefficient lead generation tools and ineffective revenue generating tools.
For example, in 2015, a joint study by Buzzsumo and Moz found half of all digital content had been shared no more than eight times. And while it’s possible to attract plenty of leads through search without having your content shared much, content that’s not being shared is unlikely to be beneficial enough to the target audience for it to be generating substantial leads.
So many businesses invest huge amounts of time and money into their blogs, expecting them to bring in heaps of leads, but unless blogs are done well, they often don’t bring any business at all. Of course, lead generation isn’t the only reason to have a blog. Blogs are a great way of increasing customer satisfaction, for instance. But this highlights how it’s easy to pour resources into a lead generation model that’s known to have great potential only for it to not work for your business.
Another example of this is pay-per-click ads.
The average Australian small business spends $7-$30 per click through Google Ads. The average click-through-rate for Google search ads is 3.17% and the average conversion rate is 3.75%. That means the average cost of a conversion is $187-$800.
Now, if you’re going to generate thousands of dollars of service sales from each conversion, that’s fine. But if each conversion is something like the purchase of a $100 textbook, then that’s pretty expensive.
It’s all about context.
Some lead generation methods seem cheap. After all, if a click on your ad costs $7, and that ad viewer then goes on to make a purchase, $7 could be a pretty low price to pay for a lead who then went on to buy something from you. Similarly, if you can pay $600 for a blog post that attracts thousands of your ideal customers every month for years to come, that looks like a pretty good deal. And if you can pay $5 for every lead from your target market that a lead generation service hands you, you might think you’re onto a winning strategy.
But it’s the hidden costs of many lead generation methods that you’ve got to watch out for. For example, if your ads have really low conversion rates, the costs pretty quickly add up. If your attractive blog post doesn’t link to any of your sales content and so doesn’t generate any sales, it’s pretty much just a waste of money. And if your lead generation service sells you unqualified leads who’ve never heard of your brand or what you offer, and it turns out most of them don’t even need your product or service, you’ve not only wasted money, you’ve also wasted all the time you spent reaching out to your leads and trying to convince them to buy from you.
Part of the problem is that many businesses don’t know how much they’re spending on lead generation or how much sales are costing them. For example, 18% of small businesses, 24% of medium organisations, and 46% of large corporations, don’t know how much they’re spending on social media marketing. In fact, many people think social media marketing is basically free.
Now, that’s not to say that these methods never offer good value for money. But it does mean you’ve got to look at those hidden costs if you want to make a decent profit. And it does mean you need to find quality lead generation options that meet your unique needs.
Often, the key is to understand how much it costs to attract your audience (not just leads, since many lead generation methods will require you to pay regardless of whether you generate a lead or not) and how much you’re paying on sales conversion (since not every lead to a sale).
Strategies for lowering your lead generation costs
Once you understand what your lead generation costs are, you can start working on either decreasing them or increasing the value you get from them. Often, deriving more value means trying new methods.
One of the best ways to decrease your lead generation costs while also exploring new lead generation methods is to use the 70-30 rule. This rule-of-thumb suggests allocating 70% of your lead generation budget to models that you know are effective for your business. You can then allocate the remaining 30% to models that you want to explore to see if they could be effective for you.
The benefits of this strategy are twofold.
Firstly, you’re allocating most of your funds to lead generation methods that you know will deliver a decent return on your investment. So, you know the majority of your budget is going to be wisely invested and will almost certainly deliver you a decent amount of business over any given period. This gives you a stable lead generation stream to keep you making decent revenue.
Secondly, you’re allocating a low-risk portion of your funds to new lead generation methods. So, you’re continuously looking for ways to evolve and improve your lead generation processes, so you can grow your business. This gives you the chance to discover lead generation methods that provide a great return on your investment than your current go-to methods and is essential since models that once worked aren’t likely to work indefinitely.
Another strategy is to use low-cost yet high-exposure passive forms of lead generation.
As an example, you probably already have a website. If it’s been optimised properly for search engines, you’ll be getting a steady flow of visitors from your target market who are directly searching for the services you offer. This is a moderate-cost and moderate-exposure form of passive lead generation.
If you pop a free profile for your business on an online service marketplace like CircleSource, you could get repeated exposure to a bigger pool of potential customers that are periodically looking to hire a range of service providers. These prospects aren’t always going to be looking for the services you provide, so this approach is less targeted. But these prospects aren’t using search engines to find their services providers because they have a dedicated place to find the skills they need, so they’re additional prospects that you wouldn’t capture through your website.
These may not bring in huge volumes of clients, but they can produce a steady stream of opportunities that cost very little to generate (just the time it takes to upload your profile and check the list of opportunities that pop up in your email inbox). And, when it comes right down to it, isn’t it better to spend an hour or two setting up a free profile on a service marketplace that has a moderate chance of successful lead generation, than it is to spend huge amounts on an expensive method that may have a better chance of successfully generating leads, but which is pretty much guaranteed to generate only a modicum of profit once the costs of generating that lead are factored into the equation?
If you’re interested in posting a profile on CircleSource, it’s completely free. You only pay when you win a job. And you only pay 7.5% of the project fee (capped at $1,250), rather than the uncapped 15-25% charged by other service platforms. So join now and start letting buyers discover you today.