If yours is like many businesses today, probably one of your main concerns is how to sustain continued growth while still keeping within a reasonable marketing budget.
When it comes to B2B lead generation, how do you know how much of your marketing budget to invest? It’s not as complicated as you might expect. With a few simple calculations, you can be sure you’re on the right track and that your investment is more than a mere leap of faith.
Many B2B marketers become frustrated when they don’t see an immediate return on investment from leads, especially when evaluating leads from a new source. But it’s important to remember that sales cycles for most businesses average about three months. Even with qualified leads, will be some time before you begin to see a return on your investment.
You’ll also want to be sure you’re using the right metrics when evaluating your leads. For example, if your average sale per customer results in $250 in profit in the first year, and you purchase 10 leads at $25 each, with a ten percent conversion rate to acquire that new customer, you might conclude that you merely broke even on your investment.
Not so, if you consider customer lifetime value (CLV). This metric is being used increasingly as the best measure of lead value. CLV reflects the present total value of a customer to the company over his or her lifetime. When we discuss CLV, we typically refer to the value of a single customer, using the average sales of such a customer. The model of CLV can be broken down as a function of these three elements:
TP: Total Annual Profit (Total Sales – Cost)
TC: Total Customers
CL: Average Customer Life (in years)
Using these elements, customer lifetime value is calculated as CLV = TP X CL.
Although CLV could measure the customer’s value over his or her lifetime, most marketers use three years (based on considerations surrounding product life cycle, customer life cycle and profit calculations).
Now when you calculate the CLV of a single customer, you will see just what the true value is of your investment in leads. Plus if you factor in any repeat or additional purchases made by each customer, that $250 profit can turn into several thousands of dollars over the term of their relationship with you.
Companies like Amazon, whose average customer purchase may only be $20, typically spend significantly more than that sum in marketing dollars to acquire each customer. Why? Because they look beyond the initial buying cycle. These savvy marketers know that over a period of several years, that customer may very well spend thousands of dollars.
Your B2B lead generation dollars are an investment in the future of your business. You can be confident of maximizing your return when you start with pre-qualified leads who have indicated a readiness to purchase your services or products. Although lead buying should not necessarily be your only means of marketing, working with a good B2B lead generation company can complement and enhance the marketing efforts you already have in place.
Generating qualified leads can be a complicated process, but a good lead generation company can specifically tailor the lead acquisition process to the needs of your business so you can be certain you’re working with quality leads–leads who are actively seeking the services you provide and are more likely convert to longtime, valuable customers.