Are you wondering whether your lead acquisition efforts are worth it? Are you getting enough ROI from your lead source? If you are investing time and money in generating leads, you also need to assess what those leads are worth to your business. It may sound complicated, but a fairly simple set of KPI metrics can help you measure your lead source ROI.
The most important KPI metrics for monitoring your lead source ROI are:
- Cost per Acquisition
- Connection Rate
- Lead Conversion Rate
- Total Lead Value
- Customer Lifetime Value
Cost Per Acquisition
The average cost of gaining each new lead is one of the most important metrics in order to confirm that your marketing dollars are well spent. Cost per acquisition (CPA) helps you to project your profitability and accurately scale your business.
There are several factors that are involved in CPA. For example, leads that are closed by agents, leads that are purchased, and the leads that are acquired through other sources are likely to carry different costs.
There is no benchmark that determines whether your CPA is good enough or not. Every business is different, with varying prices, profit margins, and expenses. It is important to understand the factors that affect your particular business and the amount that you can spend in order to acquire the most profitable leads.
The connection rate is the proportion of calls made by your agents that were answered. You calculate it by dividing the number of calls connected by the total number of calls made by the agent.
This metric assesses the quality of your lead lists. Determining the connection rate helps you to:
- Check and rectify any issues in the lead sources you have
- Monitor how the agent is performing
- Adjust the agent working schedule to more optimal hours
- Make sure you have the optimal dialing software
- Use enhanced caller ID to increase the answer rate
This is a short-term KPI, but it gives you a snapshot of daily activity. With this insight, you can decide what improvements can lead to better performance.
Lead Conversion Rate
The lead conversion rate is the most crucial lead KPI in determining your ROI. You may be making hundreds of calls per day, but unless your lead conversion rate is up to the mark these calls can waste time and money.
Your lead conversion rate is the percentage of calls that result in a sale. If this percentage is low, it suggests that you’re spending a lot of your budget to acquire leads and that the process needs to be improved. This may involve additional training for your agents, reviewing your sales script, or considering other marketing techniques such as offers and discounts.
How you figure out if your lead conversion rate is good or not depends on your niche. Anything that is over 10% is always considered good, whereas an average conversion rate is anywhere between 2% and 5%.
Total Lead Value
The total lead value is the worth of a lead over its complete lifetime. This reflects the fact that some leads are more likely to convert than others, and some customers are more valuable to the business than others. A lead source with a low conversion rate might have a good total lead value if it brings you customers who go on to spend more money with your business over the years.
Recognizing that different lead sources have different values helps justify the marketing budget and forecast the sales for a business. A total lead value approach requires a tailored strategy, as your sales team will have to find a way to identify and focus on high-value opportunities.
Knowing your total lead value helps you to:
- Identify high-value segments of your sales business
- Create profiles of top clients, so you can be aware of the potential in similar prospective leads
- Look for opportunities for group sales, or those who can make direct referrals
- Follow through on promising leads that did not convert
Customer Lifetime Value
Customer lifetime value (CLTV) is the profit or revenue that a customer brings to a business over the full length of their relationship with you. This lead KPI has the most significant impact on the revenue of a business, partly because retaining an existing customer is more cost-effective than acquiring new ones.
You can improve your CLTV by upgrading your customer service and content marketing. For example, making sure existing customers are aware of new products, or improvements in existing products, is likely to increase brand loyalty and lead to more sales. The CLTV assessment also helps you determine if the sales representatives are targeting effective leads.
Improving Your ROI From Leads
It is always exciting to generate more leads for your company. Analysis of KPI metrics can reveal areas for improvement, such as:
- A poor quality lead list
- An outdated or inadequate CRM system
- Agents that need further training
- Sales script that needs improvement
- Limitations in the dialing software
- Poor lead sources
Regular review of these issues will ensure optimum ROI and provide focus and motivation for your sales teams.
Benefits From Lead KPI Analysis
Leads are the lifeblood of any successful business, but often quality leads get lost in the process and flow of operations. To add to the confusion, there are all sorts of KPIs that can be used to evaluate your business.
However, by focusing on the right KPIs, you can improve the processes within your business that relate directly to your ROI. This will not only increase the number of conversions but also build a high-quality customer base that contributes to long-term revenue for your business.