UPDATED: What does a sales lead cost? Various methods compared

16/11/2009 at 4:23 pm 1 comment

UPDATE: The Twitter Sales Leads tool mentioned below is now available in BETA version – click here.

I spent a chunk of last week telling people about our forthcoming Twitter Sales Leads tool and how it will help them engage with people using Twitter to tweet their needs for products or services.

This feature will be included in our Pro Network membership of WeCanDo.BIZ and not only help you find sales leads amidst the 27 million daily tweets posted on Twitter (source: Pingdom via Brian Solis) but through WeCanDoCRM Social CRM also help you to track them.

Twitter Sales Leads from WeCanDo.BIZ (click to enlarge)Pro Networker, including access to Twitter Sales Leads and the full Social CRM system, costs £19.95 per month.  No one I mentioned the price to baulked, possibly because they may be spending many times that on a Cloud/hosted CRM system like Salesforce.com, as well as email marketing from VerticalResponse or Constant Contact.  Certainly, in a previous life I have frequently spent over £100 a month on hosted CRM and a separate hosted email marketing system.  And that’s before you factor in the cost of the customer data!

All of this got me wondering just where people’s expectations are as far as the cost of a sales lead (CPL – Cost Per Lead).  So I decided to draw up some comparisons with methods I have advocated in the past.  I’d love to read your comments.

First off, let’s agree what a sales lead is.  Or isn’t.  It isn’t a line in a file of email addresses you’ve bought off some outfit in Florida compiled specifically for spamming.  It isn’t a click on a website.  It isn’t a name ina phone directory you think you may be able to sell something to.  As I’ve said throughout my career — which has included stints as sales directors as well as 11 years spent running my own companies — there’s no lead without a need.  In other words, if someone doesn’t have a reason to buy we should assume they probably won’t (impulse buys only go up to a certain, small, value and don’t happen much in business).  So a “real” lead is you engaged in dialogue with someone who has identified they have a reason to buy; a need brought on by suffering some sort business pain in a B2B (business to business) context; and they’ve shared that need with you.

So, some methods of lead generation:

Telesales/telemarketing — CPL £200 – £385
We’re talking outbound ‘phone based campaigns in order to find prospects within a list of contacts.  It may be you have those contacts already (they can go out of date quickly) or have brought data in for the purpose.  I’m going to assume the latter here, which adds a little to the cost.

  • Telesales person at £200 – £350/day, depending on the knowledge required to sell the product/solution
  • 100 records required for a day of calling at £0.35 a contact from Corpdata = £35/day
  • Likely out come of 1 qualified lead from 100 ‘telephone lifts’ (calls made including no connections, voicemails etc.), but a likely 35 ‘meaningful conversations’ (discussion with the correct person where you can realistically determine their need and ability to buy)

Web advertising (banner) — CPL £30 – £50
Here I am talking aboout the sort you see as banners along the top and down the side of websites.  I have contacts into a media buying agency who represent a number of information technology vendors that work this way and will pay a pretty penny for the details of someone who has submitted their details as an information request, request for trial or demo or somesuch.  Qualified lead?  You can’t be sure they have an explicit need which is motivating them to fill out a form, but this method is likely to produce a conversion rate higher than many of the rest.  Above is a typical example of what companies pay a supplier of leads from a banner on their site when sourcing through a media buyer.

Web advertising (affiliate) – N/A
We have taken a look at a few affiliate programmes, such as SilverTap, and they tend to work by paying a commission on sales generated from clicks to a website — you’ll have sent them over through a special URL behind a banner.  There is typically no cost to join such schemes and 10% commission is fairly typical on a sale, but because it’s tough to attach a specific value to this — and also because in all other methods we’re looking at CPL not Cost Per Sale, we can’t factor this in.

Web advertising (Google Adwords) — CPL £21.50
This is a far more common way of winning leads for most small businesses because it’s so easy to implement.  You go to Google, enter the text for a banner and then state which search terms you want it displayed against.  It shows you what each will be worth.  Marketing research firm Efficeint Frontier suggests (source information at the bottom of this article) an average Cost Per Click from Google is $0.72 (that’s £0.43 in old money) and we’ve had some agreement from others on our assumed conversion rate from clicks to enquiries.

  • Typical cost per keyword £0.43
  • Typical rate of clicks to enquiries of 50:1

Email marketing — CPL £179
This method feels like one of the cheapest and it’s no wonder it’s used by so many small businesses, as an email costs just pennies to send.  For our figures here we have factored in the cost of the data again and the cost per mail (typical) of using VerticalResponse, one of the leading email marketing solutions.  No doubt there are ways of getting emails cheaper by using less reputable services and by buying in volume, but we’ve assumed here buying in and mailing out to a quality list of 5,000 contacts.  Note that once the contact list is purchased that is typically reusable many times over the year, reducing the CPL as more opportunity comes from the existing data.  We’re also assuming not ALL click through swill turn into enquiries, but that 1 in 10 will — a higher conversion rate than Adwords because the list will have been part qualified when selected and the email would have better described what’s on offer than a small display ad.

  • 5,000 records at £0.35 a contact from Corpdata = £1,750
  • 5,000 email credits in VerticalResponse at $60 = £35.72
  • Typical click through rate of 2% = 100 website visits
  • Typical rate of clicks to enquiries 10:1

Twitter Sales Leads tool — CPL £1
Now I accept we are yet to go live and get any real stats confirmed by customers, but we have been running the Twitter Sales Leads tool in test for a couple of weeks and several of our users have confirmed they have seen a typical list of 60 – 90 leads popping up in the results.  Our own research shows that one you take out duplicates caused by retweets, inexact keyword matches etc. then this total list probably comes down to somewhere around 20 – 30 leads that you’d respond to and probably create as Sales Leads in your WeCanDoCRM Social CRM system so you can track through to a sale.

Conclusion
Perhaps it’s predictable we’d come out on top of the comparisons above, but we believe it is still a worthwhile and accurate comparison of the vearious methods open to win new business.

And let’s face it, we wouldn’t be adding Twitter Sales Leads if we didn’t think it represented a great way to grow your business online!

As always, we welcome your comments to just post a reply below, especially if you disagree with any of the above calculations and can provide alternative stats.

UPDATE: We’ve updated the above with new Cost Per Click stats for Google Adwords based on figures produced by Efficeint Frontier (source data here and here) sent in to us by Dan of PPCAdSolutions. Thanks Dan!

We’ve had someone from the Adwords world step forward to help improve our calculations, how about representatives from telesales/telemarketing and the other methods we mention assisting us to update our cost comparison?  Don’t be shy!

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COMING SOON: Twitter sales leads! Salesforce.com Chatter – SECOND to do private business Twitter linked to CRM

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