What is lead generation?
If you haven’t been living in a cave, you’ve likely heard of (and executed) lead generation. In fact, 53% of marketers are spending at least half of their budget on lead gen. Are they spending that budget well? That’s up for debate.
Before we dive into how to create and optimize your lead generation marketing budget, let’s make sure we’re all on the same page.
Lead generation is the marketing-led process of driving potential customer interest in a product/service, then collecting lead data (like name, email, phone number…) to support sales efforts.
Successful lead generation programs are built through a partnership between sales and marketing to drive more quality leads over time. There is a cost to generating quality leads, and it should be less than the value of those leads to ensure ROI. So how do you figure all this out? Let us help you crunch the numbers.
The Struggle is Real
According to the State of Inbound 2018 Report, 61% of marketers believe their top marketing challenge is generating traffic and leads. Even as marketers struggle, businesses continue to invest more money into lead generation. 53% of marketers allocate more than half of their budget to lead generation. Like, we know we need to spend money on this to make it work, so just throw some more $$ at it… that’ll work, right?
The extra budget certainly can help with reach, and allocating an adequate budget to lead gen is very, very important. But how can you actually see a return on your lead generation budget? Budget planning, guys! Let’s dive into how to create a lead generation marketing budget.
3 Steps to Lead Generation Budget Planning
1. Before you think cost – strategize
Any good lead gen budget – or any budget for that matter – should start with a strong strategy. If you’re pressured to drive leads quickly, it can be tempting to skip a strategy and go straight into executing some things you think will work, like landing pages and digital ads. But this mistake can end up being costly and take more time in the long run to reset. Starting with a well-planned lead generation strategy is the best plan.
When building a lead generation strategy the main areas you want to focus are: people, process, and technology. People – who are you trying to reach? And I don’t just mean “customers”. Spend some time and really think about your buyer personas. Some key questions to ask are:
Who are our customers? Or who do we WANT to be our customers?
What do our customers say is the value we bring to them?
Where do our customers currently come from?
What does our customer journey look like?
Process – how are we going to reach and resonate with our potential leads? Think about the type of content that will catch your leads’ attention and truly help them solve a problem they may have, and where to put that content. There are a number of ways to generate leads, and without going into too much detail on the topic (stay tuned… I sense another blog post coming), we always think about tactics like paid media, organic social media, SEO… Then, think about how you’re going to turn those marketing qualified leads into sales-ready leads.
Technology is your friend. It is wise to invest in a marketing automation platform like Pardot for lead generation (and lead nurture). Marketing automation will make your programs more efficient and effective. Though there is a cost associated with this technology, it will pay off in the end when you’re able to drive more leads and nurture them to support sales.
2. Now set your goals
As a wise person once said, “If you don’t know where you are going, every road will get you nowhere.” This is true in marketing strategy as well. One of the most important steps to planning a lead generation budget (and knowing where you’re going) is setting achievable goals.
To set an achievable number of leads, reverse engineer your thinking and start with your revenue goals. Work backward and think about your average deal size and sales close rate to understand how many deals sales needs to close to reach your revenue goal. Then, think about what percentage of revenue you want marketing to be responsible for. That will help you determine how many inbound leads marketing needs to generate to help sales close enough deals to meet your revenue goals. Here’s a very helpful lead gen calculator that you can play with to get the numbers.
3. Lastly, estimate cost
a. Calculate the cost of driving traffic to your landing page.
Landing pages, complete with a Pardot form that gates an asset, are how you will capture lead information. But you need to drive enough traffic to your Pardot landing pages to reach your lead goals. You’ll likely use a combination of paid, earned, and owned media to promote your lead pages, so you will need to invest some spend to drive traffic there. Here’s how to figure it out:
The average conversion rate for a landing page is 2.35%. To determine how many landing page visitors you need to generate enough leads, take it back to everyone’s favorite middle school math problem. Multiply your lead goal by 100, then divide that number by 2.35 to get the number of visitors you need to drive to your landing page.
Now that you know how much traffic you need to drive, check out your Google Analytics – how much do you need to boost your average traffic? That will give you a good starting point to estimate how much to spend on ads, influencer marketing, and other tactics to drive traffic to your landing page.
b. Calculate your average cost per lead and lead value.
The average cost per lead varies greatly depending on a few things like the industry, the target customer, and the competition. Depending on the sources you check, you will see numbers are all over the place. Here’s a great resource for several industry averages.
Having a cost per lead that you’re comfortable starting with is great. However, it’s not only important to estimate cost per lead, but also to understand your Return On Investment (ROI). You always want to ensure that the value of your leads is higher than the cost. Here’s a simple way to think about it:
To determine the cost per lead, divide the total estimated cost of your lead generation strategy and divide it by your lead goal.
To determine the lead value, take your average deal size and multiply it by your average conversion rate.
This groundwork does take some time to develop. But we’ve seen that it’s more than worth the time to have a strong plan, goals, and a budget in mind before starting any lead generation strategy. Our clients are much more successful when a lead generation plan and budget are in place.
Have you used some of these ideas to plan your lead generation budget? Let me know on Twitter! Not sure where to start? Our team is full of strategic lead generation experts as well as Pardot consultants to help get it all done! Reach out and we can help you get on the right path.