The short answer
Take what a customer is worth over the life of the relationship, multiply by the share of qualified leads that become customers, and multiply again by the share of raw leads that qualify. That is what a raw lead is worth, and what you can afford to pay.
Most businesses judge campaigns without this number, which means they are comparing cost per lead against a feeling.
Work backwards
- What is a customer worth, including repeat business, less delivery cost?
- What proportion of qualified leads become customers?
- What proportion of raw enquiries are qualified at all?
- Multiply through to get the value of a raw lead.
- Decide what share of that you are willing to spend to acquire one.
Step three is the one people omit and it has the largest effect. Campaigns producing plenty of cheap leads that never qualify look excellent on cost per lead and lose money.
Lead quality is the hidden variable
| Campaign | Cost per lead | Qualified rate | Cost per qualified lead |
|---|---|---|---|
| A | Low | Low | Can be the worst |
| B | High | High | Can be the best |
This is why cost per lead alone misleads. You need the qualification rate per campaign, which means recording where each enquiry came from and what happened to it.
Track through to the outcome
Capture the source with every enquiry and record what happened: qualified or not, quoted, won or lost. Without that chain, you can optimise only to the top of the funnel.
This does not need a large system. A consistently completed field in whatever you already use is enough to answer the question.
Be honest about the sales cycle
For services with a long consideration period, today's spend produces enquiries over months. Judging a campaign on the first fortnight measures the wrong window.
Decide the realistic window before starting, and hold to it rather than switching campaigns off at the first quiet week.