Inbound Growth Blog

What Does Lead Generation Cost?

Written by Emma-Jane Shaw | Jun 14, 2022 6:15:11 AM

We all know the adage: “You have to spend money to make money”.

And while that’s certainly true, it would be helpful to know how much you have to spend before you can expect to start seeing results, right?

Not only will this help you plan and budget accordingly but being able to scope an initiative’s costs and ROI beforehand is a crucial component of getting the go-ahead – and funds – for a project.

More importantly, it will help keep you from overspending - a nail in the coffin of any business. Especially on marketing, a mistake many small businesses make.

This is particularly true of lead generation where the goal, ultimately, is to convert as many prospects as possible into paying customers for the lowest possible cost to maximise ROI.

Which brings us to the question; “What does – or better put, should – lead generation cost you?”

Now, we want to be clear from the start - there is no single amount we can provide here as an answer for all (no one can). There are simply too many variables that can affect a company’s lead generation cost. But what we can do is help you understand exactly what factors, from a marketing perspective, influence the cost of lead generation and provide you with an overview of pricing in general so that you can get a better idea of what you are in for and whether you are overspending or not.

Let’s start...

What does lead generation cost?

The cost of generating a lead differs quite a lot between industry sectors and companies, depending on a variety of factors such as business type, length of the sales cycle and marketing channels and tools used (more about all of this a bit later).

On average, the cost of generating a lead in 2020 was a whopping $198 per lead.

Per industry category, it looked like this:

Image source: Popupsmart

For 2022, costs are estimated to climb and fall in the below ranges depending on industry and marketing channel.

Some projected industry benchmarks include:

Images source: Linchpin SEO

Per marketing channel, costs are estimated to range from a low $14 for SEO to a staggering $1 200 for traditional advertising channels.

Image source: Linchpin SEO

Apart from industry and channel, one of the factors that will have the biggest influence on how much your lead generation cost is the number of leads a marketing campaign generates. It’s simple maths, really: the more leads you generate, the lower the cost per lead as the input costs are divvied among more heads.

Image source: Cognism

Your cost-per-lead (CPL) data is an important metric to know as it will help you understand what you spend to convert a prospect into a lead. That’s because if you spend too much, the cost of acquiring a customer may not actually be worth it. Take this example, from HubSpot, for instance:

Let's say you put $5,000 into a Google Adwords campaign, and it generates 50 new leads. In this case, your cost per lead for the campaign would be $100.

Determining whether that figure is solid or less-than-stellar hinges upon factors like your industry, company size, annual revenue, marketing budget, and the cost of your offering. If your product or service sells for $50, then a CPL of $100 won't do too much for you — but if it sells for $5,000, you'll probably be in a better place.

As you can see, there really are quite a few variables that can affect the cost of lead generation. Let’s take a closer look at the most important ones.

What affects the cost of lead generation?

I know, you already know this but, like anything, the cost is dependent on a number of things.

Here’s what goes into the creation of a lead generation campaign and the rough costs associated with it:

  • Strategy
  • Software (including potential development work)
  • Content creation
  • Paid media (Social media + Google)
  • Agency vs in-house

Let’s dive into each of these in a little more detail:

What does a lead generation strategy cost?

You need a strategy to make sure you’re executing according to a plan and to help your business achieve its goals.

A lead gen strategy comprises of the following:

A strategy workshop. This is to unpack your overall objectives and can include as little or as much as the following:

  • Unpacking your goals and objectives.
  • Buyer persona research.
  • Detailed competitor research.
  • Website analysis to situate your market positioning.
  • Topic and keyword research.
  • A distribution plan. This can include both organic and PPC plans.
  • 6 - 12 months' worth of content and campaigns laid out.

This process is used to help determine what campaigns and messaging will help best position your brand in the market. This will, of course, vary depending on your specific set of goals. A session like this can start anywhere from $4000.

*To note: The above excludes the execution of the above strategy.

What do lead management tools cost?

What software do you need to successfully execute a lead generation campaign?

You absolutely need some sort of lead capture software to monitor all the incoming leads your business is getting, as well as the performance of your lead gen campaigns.

There are a number of tools you can use, each of which has its own costs associated with them.

But before we get into pricing I want to differentiate quickly:

Lead management software vs a CRM system:

These are two different systems that certainly overlap in some ways, but are designed for different purposes.

Lead management software is, of course, used to manage and capture your leads. It should track all lead activity and have lead scoring functionality to help your team determine sales-readiness.

On the other hand, a CRM (Customer Relationship Management) can track the entire customer lifecycle pre and post-purchase. It also has the ability to house all of your campaign elements giving a holistic view of your campaign’s performance in relation to leads generated and where they are within their buying journey with your brand.

Okay, now that’s out the way, let’s get down to the brass tax of it all:

Lead generation software such as ZenDesk Sell costs anywhere from $9 - $99.

Image Source: ZenDesk

ZenDesk has pulled together a great list of other lead management tools and their pricing options if you’re wanting to do some more research.

Now if you’re looking into CRMs, as an option for your business, that pricing looks slightly different.

Because we are HubSpot Partners, HubSpot is the CRM software we highly recommend. It’s a marketing and sales-focused CRM that has the ability to house all of your campaign assets from landing pages to email automation and ads that you can easily track and report on from within the tool. It also, of course, houses all lead activity in a central database.

Read more: How Top Carpets and Floors increased leads by 150% and reduced costs by 94% with Inbound Marketing and HubSpot.

But what does that cost?

They have various paid packages that are tiered based on feature differences. This ranges from $50 per month to $3 200 per month.

We also went ahead and wrote a comprehensive piece on a range of different CRM systems along with their pricing if you’re looking to find out more.

What does content creation cost?

This is probably my favourite conversation to have, it’s one of those “how long is a piece of string” chats.

To effectively launch a lead generation campaign you will need the right content to attract your audience. This could be anything and everything from:

  • eBooks
  • Blogs
  • Videos
  • Templates and checklists
  • Design: Ads, eBooks, Landing Pages, Emails
  • Email
  • Landing pages

That list is by no means comprehensive. Your strategy would have determined what elements you require to launch your lead campaign.

If you have a content team and designers in-house, then you already know what that costs. According to Indeed, if you’re thinking about hiring for those roles you can expect to pay the following:

  • Graphic designer - According to Glassdoor the average salary for a designer is $69 419 per year.
  • Developer - According to Indeed, the average salary for a web developer is $67 717 per year.
  • Copywriter - According to Indeed, the average salary for a junior copywriter is $45 414 per year.
  • Content manager - According to Indeed, the average salary for a content manager is $61 326 per year.

That’s if you decide to hire in-house.

But you can also look at outsourcing some of this to freelancers or content creation services for slightly cheaper rates.

According to UpWork, a popular freelancing platform:

Another option could be hiring content writing services such as Verblio or Scripted, which can cost anything between $35 - $1 800 depending on what and how much content you require.

You can also look at outsourcing to an agency where they can manage your entire campaign from start to finish. This starts at roughly $4 000 and can go upwards depending on the depth of the strategy that was defined.

It’s worth noting that all the above pricing will vary according to the type and quality of content you require. Should you be in a more technical industry you might need to look at hiring industry experts to create your content which naturally will cost more. If you’re in a more accessible industry such as travel and hospitality, you’re able to hire copywriters at a more general fee.

Read more: Find out how we helped Oticon reduce its lead acquisition costs from R117.35 to R46.80 per lead with targeted marketing campaigns.

What does paid advertising cost?

According to Top Draw, who analysed the average cost for every major online advertising platform and broke it down by average CPM (Cost Per Thousand) and Cost Per Click (CPC):

Image source: Top Draw

But let’s take it a step back for a moment...

With a clearer idea as to what online advertising can cost, its important to factor in a few things here first:

  • There will be a fee added for ad account set-up if this is not already been done.
  • What will your ad spend be?
  • If you’re hiring a PPC/digital agency to run your paid media what is their management fee? This will be over and above your ad spend.

That means that you need to budget for both the managed fee as well as the paid media spend. So for example; if you want to spend $10 000 on Facebook advertising, you would then still need to factor the managed fee onto that.

In our experience, this is a much harder activity to manage in-house, so we’d recommend the use of a PPC specialist or an agency to run your paid media campaigns.

Hiring a PPC agency can cost you anywhere between $250 to $5,000+ per month. Other agencies, like ours, charge a percentage of the overall ad spend.

What does lead generation cost to do in-house vs hiring an agency?

This is really about understanding what resources and skillsets you have in-house. If you already have a content manager, lead gen software or a CRM that your company is proficient in using, and you’re comfortable with the PPC mechanisms and achieving results with them then running a lead gen campaign in-house will make a lot of sense for you. It’s then perhaps more about coming up with campaign ideas that drive results for you.

But...

If you do not have any of the above, you need to assess whether it’s worth your while outsourcing your lead gen activities. And if that’s the case what can this set you back?

Again, it depends on what you require.

Do you require software, a strategy, a campaign (including design, campaign architecture, PPC setup and creative)? If yes, then you’re looking at hiring a full-service digital agency, similar to ours.

We run on two models as do many agencies:

  • A full inbound retainer tailored to your needs. This can cost anywhere from $4 000 - $10 000 per month.
  • A cost per lead model. This can start from $39 and move upwards depending on the type of leads your business requires. Sales Qualified Leads (SQLs), for example, cost more than top of the funnel leads who require tactical nurturing before becoming sales-ready leads.

This, of course, can fluctuate depending on your industry and your growth goals.

So, what is a good cost per lead?

This is another of those zingers that have no right or wrong answer. As HubSpot notes:

“There's no definitive, "be-all, end-all" CPL figure that any business can look to as a reference point for a marketing campaign's optimal efficiency. Your ideal cost per lead will vary based on several factors — like your industry, competitive landscape, target audience, company size, annual revenue, marketing budget, and the cost of your offering. CPL also tends to fluctuate based on the channels you use for your marketing efforts.

Figuring out what a "good cost per lead" looks like essentially amounts to "feeling it out." If you're finding that your cost per lead for a given channel is disproportionately high relative to how well those leads convert, you might want to reevaluate whether that strategy is actually worth it.”

Key takeaways

Apart from the variables discussed above, factors such as leads generated (a KPI you should set at the start of any marketing campaign as part of a set of SMART goals), the channels you choose, at what stage of the buyer’s journey your prospects are, how long the campaign is active for and the price of your product or service can all affect your lead generation cost.

So you see, there's no one-size-fits-all answer to the cost of lead generation but we hope this gives you an idea of what you could be in for.

When deciding on a lead generation campaign, you need to factor in all variables and understand what the results of such an investment might be (I know we didn’t dissect this here, but we have this content in the pipeline).

At the end of the day, understanding all these figures as they relate to launching a lead generation campaign for your business is essential to planning lean yet effective marketing campaigns.

If you’re looking to accelerate your business's growth through effective lead generation campaigns, then get in touch now. Click 👉 here to see how we can supercharge your lead generation today.