How to get lead generation pricing right (+ examples, benchmarks + formulas)

The lead generation process is like a Rubik’s cube – you have to go through many iterations (channels, budget allocations, etc.) before getting the result you want. But it can be done with analysis, patience – and some smart spending moves. Read on to learn about defining and refining lead generation costs.

What are lead gen costs?

Lead generation costs are the expenses you incur when trying to find potential customers.

These expenses include:

• Digital marketing ads e.g. PPC, social media.

• Sponsored posts, influencer partnerships, or paid search engine advertising.

• Lead gen tools and software like customer relationship management (CRM) systems, marketing automation software, lead generation platforms, and analytics tools.

• Creating and maintaining a good website.

• In-person events or trade shows.

• Employee remuneration for sales and marketing teams.

• Offline marketing costs such as direct mail campaigns or print advertising.

• High-quality content such as blog posts, ebooks, webinars, videos, whitepapers, and other lead magnets

Click to read The practical guide to long-form lead generation

What impacts the cost of lead generation?

Many factors can impact how much lead generation costs. Some of them you can control, others you can’t.

Internal factors

Target audience
Understanding your audience’s behavior and preferences can impact the cost of reaching and engaging them.

Choice of lead generation methods
Depending on what methods you pick, you may be paying more for lead generation.  Paid advertising, content marketing, email campaigns, or social media, all vary in cost.

Quality of leads
Higher-quality leads may require more tailored and costly strategies to attract and convert.

In-house vs. outsourcing
Your choice of handling lead generation in-house or outsourcing it to agencies can impact costs.

Technology and tools
Investments in lead generation software and analytics tools can add to the overall expenses  – but it’s worth noting that these investments can have high ROI and significantly streamline your lead generation process.

Content complexity
If you choose to create more complex content, such as video production, this can raise your lead gen costs.

Testing and optimization
Continuously testing and optimizing lead generation campaigns may require ongoing expenses.

External factors

Industry
Highly competitive industries may require more significant investments to stand out.

Geographic location
Costs can vary based on the geographic area you’re targeting. Advertising in highly populated areas may be more expensive.

Competition
The level of competition in your industry or niche can affect ad bidding and overall campaign costs.

Regulations
Compliance with data privacy and advertising regulations can lead to additional costs for legal and compliance considerations.

Understanding how these factors interact and making informed decisions regarding your lead generation strategy can help control and optimize your lead generation costs for better results.

Common lead generation pricing models

Lead generation providers offer various pricing models to cater to the diverse needs of businesses. Common lead generation pricing models include:

• Pay-Per-Lead (PPL). Businesses pay a fixed fee for each generated lead. It’s a performance-driven model, ensuring that costs align with actual results. PPL is often preferred in B2B industries where lead quality is paramount.

• Pay-Per-Click (PPC). Paying a fee each time a user clicks on an ad. While commonly associated with online advertising, it’s a critical component of digital marketing and lead generation efforts.

• Cost-Per-Action (CPA). Charges when a specific action is taken, such as form submissions, appointment bookings, or purchases. Its flexibility makes it adaptable to various lead-generation campaigns.

• Subscription-based. Regular monthly or yearly payments for access to a standardized lead generation service. Often seen in software-as-a-service (SaaS) companies providing lead generation tools.

• Retainer-based. An ongoing, pre-agreed fee for continuous lead generation services. Often customized and may vary based on the specific lead generation services required. The client retains the service provider for their expertise and continuous support.

• Fixed price. Paying a pre-negotiated sum for specific lead generation services or campaigns. This pricing model suits one-time projects or services. The cost is agreed upon in advance and does not change, regardless of the quantity or quality of leads generated.

• Bulk data purchasing:Paying for leads from a pre-existing database. Pricing tends to be based on the quantity of data purchased, with discounts for larger volumes. Typically, agencies charge less for bulk data purchasing because the leads are very low quality, so they’ll have a low conversion rate. This model enables businesses to quickly expand their lead database. However, data quality, accuracy, and compliance with privacy regulations may suffer with this approach.

• Hourly rate. Certain agencies charge hourly rates for lead generation services, particularly when tasks involve research, data collection, or strategy development.

• Revenue share. The lead generation service takes a percentage of revenue generated from the provided leads. This aligns the service provider’s interests with the client’s success.

• Tiered pricing. Various pricing tiers are based on lead volume or quality. Businesses select the tier aligned with their specific needs.

• Hybrid models. Combines elements from multiple models. For example, a subscription fee for platform access (subscription-based) may be combined with a pay-per-lead fee (PPL) for qualified leads.

• Custom pricing. In some cases, businesses negotiate custom pricing models with lead generation service providers to meet unique requirements and goals.

Your choice of pricing model should reflect your objectives, budget, and business nature.

How to calculate cost per lead (CPL)?

Calculating your cost per lead (CPL) is essential for evaluating the efficiency and cost-effectiveness of your lead generation efforts. To determine CPL, follow these steps:

Calculate your total lead generation costs

Start by adding up all the expenses associated with your lead generation campaign. This includes advertising costs, content creation expenses, software subscriptions, salaries of the team involved, and any other relevant costs.

Add up the total leads generated

Count the number of leads your campaign has produced during the period you’re analyzing.

Use the CPL formula

Divide the total lead generation costs by the total number of leads generated. The formula for calculating CPL is:

CPL = Total Lead Generation Costs / Total Leads Generated

For example, if you spent $5,000 on your lead generation campaign and obtained 500 leads, your CPL would be:

CPL = $5,000 / 500 leads = $10 per lead

This means that it costs you $10 to acquire each lead through your campaign. Understanding your CPL helps assess whether your lead gen efforts are flying high or falling flat. If your CPL is too high, you may need to optimize your strategy to reduce costs or improve lead quality to ensure a better return on investment. On the flip side, if your CPL is low, it indicates a cost-effective campaign and a potentially higher ROI. (This is the point where you can pat yourself on the back.)

What is a good CPL target?

In all honesty, there’s no one-target-fits-all figure. It can vary widely depending on your industry, business model, and specific goals. What constitutes a ‘good’ CPL target is relative and should be determined based on factors such as your budget, customer lifetime value, and industry benchmarks.

Generally, a good CPL allows you to acquire leads profitably while maintaining a positive return on investment (ROI).

For some businesses with high-value products or services, a higher CPL may be acceptable– as long as it leads to qualified and high-converting leads. In contrast, businesses with lower-margin products or services may need to aim for a lower CPL to ensure profitability.

Industry and channel benchmarks help to determine a ‘good’ CPL for your business, (see tables below), but remember that your unique circumstances and strategies play a significant role.

Average CPL by marketing channel

B2B sales engagement platform Sopro released data in 2023 showing the ultimate average cost per lead for each B2B channel. Its study is based on Sopro data from its marketing and finance team; over 15,000 client email campaigns, input from ‘new robot overlords’ (OpenAI’s ChatGPT), and 42 different studies and data (as many sources as it could find).

While this data offers a general idea of what to expect in terms of CPL for each channel, be mindful that CPL can vary widely within each channel based on campaign specifics, targeting, and other factors. Effective CPL management involves fine-tuning your strategies and optimizing targeting to achieve the best results for your specific goals and industry.

Average CPL by industry

Sopro also provided 2023 data that looks at the cost per lead by industry.

Again, be mindful that numerous factors can impact how these figures vary, such as market conditions, specific business strategies, and geographical location.

Businesses should analyze their own CPL data to establish more accurate benchmarks and make informed decisions about customer acquisition strategies.

You can view the full findings (plus processes, sources, etc.) from Sopro here.

How to set your lead generation budget

Define your goals

Begin by clearly outlining your lead generation objectives. Determine the number of leads you want to generate and the time frame within which you want to achieve them. This will serve as the foundation for your budget.

Know your customer acquisition cost (CAC)

Calculate the average cost to acquire a customer by dividing your past sales and marketing expenses by the number of new customers acquired. This helps you set a baseline for your lead generation budget.

Identify your lead sources

Different lead generation channels have varying costs. Whether it’s online advertising, content marketing, email marketing, or trade shows, consider the most effective channels for reaching your target audience.

Allocate resources

Based on your CAC and lead sources, allocate a portion of your marketing budget to lead generation. Be realistic about what you can afford and how much you need to spend to achieve your goals.

Testing and optimization

Be prepared to adjust your budget as you gather data. Test different lead generation strategies and allocate more resources to the ones that deliver the best results. And make sure to have defined lead generation KPIs to see how you’re measuring up. This iterative process will help you optimize your budget over time.

Consider the lifetime value (LTV) of a customer

Understanding the long-term value of a customer can justify a higher lead generation budget, especially if your business model relies on recurring revenue.

Monitor ROI

Continuously assess your lead generation efforts’ return on investment (ROI). If a channel or campaign isn’t producing results, consider reallocating resources to more effective strategies.

Flexible, scalable lead gen budgets

Ensure your budget is flexible enough to adapt to changing market conditions and is scalable to accommodate growth.

In a nutshell, set your lead generation budget by aligning it with your specific goals, CAC, and chosen lead sources. Be prepared to adjust and optimize your budget based on real-time data and evolving business needs.

1. Tech / SaaS business lead gen cost

Business
A B2B SaaS company that provides project management software for small and medium-sized enterprises (SMEs).

Goal
Acquire 1,500 leads per month to increase sales and subscriptions.

Customer Acquisition Cost (CAC)
The historical CAC analysis reveals that the average cost is £300, which includes marketing and sales expenses.

Lead generation channels

• Content marketing. The company invests in creating blog content, ebooks, and webinars to attract organic traffic and educate potential customers.
• PPC advertising. It runs pay-per-click ad campaigns on platforms such as Google Ads to target SMEs searching for project management solutions.
• Email marketing. The company maintains an active email list and runs targeted email campaigns for lead nurturing purposes.

Budget Calculation
The annual budget for lead generation is £300,000 (£300 CAC x 1,500 leads per month x 12 months).

Customer Lifetime Value (LTV)
The company estimates the LTV of a customer to be £3,000 over three years. This justifies the CAC as the long-term value of a customer is substantial.

ROI monitoring
The company regularly reviews ROI for each channel and tracks the cost per lead, ensuring it aligns with its budget and revenue goals.

Flexible and scalable
The budget is flexible to accommodate shifts in channel performance and scalable to handle an increase in lead generation goals if the business experiences rapid growth.

2. Financial services lead gen costs

Business
A financial advisory firm specializing in retirement planning and wealth management services.

Goal
Acquire 100 qualified leads per month to increase client acquisition.

Customer Acquisition Cost (CAC)
The historical CAC analysis reveals that the average cost is £2,000, including marketing and sales expenses.

Lead generation channels

• Content marketing. The company invests in creating high-quality blog content, whitepapers, and webinars on retirement planning and financial advice.
• Pay-Per-Click (PPC) advertising. It runs Google Ads campaigns targeting keywords related to retirement planning and wealth management.
• Social media advertising. The company uses social media platforms to reach its target audience and promote its services.
• Seminars and workshops. It conducts monthly retirement planning workshops and invites prospects to attend.

Budget calculation
The annual budget for lead generation is £240,000 (£2,000 CAC x 100 leads per month x 12 months).

Customer Lifetime Value (LTV)
The company estimates the LTV of a client to be £20,000 over ten years, justifying the CAC because of the long-term value of a client.

ROI monitoring
Again, ROI is tracked closely for each channel. The business reviews the cost per lead to ensure it aligns with its budget and revenue goals.

Flexible and scalable
As always, the budget is designed to be flexible, allowing for adjustments based on channel performance. It’s also scalable to handle increased lead generation goals if the business starts growing.

3. Professional services lead gen

Business
A law firm specializing in family law, estate planning, and probate services.

Goal
Acquire 50 qualified leads per month to increase client acquisition.

Customer Acquisition Cost (CAC)
The historical CAC analysis reveals that the average cost is £5,000, including marketing and sales expenses.

Lead generation channels

• Content marketing. The firm invests in creating informative blog content, legal guides, a podcast, and webinars on family law and estate planning topics.
• Pay-Per-Click (PPC) advertising. It runs Google Ads campaigns targeting keywords related to family law, estate planning, and legal services.
• Social media advertising. The firm uses social media platforms to reach individuals seeking legal advice.
• Referral network. Building and maintaining relationships with other professionals, such as accountants and real estate agents, to receive referrals.

Budget calculation
The annual budget for lead generation is £300,000 (£5,000 CAC x 50 leads per month x 12 months).

Customer Lifetime Value (LTV)
The firm estimates the LTV of a client to be £20,000 over ten years, justifying the CAC – again, due to the substantial long-term value of the client.

ROI monitoring
Close tracking of ROI, reviewing its CPL, and ensuring all is aligning with its budget and revenue goals.

Flexible and scalable
As per the last two examples, its flexible budget allows for adjustments based on channel performance and offers scalability should the business start growing.

Ensure your pick-and-mix lead gen activities align with your business goals, audience, and industry. Most importantly, track your results, refine your activities, and reallocate your lead gen budget – investing more in what’s sending the best quality leads your way. Generating higher-quality leads will reduce your overall costs – so make sure to prioritize quality leads over quantity every time.

Also, make sure to budget for both short and long-term lead gen activities as part of your overall strategy. Organic leads take time but are worth the effort (and patience!).

We’ve put together a free guide, where we teach you all about inbound lead generation – a game changer for audience engagement and quality lead capture. Check it out ⬇️