"Why cost-per-lead budgets fail and fewer leads are better"

Brian Carroll put up a post that aligns perfectly with my own thinking on why “cost per lead” marketing goals and budgets can be misleading at their best, and downright dangerous at their worst.

In case you think I’m implying that calculating the cost per lead isn’t helpful – no, tracking cost per lead metrics can be useful as just one of many useful metrics. The problem is when cost per lead influences budgeting or purchasing behavior too strongly; then it becomes damaging. Simplistic cost per lead goals incent marketing teams to buy mass quantities of lower quality leads with lower close rates, rather than investing in sources that might generate fewer leads over more time but with higher close rates.

In addition to cost per lead, lead sources should be evaluated for quality metrics:
* lead-to-opportunity conversion rates / “cost per opportunity”, and
* opportunity-to-close conversion rates / “cost per dollar of bookings”

Brian’s post:

“A reader asked me to explain why fewer leads are better and why “cost-per-lead” budgets fail. These are two great questions that have the same fundamental answer: quality first then quantity.

The truth is that sales people care very little about the cost of the leads we generate. What they really care about is how many of those leads will actually become viable sales opportunities.

For this reason, I think cost-per-lead measurements are irrelevant unless we can answer another fundamental question first, “What is our rate of lead acceptance (a.k.a. sales pursuit) into the sales pipeline” and then “What is the cost per opportunity?”

Sadly, I find that a lot of marketers tend focus on cost-per-lead because they really don’t know what happens to their leads after they hand them off to their sales team…”

Read on: http://blog.startwithalead.com/weblog/2008/03/why-cost-per-le.html