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The 3 Basic Metrics to Lead Generation Campaign Budgets

Chris Sullivan

November 5, 2014
Chris Sullivan

The key step toward making anything great, be it a house, a retirement plan, a weight loss program or a marketing campaign, is laying a solid foundation. If your foundation is strong, the chances for long-term success increase exponentially. However, if your foundation is shaky, you’ll spend more money and time making repairs and adjustments. Or even quit all together.

When it comes to marketing and building a lead generation campaign, there are three basic metrics that marketers need to establish and benchmark: cost-per-lead (CPL), cost-per-acquisition (CPA) and lifetime value (LTV).

  1. CPL: Knowing the historical cost to generate a lead is one of the most important metrics that marketers need to learn. When you understand these costs, you can start to segment leads by marketing or media tactics. And when you track a lead through to a “sold” and a recurring customer, you can really start to optimize your marketing investments.
  1. CPA: When marketers have the ability to track lead’s close rate percentages, they’re now able to track the cost to acquire a customer. Simple math tells us that if a lead costs $100 and you close 1 out of 5 leads (20%), your cost to acquire a customer is $500. Once you benchmark this metric, you can start asking some good questions, like what steps you can take to improve your close rate.
  1. LTV: Understanding the lifetime worth of a newly acquired customer is imperative when establishing campaign goals. When you know a customer’s average amount of purchases or average number of years of service, you have the ability to project the total marketing return on investment. If your CPL is $100, your CPA is $500, but your average customer spends only $550, is it worth it? Would you change your mind if you knew that 50% of your customers average 5 years of service or make 20 purchases? Understanding the LTV of a customer is crucial to making smart marketing decisions.

Once a marketer establishes and benchmarks these three metrics, the fun really starts and you can begin with creative process…but that’s another story.