Measuring DM results: Cost Per Qualified Lead.
By Alan Sharpe
Cost Per Qualified Lead measures how much you must spend
to attract one qualified lead. Remember that anyone who
responds to your offer is called an inquiry. But not all
inquiries are qualified to buy. Not all become customers.
My definition of a qualified lead is someone who meets
four criteria:
- Need: They need your product or service
- Authority: They have the authority to buy
- Budget: They have the budget to buy
- Readiness: They are ready to buy now
Anyone who meets some of these criteria but not all is
simply a lead that needs to be cultivated. This process
is called lead development.
Not every qualified lead will buy. Cost Per Qualified Lead
simply measures how much you must spend to generate a
qualified lead from among all the people you target with
your mailing.
Typical costs include the expense of the mailing (list rental,
printing, writing, design, postage) plus any costs you incur
in qualifying each lead. These qualifying costs include
telephone and email follow-up, and fulfilment costs if you
must mail the inquirer something before you can qualify them.
If you need a face-to-face meeting before you can qualify a
lead (not recommended because of cost), add that cost as well.
One thing to bear in mind is that you will not likely qualify
each inquiry. Some will be on vacation, others in meetings,
others on trips. And of those that you do reach, a majority
will usually not be qualified (they will lack a need, or the
authority to buy, not have the budget, or not be ready to
buy now).
The industry average for reaching inquiries to qualify them
is 70%. In other words, of those inquiries that you want to
qualify (by phone, lets say), you will reach 70%. The average
qualification rate is 20% (20% of those reached will turn out
to be qualified leads).
Here’s how you calculate your Cost Per Qualified Lead.
Number of pieces mailed (for example): 10,000
Response rate: 1%
Number of inquiries: 100
Number that you manage to reach by phone to qualify: 70
Cost of qualifying by phone, per inquiry: $30
Number who turn out to be qualified leads (20%): 14
Total cost of qualifying ($30 X 70): $2,100
Campaign cost of $10,000 + phone qualifying cost = $12,200
Total cost of $12,200 divided by 14 qualified leads = $871.42
In other words, you must spend $871.42 to attract each lead
who needs your product or service, can afford it, has authority
to buy, and is ready to buy now.
As you can see, Cost Per Qualified Lead is a sobering number,
especially for businesses that have never calcualted their
lead generating costs.
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Alan Sharpe is a direct mail copywriter. Alan helps hi-tech businesses generate sales and secure sales meetings with qualified
prospects using cost-effective, compelling direct mail marketing.
Subscribe to "Sharpe & Direct," his weekly
direct mail marketing newsletter
at www.sharpecopy.com. Browse the best direct mail books,
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and sales lead generation books at Alan's
online bookstore.
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