Lead generation has been deemed as one of the most effective strategies for marketing.

In this digital age where literally billions of people are on the internet, there are tons of ways to acquire leads.

With that said, each method of lead generation includes lots of different types of processes with different types of approach making it very delicate.

Lead Generation sample method - Funnel method

(Image Source: FunnelEnvy)

With all the methods, processes, tools and time involved, how much does lead generation really cost?

It varies and the cost will be based on factors such as number of leads, cost per lead, tools to be used, cost per day, and so on.

So, before we get an estimate, let’s get a good scope of lead generation first.

 

Kinds of Leads

Marketing Qualified Lead (MQL)

MQLs have met the standards you have set out to be qualified leads. These leads are the ones who might be interested in your products or services given their profile.

They are called marketing qualified leads because they’ve engaged with your marketing strategies and campaigns, but have yet to decide if they are ready to engage.

They fit the criteria of your target market and have shown interest, but they are not 100% ready to be converted into paying customers yet.

 

Sales Qualified Lead (SQL)

SQLs, on the other hand have shown enthusiasm and interest in your product or service and have taken action.

This means that they’ve most likely sent an email, messaged your platform, asked questions, set up a consultation or requested a demo. It’s like they’ve added to their carts and are ready to check out.

These are usually more of the higher-qualified leads because they are all ready to convert.

MQL vs SQL

(Image Source: Ledgeview Partners)

 

Service Qualified Lead

SQLs are contacts who have shown enthusiasm and interest in your services and have shown that they are willing to become paying customers.

These leads can be active users of your services and tools who continues to upgrade their subscriptions or plans.

A good example would be Spotify. They give a 30-day trial for their first time users and when the 30 days are up, they have a choice to upgrade to a premium plan.

service qualified lead - free trial sample

 (Image Source: Spotify Community)

Sure, buying leads saves you a ton of time and effort than if you waited for them to organically materialize, but they often come across as impersonal or intrusive, even.

Try to strive for leads that have a somewhat personal connection to your brand or service.

Lead scoring can also help you funnel out your leads from highly-engaged to no engagements.

Highly-qualified leads are closest to become customers, so you’ll want to focus on those leads.

 

Lead Generation Cost Factors

For a successful lead generation, there are a lot of methods, processes, and tools involved.

Some companies offer an all-in-one service and some don’t. It will depend on what type of services you want.

Agencies or people that specialize in lead generation usually charge per lead or by the number of leads you need.

These leads may come from inbound and outbound marketing. It sounds easy but the process done to get those leads are quite rigorous and will need lots of time and effort.

 

Costs may be affected by the following:

 

  • Cost of Tools or Software Used

These tools generate thousands of leads per day and that’s a lot.

The results when using these tools can be jaw dropping but what they mostly supply is the “Quantity” part of your list of leads. 

So, it would still be up to you or the team you hire to run through the list and choose qualified leads.

One of the best lead generation tools out there is LeadFuze.

Aside from the astounding amount of leads that it generates per day, it also has functions that will definitely be effective for your lead generation process.

LeadFuze has FuzeBot which works on searching for leads even when you’re offline. It runs on the background 24/7, giving you more time to focus on other things that you need to do.

Automate Your List Building

Don't have time for prospecting? 

Use LeadFuze's Fuzebot! Fuzebot is your list building assistant.

Just assign the search criteria you are looking for, and everyday Fuzebot will add matching leads to a list (and therefore revealing contact information).

  • Campaign Creation and Design

Another important part of your business marketing strategy will be how effective your campaigns will be.

You can either work with a team or hire a freelancer for the creation of your content and it definitely won’t come cheap but you will have assurance of having great and most importantly effective content for reeling in customers or leads.

You always have the option to do it yourself but it will take most of your time so hiring a team of experts in campaign and design is a favorable option.

Content creation will more or less cost around $50-$3000 depending on what you want made and how many. This will be cost per content, so make sure to give all the good ideas you have for content.

88% of marketers say that content creation and marketing is one of the most effective lead generation tactics which is pretty obvious why.

88% of marketers say that content creation and marketing is one of the most effective lead generation tactics Click To Tweet

 

  • Content Marketing

Content marketing gets three times as many prospects as outbound marketing but costs 62% less which makes it quite favorable for lead generation. 

Content marketing gets three times as many prospects as outbound marketingq Click To Tweet

Beside the fact that it generates the most leads, it costs the least. With that said, creating good and informative content is vital for marketing, attracting more prospects.

Content marketing will cost roughly around $5000 to $50,000 per month depending on what your goals are, what your business size is, resources, and of course your budget.

Again, there are freelancers out there that specialize in marketing that will cost you a lot less. So make sure you take a look at all of your options.

Content marketing will cost roughly around $5000 to $50,000 per month Click To Tweet

 

  • Management Fee

This will be the over all fee of the team or person you will be hiring for lead generation. 

 

Lead Generation Cost Per Lead

Cost per lead will be based on a lot of factors. As of 2020, the average cost per lead is $198.

Here’s a reference on how much a lead will cost for each different industry.

lead generation cost per lead

(Image Source: Marketing Charts)

Cost per Lead Equation

Cost Per Lead (CPL) = Total Marketing Spend / Total Leads Generated

Take the total of how much you’ve spent on lead generation, say, on a specific campaign.

Then you divide it by the number of leads that this certain campaign has generated in the same time frame.

Let’s take into consideration the businesses that are only starting out or smaller-scale businesses.

If you’ve shelled out a sum of $1500 on a campaign for a holiday and you’ve managed to generate 80 leads during this campaign,  the computation will look something like this:

$1500 / 80 leads = $18 .75 per lead

On the other hand, the average costs for leads varies greatly depending on which industry your business falls under.

(Image Source: HubSpot)

Within social media, there are also average costs per engagements or follows.

It’s important to keep in mind that generating leads is about a higher return on investment.

The higher your ROI, all the more likely you will pursue obtaining leads and your leads will be valued at a higher cost.

The lower your ROI, however, the less likely you will be willing to pay for lead capturing and generating.

Hiring outsourced lead generation industries will cost you from $24k to $240k annually, but these are experienced professionals and even specialists that will help you out.

Hiring outsourced lead generation industries will cost you from $24k to $240k annually Click To Tweet

|

Costs Per Channel

Aside from benchmarks per industry, we can also measure the costs per lead by which channels we use to generate leads.

 

Offline Marketing methods such as print ads, billboards, newspaper ads, TV commercials and radio features which are usually the last thing on every marketer’s mind.

But despite this stigma, they are still definitely effective.

Depending on your target market, these methods have survived because of their efficiency.

On average, offline marketing methods cost somewhere between $38 (lowest), $619 (average) and $1200 (high).

 

Search Engine Optimization (SEO) is the process of optimizing your website mainly to be on the first page of search results.

You have a bigger chance of generating qualified leads organically by optimizing your website to fit Google’s criteria.

People are more likely to click on the first thing they see on the first page of the search results, it’s rare that they go the second page and the next.

The average cost per lead using SEO can range from $14 (low), $31 (average) and $47 (high).

 

Search Engine Marketing (SEM) is done in a similar fashion to SEO, but focuses more on paid ads and campaigns as opposed to SEO’s more organic approach.

These are paid advertisements that appear on search engine results page such as Google and Bing.

Its average cost per lead is somewhere between $38 (low), $110 (average) and $181 (high).

 

Content Marketing involves the creation of content optimized for different platforms.

Blogging is a popular content-creation strategy that has been around way before social media took the entire world by storm.

With referrals, the average cost per lead in content marketing is around $92, while its lowest being somewhere around $43 and its highest being $140.

Social Media Marketing is arguably the most popular and effective marketing strategy.

Modern marketers have turned to social media as the pinnacle of marketing just about anything.

Facebook, LinkedIn, Instagram and Twitter are among the most used platforms for this.

Social Media Lead Generation

Because everyone is on social media, things tend to move a little bit faster on those platforms.

Thankfully, ads generated on these platforms won’t break the bank.

The average cost per lead on most social media platforms is at $58. The lowest being $34, and the highest at $82.

LinkedIn is considered a social media platform, but follows a different algorithm and target market.

The average cost per lead on LinkedIn is at $75. The lowest being $51 and the highest being $99.

 

Video Marketing, along with social media marketing, has grown exponentially in the past few years.

It has been deemed the medium of marketing that generates the most engagements.

Because videos tend to me more interactive and informative, many people are attracted to it.

But because it takes so much effort and time to create video content, it can be costly.

Blog marketing lead generation

(Image Source: Hubspot)

The average cost per lead in video marketing is at a high $174. Its lowest being $59, and its highest is a whopping $288!

The success of these videos is also rooted in whether or not they are put out on the more popular video websites such as YouTube.

 

Public Relations (PR) requires more outreach. We often see this in the form of sponsored content.

Vloggers and other forms of content creators are usually sent what we call PR packages, containing a company’s products.

This way, people who have quite a following can vouch for these products to their wide reach.

Content like this can also be informative and involve other channels like social media content creation or even sponsored videos.

This can be costly but it can rake in big leads, which is why mostly bigger companies tend to use this marketing strategy.

Its average cost being $294, its lowest being $108 and its highest being $480!

Stats via VisitorQueue

 

Strategic Course of Action: Inbound or Outbound Marketing?

inbound and outbound marketing lead generation

(Image Source: Neil Patel Blog)

 

Knowing what method you need to generate leads will help you see how much you’ll need for lead generation.

Which of your marketing strategies have generated the most leads? Ads, trade shows, webinars, eBooks, social media content?

Inbound marketing is proven to generate more leads than outbound marketing. 

This is because inbound marketing techniques cover a ton of “free” platforms.

Creating free content on websites like blogs or social media posts, or even optimizing your websites and platforms for SEO can bring in leads for little to no costs.

The main goal of inbound lead generation strategies is to be found by qualified prospects who are looking for answers.

As opposed to outbound marketing and lead generation strategies that focus a lot on baiting leads and reaching out to them directly.

Outbound marketing strategies can include trade shows, telemarketing and direct mail.

The effort you put into outbound strategies can be a little more than inbound strategies.

You are putting yourself out there and also spending more.

But some companies just prefer outbound marketing methods because they’ve been around for quite the amount of time and still prove to be effective in generating leads.

 

How Many Leads Will You Need?

Allocating a whole budget for lead generation and sales as a whole is driven by how many leads you bring in.

Apart from the industry average costs per leads also depend on which lead generating channel you use or invest in, the scale of your business, and how much revenue your company gets.

Your revenue is the total amount of income generated by the sale of goods or services related to the company’s primary operations.

The amount of leads you’ll need will also influence how high your revenue needs to be.

The analysis of this will require prior and in-depth knowledge of your company’s revenue.

To get down to the bottom of it, you’ll need specific data on:

  1. Targeted Revenue / Monthly Revenue Target is the amount of revenue your company aims to reach at the end of a given period.
  2. Marketing-Driven Revenue is the part of the income that you’ve gotten based on how effective your marketing campaigns are.
  3. Average Sales Price (ASP) is the average number of service sales / number of units or products that are sold.
  4. Marketing-Driven Deals is the marketing-driven revenue to be divided by the average sales price.
  5. Opportunity-to-Sale Ratio is the percentage of leads you convert into paying customers or the number of deals that you close.
  6. Qualified Lead-to-Opportunity Ratio is the percentage of qualified leads that it takes to provide more opportunities for your business.
  7. Lead-to-Qualified-Lead Ratio is how many inquiries or prospects it takes to produce a qualified lead.

Being able to determine these numbers and percentages will be helpful in pinpointing just how many leads you will need and how much your budget should be when allocating funds for your lead generation services.

Of course, this model is just an estimate or an average of our list above. It will still depend on your strategy and process.

lead generation cost revenue

(Image Source: Fusion Marketing Partners)

 

Lead Generation Costing for in-house Sales Development Representatives and Business Development Representatives

Now that we’ve discussed the initial costs of outsourcing your needs for lead generation, let’s talk about in-house Sales and Business Development Reps (SDR and BDRs).

Consider hiring your own personal Sales Development Reps and Business Development Reps to look after and take charge of your lead generation channels.

Sales Development Representatives or reps (SDRs) specialize in prospecting, qualifying and even reaching out to leads.

While they don’t necessarily focus on closing deals, they do take charge of getting in contact with many different leads, and establishing whether or not they are qualified leads for your business.

They basically dictate the sales pipeline by using these connections and familiarizing themselves with what your company needs.

In the process, they inform leads about what your company has to offer, answer any questions that they may be asking and allocate resources to prospects.

This means that they should have great communication skills!

Business Development Representatives or reps (BDRs) sometimes work alongside SDRs.

While SDRs are focused on inbound lead generation methods, BDRs conversely focus on outbound lead generation methods.

(Image Source: ActiveCampaign)

Having an SDR and BDR on your team or a team made up of both will take a lot of things off your hands.

But apart from finding and hiring those who are a perfect fit for the job, you will also have to invest in their training.

Marketing teams hold your business up by the strategies and methods that they use, so it is crucial that the people you put in charge of this will be properly trained and familiarized with your company’s needs.

Extra training and third-party tools, apps or channels will add to your list of costs.

On average, SDRs and BDRs earn between $50,000 to 80,000 annually with benefits, depending on their level of experience.

This is exclusive of their software and lead data, which usually cost between $1,000 to 15,000 depending on your tools and software of choice.

And training will usually cost you another $3,000 to 10,000 per rep!

All in all, you will probably end up paying somewhere between $60k to 125k annually!

That is quite a lot of money to allocate towards a team, especially since this will usually take a little bit longer than outsourcing.

The convenience of having a whole team is that they will be working specifically for your goals, have familiarized themselves with your company’s needs, which means you get the highest quality of leads.

But the costs are high, and still have somewhat of a higher turnover rate.

This means that the average SDR quits after 12 to 14 months, which means you will need to hire and train another set of SDRs.

Weigh the pros and cons between hiring in-house reps versus outsourcing them and see which one is worth the investment.

 

Key Takeaway

Lead generation is one of the most effective ways to help your business grow.

Which is also why no matter the method or strategy you choose, it is definitely going to cost you.

While many free tools and services are available for everyone to use, most of the effective methods come with paid agencies and other service providers.

You have the option of hiring outsourced lead generation teams to do all the lead generation business for you, or you can also hire your own in-house team.

In some cases, outsourced lead generation agencies will be more efficient in generating leads, which helps take a lot off your hands.

Hiring your own in-house team of SDRs and BDRs is another convenient option, but will cost more than outsourcing agencies.

However daunting lead generation can be, you will find that a team of people who have dedicated their time to generating leads will be of much help to you rather than trying to gather those leads yourself.

The costs you spend on leads will also vary depending on the channels you choose and the industry you’re part of.

Editors Note:

Want to help contribute to future articles? Have data-backed and tactical advice to share? I’d love to hear from you!

We have over 60,000 monthly readers that would love to see it! Contact us and let's discuss your ideas!

Monica Bogayong
About Author: Monica Bogayong
I'm a Content Writer for LeadFuze.