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How Much Does Lead Generation Cost? [+Examples]

Have you ever spent some money on a marketing campaign, got a few leads, and wondered if it was a good use of your cash? 

Read on, if you answered yes—

You can run lead generation campaigns with more confidence if you determine a lead cost. It will tell you whether a campaign was a good deal or not. And eventually, it will help you ensure the sustainable growth of your business.

In this article, we’ll go through the following:

  • Various costs of lead generation
  • Why you should calculate cost per lead
  • Average leads price by industry

What are lead generation costs?

Most business owners don’t want to spend a lot of money on leads or, better still, get them for free. But effective marketing campaigns require funds to cover the cost of lead generation. For example:

1. Using sales intelligence software

It lets your sales teams get rid of the manual labor involved with generating targeted leads which significantly speeds up the sales process. But you need to be careful to choose a provider with verified data.

2. Buying sales lead lists

They may be a boost your company needs to grow. However, the lead quality is usually low. It means you need human resources to evaluate the contacts on the list. 

3. Outsourcing lead generation agency

You don’t have to build a B2B telemarketing team in-house. you can try to outsource the service to lead generation companies. The downside is that marketers making outbound calls on your behalf may not be familiar with your product or service. It may result in low conversion rates.

4. Paying for lead ads on LinkedIn, Facebook, and social media

It is one of the most expensive costs of lead generation. It requires a team of marketing specialists to run and monitor the campaigns and a budget to cover digital ads.

5. Funding incentives and immediate rewards

Whether it is a white paper or a gift card, you usually obtain high-quality leads but you have to act quickly to convert them. 

6. Hiring and training marketing specialists 

You get a knowledgeable team of lead generation experts who know your product inside out. But it takes time to hire and train them properly.

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How much should a lead cost your business?

Lead generation is an essential part of every consumer’s journey to becoming a paying customer. It remains a top priority for the majority of marketers. So much so that 55% of them increased demand generation budgets to reach their marketing goals in 2021.

But before you jump on the bandwagon and add more funds to your lead gen spending, you should know your cost per lead (CPL) like the back of your hand. Otherwise, you risk paying more per lead than they are worth.

In simple words, CPL is what it costs to get one lead. For example, if you spend $1,000 on a social media campaign and you get 10 leads, your CPL is $100.

Here’s how to calculate a lead cost for any marketing campaign:

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

How-much-does-lead-generation-cost-infographic1-blog

Alternatively, you can use a CPL calculator to do the math. It will also help you calculate how many leads you need to obtain profit.

What is a good cost per lead?

Generally speaking, the lower the lead cost, the more effective your marketing campaign is. It means you’re attracting more leads for your sales team for less money.

To determine whether lead generation cost is a good deal, consider your customer lifetime value.

Let’s follow a simple lead cost example.

If your customers spend on average $3,000 on your products or services from the time they first become your paying customers to the time they churn, and your gross profit is, say, 50% it leaves you with $1,500. 

Next, consider the rate at which your sales team closes deals. For the sake of simplicity, let’s assume they convert one in 10 leads, so their conversion rate is 10%. 

In this example, one lead generates $150 of gross profit for your company.

You can now determine how much you’d like to invest in generating leads and still hit revenue goals.

What is the average lead cost?

According to the 2017 Demand Generation Benchmarks Report, the average cost per lead was $198

But that’s a useless stat— 

HubSpot removed it from its latest reports because cost per lead benchmarks vary dramatically depending on the industry you’re in. Other variables may include your target market and the competition in your sector. 

According to Marketing Charts, leads cost the most in the technology sector, followed by healthcare and finance. And the cheapest leads are in the retail industry and non-profits.

Average cost per lead by industry

Industry

Average cost per lead

Technology

$ 208

Healthcare

$ 162

Finance

$ 160

Manufacturing

$ 136

Business Services

$ 132

Travel & Tourism

$ 106

Media & Publishing

$ 108

Consumer Products

$ 105

Marketing

$ 99

Education

$ 55

Telecom

$ 45

Retail

$ 34

Non-Profits

$ 31


How to lower the B2B costs of lead generation?

If you find out that the cost per lead is higher than their value, it means it’s time to redesign lead generation strategies. Check out the best tips for increasing the efficiency of your marketing campaigns.

1. Expand your prospects' database

It’s one of the easiest ways of hitting your goals. But instead of creating a contacts database manually, use tools to get actionable B2B contact data. Try for example chrome extensions for LinkedIn to access and export email addresses and direct dials of your ideal customer.


2. Improve your landing page design 

If you’re paying for traffic on Facebook or other lead sources, make sure your landing page is optimized for conversions. Include a clear offer above the fold and test it before launching. For example, you can show it to someone and ask if they understand the offer at first glance.

3. Narrow down your target audience

It’s hard to get optimal CPL without creating an ideal customer profile. A clear understanding of what type of company is most likely to need your products and services improves the cost-effectiveness of our lead gen efforts.

4. Use inbound marketing methods

Attracting inbound marketing leads organically is a great way of collecting bottom-of-the-funnel leads who are more likely to convert. You can offer different types of content for every stage of the funnel and nurture contacts through to the sale. It causes less friction than e.g. paid advertising.

5. Eliminate poorly performing channels

Whatever method of capturing leads you choose, always monitor the cost of leads in each campaign. It will help you focus your resources on the most effective ones and get rid of those that drive up the cost per lead.

Tip! Find out how a telecom company, which struggled with a high cost per lead, managed to exceed their revenue targets by 60% thanks to trying out new lead gen methods.

Key takeaways

There’s no simple answer to how much leads cost. Here are a couple of things to remember:

  • There are several methods of generating sales leads and they usually require a set marketing budget to be effective.
  • You should always analyze your customer base and the profit it generates to determine lead costs. 
  • In some industries, lead costs are higher than in others but the sole average cost per lead by sector shouldn’t dictate your spending.

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