This article was originally published on the Spectrum blog.
What would you pay for a solid business lead?
It’s a simple enough question really, and if you have the answer down pat your business is benefiting – BIG TIME. Knowing your ALV, or Average Lead Value, is the first crucial step to calculating how much money potential customers will leave at your professional doormat. Furthermore, determining your ALV makes it easy to measure the effectiveness of your marketing ventures. So next time you rollout a PPC campaign or fire off an email blast, you can mathematically determine if your ROI was worth it.
If your website is designed to generate leads, you’re probably aware of the fact that Google doesn’t do any of the ALV legwork for you. Oh well, good thing you can figure it out yourself – it’ll take you five minutes – just follow these three steps:
1. Define What Constitutes a Lead
Your business’s ALV is the average amount of money you acquire every time a visitor becomes a lead on your website. So, what constitutes a lead on your site? This answer will vary, but generally it’s whenever a visitor expresses interest in your service/product or company. For instance, signing up for a newsletter, requesting a quote and/or subscribing to your blog are common “lead activities.” It’s also imperative that you’re tracking your leads, because ultimately, you’ll need data to calculate your ALV.
2. Collect the Data
You’ll need the following three stats:
a) Average # of leads per timeframe* - e.g. 100 leads / month
b) Average sales revenue during timeframe – e.g. $125,000 / month
c) Average profit margin / sale – e.g. Approx. 5% of each sale is profit
Note* - your time frame can be a month, a quarter, a year or even longer, just make sure it’s consistent across your number of leads and overall sales revenue. Of course, the longer the period of data the better (this way, good/bad months and seasonal fluctuations are cut out of the equation).
3. Plug Your Data into this Formula:
If you calculated the example stats we gave you in Step 2, you should’ve arrived at an ALV of $62.50.
Now figure out your own Average Lead Value! Remember, doing so will help you determine if your advertising and marketing dollars are truly paying off. It’ll also give you valuable insight about whereto market your company and to whom. These are the steps companies are taking nowadays in order to stay competitive. Are you?