Making efforts to boost your Lead Generation ROI (Return on Investment) requires you to measure lead generation ROI for each lead generation or digital marketing campaign of your business. Unfortunately, just making irrational and ill-informed changes to your lead generation strategy doesn’t promise to offer a remarkable difference in outcomes.
Most of the time, you just need minor changes to your lead generation roadmap to boost sales and significantly impact a business ROI.
Undoubtedly, a primary objective behind setting up an optimized lead generation strategy is to improve ROI for all inbound campaigns. However, suppose your lead generation funnel is fully saturated with many leads that eventually left the funnel without turning into sales. In that case, there is a big question about the quality of leads and the potential of your sales funnel to generate hot leads.
Therefore, you need to calculate lead generation ROI to determine whether you are using your capital in the right approach for the right leads or just exacerbating your business without considering the vital lead generation KPIs.
What is Return on Investment ROI
Return on investment is calculated as a ratio of your net investment to the net revenue you are generating from this investment. A high ROI means the return is more than the cost you put in to gain that return.
On the performance aspect, ROI is used to assess an investment’s positive or negative impact on the particular lead generation campaign or your overall digital marketing initiatives. It also helps you compare different campaigns’ efficiencies concerning their investment.
ROI = Return in terms of Revenue / Investment in terms of expenditure or budget
Why Measuring ROI Crucial for Lead Generation Campaigns
Measuring lead generation ROI is necessary to capitalize well on your expenditures and improve your overall approach to lead generation. Some of its significant advantages include:
Utilize marketing budget efficiently
By calculating lead generation ROI you can optimize your lead generation process for improvements and utilize your marketing budget efficiently. This efficient use of the marketing budget can be ensured by reducing customer acquisition costs and generating more revenue with the least budget possible.
Identify your Area of Improvement and where you’re losing money
By measuring lead generation ROI, you can find potential leakages and losing points in your lead generation funnel. Lead generation KPIs that help you calculate lead generation ROI notify you about different anomalies and roadblocks in your sales funnel responsible for your poor ROI.
You get to know your target audience and well-performing campaigns
If you are aiming at the wrong market segment for your lead generation efforts you will have a hard time generating hot leads for your business. Lead generation KPIs like customer lifetime value, conversion rates, website traffic, engagement rate, etc help you set your target towards the right audience.
You can also use these KPIs to compare your least-performing campaigns with well-performing campaigns and make necessary adjustments. For instance, your Facebook lead generation campaign is performing with outstanding KPIs.
Whereas you fail to get enough qualified leads and conversions from Linkedin. You can compare both campaigns to check whether you are targeting the right audience on Linkedin just like you are doing on Facebook.
Help you in taking strategic decisions
Lead generation KPIs give you valuable insights into all your B2B lead generation efforts and help you make strategic decisions. A targetted and relevant strategy is a prerequisite to making any state-of-the-art approach or tactic to produce results.
Set a roadmap plan to achieve your goals
By calculating lead generation ROI, you can revamp and change the course of your lead generation roadmap to divert it towards high revenue with fewer investments.
You might be generating remarkable revenue from your existing roadmap or approach, but there’s always a space to reduce the expenditure and scale the ROI for each campaign.
Also read about the Tips to Improve Lead Generation Campaigns ROI
How To Calculate ROI of Lead Generation Campaigns
Measuring lead generation ROI is not a standalone process. It involves different parameters and aspects regarding lead generation KPIs or matrices to calculate lead generation ROI for a particular campaign. Let’s discuss each of the key lead generation KPIs in detail.
Cost per Lead (CPL)
Cost per Lead for a lead generation campaign can be calculated as a ratio of a particular campaign’s budget to the number of leads generated by it.
CPL = Total Campaign’s Spending / Number of Leads Generated
For instance, you spend 1000$ for a Google Ads campaign and earn 50 leads (here the leads are indicating the prospects who made a click on your Ads). In the said case, your CPL will be 20$ per Lead.
But solely, a higher CPL doesn’t promise a better ROI, and you might need to improve the quality of your leads and rethink your target audience. What if your CPL is lower but CPA is much higher? Let’s discuss what CPA is.
Cost per acquisition (CPA)
Cost per acquisition CPA the ratio of actual customers you convert to the budget your invested in getting these customers. For instance, your conversion rate for the aforementioned lead generation campaign is 50%.
It means out of 50 leads, you are getting 25 paying customers. Therefore, your CPA will be 10$. It means you are getting each customer against 10$ of investment.
But how much each of these customers is willing to spend on buying from your business?
Customer Lifetime Value (CLTV)
Customer Lifetime Value (CLTV) is the net profit a customer helps you make throughout their active linkage with your business. It is heavily impacted by the customer retention rate of your business.
Average Revenue Per Customer (ARPC)
The average revenue per user is another significant lead generation KPI. It is calculated as the amount of revenue that a business can generate from a single customer. Mathematically:
ARPC = Total Revenue Generated by a Business/Total Active Customers
It helps you in determining the number of ghost customers which you were previously deemed active. Nurturing these ghost customers can improve this KPI to a notable extent.
Lead Conversion Rate
Lead Conversion Rate is the percentage of prospects turning into customers compared to the one generated as leads. For instance, as discussed earlier, if 25 out of 50 leads turn into paying customers, your lead conversion rate will be 50%.
Traffic to your website
The traffic on your website showcases the immediate impact of your lead generation campaigns. But the plain traffic doesn’t earn you anything you need to engage them with your content and convert them into leads for further nurturing up to the sales conversion.
Another vital factor, especially for social media lead generation or marketing campaigns, is engagement rate. It is calculated as the percentage of engagements for a particular post on social media (like, share, comment, etc) to the total audience that came across your post.
CPL and CPA are used to check the relevancy of your lead generation campaigns. For instance, fewer CPL and CPA means your lead generation campaigns are relevant to the targeted audience in your niche and your efforts are geared towards the right set of prospects.
If you are gaining referrals for your business products or services, it’s another indicator that shows how impactful your lead generation and inbound marketing efforts are.
Calculating the budget spending is equally essential to calculating ROI as calculating revenue for your lead generation campaigns.
Therefore, start by calculating the total salary you are paying to your marketing team to evaluate your ROI. It helps you in eliminating unnecessary resources or helps you decide whether you are in a condition to hire more resources for further improvement.
Marketing tool subscriptions
Another notable factor that counts in calculating ROI is the subscription fees you are paying for the marketing tools your SEO, content, email marketing team, and PPC experts are using for a range of purposes like keyword research tools, plagiarism testing platforms, and email automation tools, etc.
Cost of marketing materials
The Cost you pay to your support teams, especially graphic designers and content creators, also shares a significant portion of your investment. It is, therefore, mandatory to include this Cost in the frame for a more accurate calculation of lead generation ROI.
Last but not least, Ad spend is the amount of expenditure you invest in biding for the paid advertisement on Google and social media ads like Facebook Ads or Linkedin Ads. You are charged for every single click your targeted audience for paid ads makes on your Ad.
Therefore, it is highly recommended to refrain from neglecting this crucial aspect or you may end up worsening your ROI despite having all other factors in your favor.
This KPI is vital to calculate ROAS (Return on Ads Spending). ROAS is an ROI of a B2B Lead Generation Campaign for PPC or paid advertisements.
For instance, a B2B service invests $5,000 on a Google Ad campaign for April. For that particular month, the campaign generates revenue of $20,000. In the said case, the ROAS for a company is 20,000/5000 or 400 percent.
Understanding the ROI for Lead Generation Campaigns
You can calculate ROI for different lead generation campaigns, including Paid Ads, Email Marketing, SEO, content marketing, etc.
Understanding the ROI of SEO Efforts
To calculate lead generation ROI for SEO you need to consider website clicks, bounce rate, search engine rankings, organic website traffic, and organic conversion rates that are driven by a particular campaign.
Understanding the ROI of Content Marketing
Start by calculating the cost of content ideation, planning, and production. Then, add all these costs along with the distribution cost and divide the total profit made over the same period by the total cost.
For instance, if you spend $1000 on producing content and lock sales of $5000 from the content leads, your ROI will be 400%. Mathematically:
ROI = [(Revenue – Investment)/Investment] x 100
Understanding the ROI of Email Marketing
The ROI of email marketing is to calculate the impact of your overall email marketing efforts. The factors impacting your email marketing efforts include email open rates, lead conversion, and email engagement rates.
Determining ROI of Social Media Lead Generation
As discussed earlier, the ROI of social media lead generation is directly linked with the engagement rates for the particular post, video, or Ad.
Facebook, Linkedin, and Twitter follow the same like, click, comment, and share model for engagement. In the case of YouTube, the video watch time for a particular video is the primary game-changer in improving your ROI for YouTube lead generation.
Determining ROI of Lead Generation Ads (PPC, Facebook Ads, LinkedIn Ads)
Calculating the ROI of lead generation Ads involves KPIs of paid ads on Facebook Ads, Linkedin Ads, and Google Ads. It helps you in using your budget wisely for paid ad campaigns on Google and Social media.
Measuring ROI of PR
You must evaluate your ROI for Paid Referrals by calculating the ROI of PR campaigns. It can be calculated as a percentage of revenue you generate from referrals to the amount of reward you are paying to the customers who earn you these customers in return.
Calculate the ROI of Lead Nurturing
Calculate the ROI of Appointment Setting
It helps you decide whether to stick with the in-house appointment setting or opt for an outsourcing appointment setting for more efficient use of your marketing budget and available resources.
Calculate the ROI of Pay Per Call
For pay per call lead generation, you calculate the ROI as pay per call or cost per call. If your Cost per call is higher you need to consider outsourcing the pay per call service for a more targeted and efficient strategy and keep your in-house sales team busy in core sales operations.
Qualified Leads ( MQL, SQL)
Another significant aspect is calculating the ratio of SQLs to MQLs. It offers a range of insights like:
- How optimized your sales funnel is?
- How many leads you can drive to the sales goal? (Conversion rate)
- Why is the particular number of MQLs not turning into SQLs? (Helps in optimizing lead nurturing process)
All these lead generations KPIs and lead generation ROI calculators we discussed in this article are essential to gain rich insights into your overall lead generation campaign.
You can calculate lead generation ROI for each campaign or each stage of your sales funnel to better understand and optimize your sales funnel. Even slight adjustments in the lead generation process can help you spare your budget, boost your sales, and skyrocket your ROI to a remarkable extent.