New leads help offset the inevitable customer attrition experienced by every business, bringing in new blood and new opportunities to develop enduring business relationships. However, if the cost of locating and nurturing these leads is too high, then organizations may find themselves reaping too little ROI to make the process worthwhile. Here, we share five proven steps to help reduce cost per lead, and help you get the most out of your new business prospects.
For any business organization, customer retention is essential. And, while the notion that the customer is always right may not apply in quite the same way that it used to, the inescapable truth is that customers are the lifeblood of business. Without customers to purchase goods or services, there is no cash inflow to offset expenses, no objective to pursue, and no reason for your organization to exist.
Statistics from Gartner Group reveal that 80% of a company’s future revenue will come from just 20% of its existing customers. That being said, in today’s crowded and competitive business arena, customer attrition is a challenge that all companies must face. After all, even the best, most loyal customers may eventually turn their attention elsewhere. In order to grow and sustain a healthy bottom line, companies must continue to attract and acquire new customers.
That’s where lead generation enters the picture.
According to Lee Resource Inc., it costs a company five times more to attract new customers than to keep an existing customer. In fact, when you factor in all the costs involved in sales lead generation, many companies who make a sale to a new customer are barely breaking even on the transaction.
To remain competitive and profitable, companies need to do more than simply generate leads; they need to generate more quality leads, while at the same time lowering the costs associated with each of those leads. To that end, here are five steps business marketers can use to reduce the cost per lead:
1. Define the sales funnel
Marketers may know who their best leads are, but having a clear understanding of where a prospect is in the buying journey is essential to making those leads cost-effective. That’s where the sales funnel comes in. By defining each stage of the sales funnel process—from the open top of the funnel where prospects who have a basic awareness and curiosity about the company reside, to the narrow bottom of the funnel where prospects finally become full-fledged customers—marketers can align their marketing and sales processes according to the prospect’s position in the funnel.
Understanding the funnel allows marketers to tailor programs and messages to move more leads down the funnel to the buying stage. The key to success with this process lies in effective internal communication, so that everyone in the marketing and sales departments are operating on the same definition of the sales funnel.
2. Reevaluate content marketing
According to Demand Metric, content marketing generates three times as many leads as traditional outbound marketing, but costs 62% less. Additionally, a study by HubSpot shows that the average outbound lead costs $346, while the average inbound lead costs only $135.
These telling statistics should motivate marketers to focus more on attracting prospects through inbound marketing strategies—such as providing relevant, informative, high quality, non-self promotional content—rather than pushing a seemingly self-serving message on prospects through traditional outbound strategies.
Blogging and social media are two inbound marketing channels where quality content can bring big dividends in the form of less-expensive and more-qualified leads. In a HubSpot survey connected with the aforementioned study, 52% of companies who blog indicated that leads from this marketing channel were “Below Average Cost”. In addition, companies that blog are shown to generate
55% more traffic than those that don’t. Social media, which is all about connecting and engaging prospects through quality content, was also shown to be among the least expensive ways to generate leads.
3. Use marketing automation
Statistics from MarketingProfs indicate that 37% of B2B marketers are using marketing automation to generate leads. As for just how cost-effective marketing automation software is for B2B lead generation, Gartner Research shows that companies that automate lead management see a 10 % greater increase in revenue within 6–9 months. Additionally, Forrester Research reveals that, “46% of marketers with mature lead management processes have sales teams that follow up on more than 75% of marketing-generated leads.”
A March 2014 study conducted by Regalix found that an overwhelming number of B2B marketers polled worldwide saw measurable benefits from marketing automation in the areas of lead management and lead nurturing.
4. Leverage organic search
With the world at their fingertips, 78% of Internet users conduct research online before buying a product or service. And while pay-per-click campaigns can help to drive traffic to a business website, a better and less expensive approach is to attract prospects organically through search engines.
Organic search is about generating online leads by ranking high for certain keywords on the Google Search Results page. This means that when leads and other potential customers perform online searches for terms that are relevant to your business, your site will appear in one of the top spots for search results, leading to more exposure and a higher chances of receiving site visitors. And while achieving that goal can be challenging, the upside is that by reaching it, you’ll enjoy the benefits of free advertising through a medium that customers trust.
Leveraging organic search requires the use of some basic search engine optimization techniques and tools to get a website to rank higher. Keyword research and analysis are effective ways to identify keywords that have the best odds of being found online and garnering higher search engine rankings. As organic search brings in more online leads, organizations can lower the cost per lead further by reducing or cutting out less-effective strategies, such as print advertising and pay-per-click campaigns.
5. Embrace social media marketing
In today’s ultra-connected world, social media sites such as Facebook, Twitter and LinkedIn have become powerful platforms for companies to engage and communicate with prospects. Like other inbound marketing methods, social media marketing costs virtually nothing for organizations to implement and use. Care should be taken to ensure that the content shared via social media has value to the consumer, and shows that the company genuinely cares about what customers think, need, and are looking for. Communications that come off as ‘pitchy’ and self-promotional should be avoided at all costs, as they can lead to negative comments and “shares” within the social community, and can seriously damage a company’s credibility.
Companies that adopt social media marketing need to understand that it takes time to establish credibility and trust within the social network. However, efforts to do so will be rewarded with qualified leads, higher conversions, and a more loyal customer base.
If you cast a wide enough net, the law of averages assures you that you’ll find a dedicated future customer or two among the unqualified leads that you have to throw back. Unfortunately, if you’re spending too much money on the leads that are not likely to pay off, you may find that even the profitable clients that you do acquire will be unable to offset the cost. So, take steps to reduce the amount that you spend per lead, and you’ll be able to enjoy a better ROI, and a more successful future for your business.
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