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How to optimize what you can pay for new leads

This document is for Media Buyers, Brand Marketing Directors, and Brand Owners looking to optimize what you pay for a new lead.

Common New Lead Acquisition Scenarios

Here are some common scenarios media buyers, brand marketing directors, and brand owners face when optimizing new lead acquisition:

  • You focus on lowest cost per lead possible instead of setting your cost per lead goal accurately
  • You receive a report from your media buyer/agency on your cost per lead and having no idea if the cost per lead is a "good" number or not
  • You get sick and tired of focusing on cheap leads and having no clue if they turn into profitable customers

Why you need this

Setting a correct cost per lead can be more challenging than you think.  While everyone wants more leads, as cheap as possible, that type of thinking can lead to a focus on cheap leads at the expense of good leads.  Many times leads are cheap because they aren’t any good.

 

We are looking to optimize the right price to bid on new leads so that we maximize both the quantity and the quality of the leads.

How To Optimize Your New Lead Acquisition Costs

To optimize what you can pay for a new lead, we are going to use the New Lead Cohort report. The New Lead Cohort report looks at all new leads created in a specific time bucket from your CRM and connects them to their actual lifetime value based on the order system you have integrated with Wicked Reports.  

 

This document assumes you are comfortable with the explanations of the fields and filters of the  New Lead Cohort report.

 

The Wicked Playbook on how to analyze and optimize new lead acquisition cost. Let’s walk through an example using an actual ecommerce client.

 

Step 1: Set the best filters for this report goal: New Lead Cohort filters with no estimated cost per lead

    1. Clear out any estimated cost per lead value
    2. Set the time interval to 0/7/21/30/90 days  
    3. Set the date range to Last 365 days

 

 

Step 2: Run the report 

New Lead Cohort

 

Step 3 : Decide your lead profit goal - we are going to use 100% for this example.

 

Step 4:  Determine which lead acquisition months are most indicative of the marketing you are going to run for the next month.  With the wildly diverse lead values over time in this example, it is not safe to take an average. Something has dramatically changed (for the better) in their marketing! 

New Lead Cohort divergent values

We will use March 2020’s data values since it has the longest range of data and the past 2 months have such a dramatic increase in value.

New Lead Cohort focus on march

Step 5: Calculate the new lead to customer conversion rate for the rows you are using to calculate cost per lead optimization.  Use this formula:  Total customers / New leads = New lead to customer conversion rate.

Let's plug in the numbers from March 2020 above.

Total customers / New leads = New lead to customer conversion rate.

1,595 / 3,286 = 48.5%   wow, great job here!

 

Step 6: Financially, and psychologically, select how long you can wait to hit your profit goal.  We are going with 30 days. Using the new & improved March lead values, at day 30 the lead value is $109.29.

 

Step 7:  Calculate the new lead acquisition cost goal with this formula:

Convert the profit goal percentage into a number.  100% = 1.00, 50% = 0.5, 200% = 2, etc

(lead to customer conversion rate) * (New Lead value at acceptable point in time / (1 + profit goal)) = new lead acquisition cost

(0.485) * ($109.20 / (1 + 1)) = new lead acquisition cost

$26.48 = new lead acquisition cost to hit profit goal of 100% in 30 days assuming the same new lead to customer conversion rate & same average lead value at day 30!

 

Now it’s your turn. Follow the steps above, here they are in condensed outline format:

  1. Set the best filters for this report goal
    1. Clear out any estimated cost per lead value
    2. Set the time interval to 0/7/21/30/90 days
    3. Set the date range to Last 365 days
  2. Run the report.
  3. Decide what your lead profit goal is.  
  4. Select the row(s) that are indicative of probable future month’s values
  5. Calculate the new lead to customer conversion rate
  6. Find your  acceptable financial and psychological lead value.  That column’s date interval is how long it will take you to make that value if your middle funnel post lead conversion rates & values stay the same.
  7. Calculate the new lead acquisition cost goal.  This is the price you can pay for new leads to hit your profit goal in the timeframe desired.

Go do this now!

WickedSmartz Tips

captain wicked pointing to rightIf your new lead acquisition cost goal is a lot higher than what you are currently paying for a new lead, congrats!  You can scale ad spend on your channels and campaigns to increase your lead quantity.  

 

Scaling ad spend should start to raise the cost per lead.  But as long as your cost per lead is still below your target price, and your conversion rates hold, the increased ad spend should increase overall revenue within the time frame identified.. 

 

Monitor your ROI and conversion rates - it is likely both come down slightly but the increased overall revenue makes up for the decrease.

 

captain wicked pointing to rightWhen you target lead acquisition cost is lower than you can currently acquire leads, you have some areas to focus on - and it’s not always the paid media ads themselve (although it could be):  

  • Optimize your ads
  • Optimize your targeting
  • Optimize your landing page
  • Optimize your offer itself
  • Optimize your post lead acquisition conversion funnels - email, paid retargeting, sales followup, website conversion tech.

You can further filter this report by Source(s) and/or campaign(s) of new lead generation and optimize your lead acquisition targets by Source.  Then update your budgets and bids accordingly

Advanced - if you have enough Google lead attribution, run this report by filtering on all values containing Adwords & Google You can use this process to set your Google Smart Campaign CPA goals.  Then turn on the Wicked Google Conversion optimizer, and potentially realize the dream - data-driven scaled ad spend at your ROI goals on auto-pilot.

Troubleshooting

See the New Lead Cohort report troubleshooting section