If you have a sales team, you know they need qualified sales leads. The more leads the better, provided that the leads are well qualified. With an ongoing flow of leads, your sales team can eliminate time spent on unproductive cold calls and convert the leads you generated into sales.
Even if you don’t have a sales team, you’ll probably need to spend money on follow-up activities, such as repeat emails or sending a newsletter to convert some of those leads into sales.
Through direct mail, email, or online media, you may have generated plenty of sales leads and understand your conversion rate. But how many actually turn into sales? Knowing this information can help you evaluate the quality of sales leads you’re generating and how well your sales team or other follow-up activities impact performance.
In short, while the cost-per-lead metric is important, your cost-per-sale will ultimately impact the profitability of your lead generation program.
Here’s how you measure cost-per-sale:
- Calculate the amount of money you spent gathering the impressions needed to generate your leads.
- Add the amount you spent on any follow-up activities to encourage your leads to convert to a sale. This could represent salesperson activities, sending additional newsletters, etc. This is your total cost for lead generation.
- Divide the number of sales you generated from this campaign by your total cost for lead generation. The result is your cost-per-sale.
Here’s a hypothetical example:
- You spent $15,000 sending an email to 20,000 potential prospects.
- From those 20,000 emails you sent, you generated 1,000 leads (note that as discussed in the previous section, your cost-per-lead is $15 [$15,000/1000 leads]).
- You spent an additional $2,500 in lead follow-up activities, for a total of $17,500 spent for the entire campaign.
- Of the 1,000 leads you generated, 100 of them eventually made a purchase.*
- Your cost-per-sale is $175 ($17,500/100).
*Also note that you converted 1,000 leads into 100 sales. This is your conversion-to-sale rate, another metric that may be useful in evaluating your lead generation program.