How to Calculate the Value of Your Leads
I’m going to show you how to calculate the value of your leads using JEMSU’s lead value calculator. It’s particularly important to calculate the value of your leads if you are a service-based business or a business that gets a majority of its leads from phone calls or form submissions. So we’re going to hop right in using some example data and we’ll show you how to calculate and find the value of your lead and the target cost you should be spending on each lead. So the first question in the lead value calculator is the average value of a single customer transaction. In our example data, we’re saying we’re a bookkeeping firm that has an average value of $500 a month. Um, we’ve stated that in this example, the average number of transactions over the life of the customer is going to be three and a half years.
So we’re going to say 42 months is the average lifetime, um, that this particular customer stays with us or on average. And so that will output the average lifetime value of a customer, which in this case would be $21,000. Uh, we then need to find the average conversion rate of a lead. In this case we’re saying we’re, we’ll convert about one in 10 phone calls we get are one in 10 form submissions into a customer. So we’re saying we convert 10%, so that will output the average value of a lead for us, which is $2,100. So it’s pretty simple. All it’s really doing is taking the average lifetime value of a customer and multiplying it by the average conversion rate of a lead to get you your average value of a lead, which is $2,100 in this case. Um, the next, the next field we need to fill out is the percentage of gross revenue spent on marketing.
In this case, we’re going to say they spend 9% of their gross revenue on marketing. That’s about the average middle average. It’s not low, it’s not high. It’s pretty average to spend about 9%. And then that will output a target cost per lead. So for this scenario, the recommendation would be that we spend $189, uh, per lead. Um, that is what you would want to aim for in your digital advertising. Whether you’re advertising on Google ads, being Facebook, any social channels, really anywhere. This is the target that we should aim for. So that’s how you calculate the value of your leads using Jim Sue’s lead value calculator. Thank you.
Leave A Comment