What is the value of an online-generated lead? Part II – Money vs. Time

Professional selling is the most subjective profession in the world making results and performance data is extremely difficult to quantify.  In addition to selling activity being hard to measure, as sales people, we are naturally biased and it is very easy to fool yourself when it comes to what you actually do.  Often, what you think and feel you accomplished will be quite different from the factual data.  You must keep good records and know how to work proficiently especially when looking for leads online.

Before you jump on the Internet and start searching to generate leads online, you need some very important data.  In addition to understanding how to find leads online, you need to know the value of a lead to determine how much time and money you can invest.  To do this, you first need to know your own sales numbers that you must obtain from actual sales performance data:

  1. What is your average sales commission?
  2. What is your overall closing average?
  3. What is your appointment to closing average?
  4. What is your prospect to appointment average?
  5. What is your lead to prospect average?

A selling scenario

To determine the true value of an online lead, let us use a hypothetical sales person named Joe Smith.  Joe generates leads online.  He then takes those leads and makes calls to gather some information and seek an opt-in to send literature.  Of those who opt-in, Joe calls a second time to confirm the material and to set up a qualifying appointment.  From the qualifying interview, Joe creates proposals and goes back to close.

Hypothetical numbers

Over time, we see that Joe’s numbers look like this:

  1. Average sales commission:  $300 US
  2. Overall closing average25%
  3. Appointment to closing average: 65%
  4. Prospect to appointment average: 30%
  5. Lead to prospect average:  20%

Joe uses purely organic search methods when he generates leads online, spending no actual cash.  Out of 100 leads, he is able to convert 20% or 20 leads into qualified prospects to make contact.  Of those 20, Joe is able to make an appointment with 6 prospects or 30%.  Of those six, he manages to set closing interviews to ask for the order with four and closes one sale.  From that sale, Joe earns a sales commission of $300.

What is an online-generated lead worth?

The first thought is that this is quite simple; since Joe eventually earns $300 from 100 online leads, then each lead has an effective value of $3.  While this may be the case for Joe, do not fall into the trap of jumping directly to your bottom line sales earnings and dividing it by the number of leads.  Doing so will invariably produce inaccurate data.  Also, you will need the additional information to determine the true value of a lead generated online.

Part III – Time vs. Money

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