Calculating a more accurate look at the revenue per lead for your search engine marketing programs
Here, you’ll find:
- How to determine the true value of your leads
- Why aligning sales strategies with marketing offers more accurate data
- The best results-driven reports to develop
- The importance of a lead-scoring system
Put on your blue-light-blocking glasses, crack those knuckles, and fire up your calculator. It’s time to do some math.
Being able to calculate your PPC ROI is an important part of running a digital marketing program. As Capterra reports, their savviest vendors know just how much revenue a new customer means to them.
Knowing the true value of the leads you’re currently bringing in can help you in numerous ways. Most notably, it can inform decisions and shape pay-per-click (PPC) strategies. The result: You can generate more leads in the future. Calculating revenue per lead, however, isn’t always as simple as dividing the cost per lead by the revenue earned per lead.
To find the true revenue per lead, you need to set up a system that connects high-quality leads to the dollar amount spent on each individual lead. Luckily, you don’t have to rely only on intuition and estimations. By connecting your marketing and sales strategies in a meaningful way, you can better leverage the power of the data you have.
Where to begin
At face value, the formula for calculating revenue per lead is fairly simple:
Total Revenue Generated / Total Number of Leads = Average Revenue Per Lead
However, finding the average returns isn’t necessarily a long-term recipe for success. You need to be able to factor in PPC site traffic and customer relationship management (CRM) data as well. This will allow you to see which leads in the CRM are high-valued opportunities or closed sales.
You also want to decide how to measure quality leads. These are the types you want to attract — those that move through the funnel quickly and/or convert for the highest LTV (lifetime value).
It’s worth noting that calculating PPC ROI this way isn’t a one-size-fits-all method. For example: if you sell high-end software or services, your sales cycle may be anywhere from six months to two years. This means that just getting a handful of sign-ups or registrations per month can be sufficient, as the potential revenue from those leads would cover the entire SEM program cost.
However, you don’t want to necessarily go all-in on whatever strategy brought those leads in just yet, because the data set is too small to be able to measure confidently.
Get all of your variables in place
For a more accurate look at lead value, you’ll want to develop a lead scoring system with robust CRM and keyword tracking technology either in-house or with an agency. This will make it easier to connect specific PPC site visitors with sales and lead value.
You can track big data as well as input subjective data regarding personal experiences with the lead. By tracking which clients or customers stood out as exceptionally good leads throughout the sales cycle, you can connect each with corresponding PPC site traffic data and see what patterns emerge.
For example, if a specific keyword or ad group drove the highest value sales, it might be worth allocating more of your budget there. Alternatively, if your highest lifetime value (LTV) is coming from desktop PPC leads, shift more budget to desktop over mobile campaigns.
The next step is to develop PPC ROI reports that focus on what you care about: real results. If you don’t already, it’s a good idea to start tracking data year-over-year as well as monthly. Instead of only relying on statistics or intuition, this lets you combine the science and the art of effective digital marketing to drive serious ROI.
Oftentimes, marketers don’t properly connect revenue earned to cost per lead. Looking at the average ROI for any given PPC campaign is not the best way to derive meaningful insights.
Seasoned experts know to use a results-driven approach and work backward instead of using a “guess-and-check” PPC ROI approach.
Calculate anticipated ROI before anticipated site traffic
Judging your generic site traffic from PPC campaigns can have numerous pitfalls. To improve your bidding strategy, you want to work backward here as well, by scoring leads and using “money keywords” for results-oriented PPC campaigns.
When you take measures to get highly qualified leads from the first click, you connect marketing strategy with sales strategy in a way that makes sense.
Get the final results and know your cost per lead
Put a system in place that allows you to connect leads and actual sales values with your PPC strategy. That way, you can properly calculate the cost per lead. Return to the simple equation of Total Revenue Generated divided by Total Number of Leads. This offers a meaningful analysis of PPC ROI.
By taking a scientific approach to calculating revenue (with an appropriate amount of anecdotal evidence based on recent experiences with customers or clients), you can feel confident that you have a handle on your true lead value.
The team at HawkSEM has years of combined experience taking PPC campaigns to the next level. For more on how we can help you, simply request a consultation.
This post was originally published in August 2014 and was updated in October 2019.