Redefining the Marketing Dashboard

So you’ve started generating leads for your sales team, and you want to know how good of a job you’re doing. There’s a ton of different marketing metrics to track, so where do you start? Over the next several blog entries, I’ll identify some basic metrics that I used to track when running b2b marketing programs.

Why Measure Cost per Lead?

One critical marketing metric to actively track is the average cost per lead. Now, when would you want to use this metric, or for that matter, why would you ever need to track this metric? This statistic helps you determine how to best spend your marketing dollars on future programs. You ideally want to spend your money on programs that generate the most high quality leads. Let’s use a basic example to illustrate this point. You ran marketing campaign A that yielded an avg. cost per lead of $1, whereas marketing campaign B cost $0.25 per lead. If you only had a $1 to spend on your next program, you’re much better off investing in campaign B (assuming the lead quality of both programs are comparable). That $1 spent would generate 4 leads in campaign B, versus only 1 lead in campaign A.

How to Calculate Cost per Lead

To track your average cost per lead, you’ll need two simple pieces of data: the total amount of money spent on the marketing campaign, and the total leads generated by that campaign. Calculating the cost per lead is simply:


Avg. cost per lead= total money spent on marketing campaign/ total leads generated


You’re best off by calculating this metric separately for each marketing channel utilized. For example, your cost per lead will be much higher for a trade show than it would be for an email campaign. Coming up with a single cost per lead across all marketing channels might artificially skew the number high or low, depending on your marketing mix.


What I like to do is calculate my overall cost per lead by channel, and then within each channel individually calculate the cost per lead by campaign (here’s an example of a marketing report measuring cost per lead by marketing channel). This allows me to benchmark how cost effective individual campaigns are against the averages for that marketing channel. For example, I would calculate an aggregate avg. cost per lead for all offline seminar and events, and then would calculate the cost per lead for an individual trade show and compare it to my aggregate number.

When to Use Cost per Lead?

Now to be fair, there are many out there that believe this metric is not as important as tracking the cost per opportunity. In fact, Brian Carroll has a really good post on why marketers should track cost per qualified opportunity, and not cost per lead. In principle, I agree with his post. However, that said, I do believe that there are instances when you may have no choice but to measure cost per lead.


One such instance is soon after you’ve run your campaign. In the beginning, your cost per opportunity will be artificially high because it may take several weeks, even months before leads convert to an opportunity. For example, you spent $50,000 to exhibit at a trade show that generated 500 leads. One week after you uploaded your leads, sales converted 5 leads to opportunities. That means your cost per opportunity is $10,000 (cost per opportunity=$50,000/5). You might find that after 3 months, sales converts a total of 250 leads into opportunities. That means your cost per opportunity has decreased to $200 per opportunity ($50,000/250). If you need to make decisions around marketing spend and don’t have the time to wait 3 months to determine the true cost per opportunity, then I would use the cost per lead.


If you want to remove the sales variable from your metrics, than I would use cost per lead over cost per opportunity. In other words, your cost per opportunity is closely tied to your sales team’s ability to quickly and effectively convert leads to opportunities. There may be instances where you have underperforming sales teams that aren’t following up and converting leads. In these instances, your cost per opportunity data will be skewed. That said, I strongly believe in measuring marketing effectiveness by closely linking results to sales. In the end, I would track both cost per lead as well as cost per opportunity.


This is the second post in a series of blog articles on Marketing Metrics that Matter:


Part 1: Cost per Lead Metrics: The How, When, and Why
Part 2: Cost per Qualified Lead: Turning Lead into Gold

Tags: b2b marketing, calculating marketing metrics, cost per lead, marketing analytics

This entry was posted on Tuesday, July 14th, 2009 at 9:48 am and is filed under Marketing Metrics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.