How Much Does Lead Generation Cost? [+How to Optimise It]

If you’re wondering how much lead generation costs to see if your campaigns are a good use of your cash, read on—

We’ll show how to determine a lead cost and how to optimise it to ensure the sustainable growth of your business.

What are lead generation costs?

In simple words, lead generation costs are all the expenses incurred to get one lead. For example, if you spend $1,000 on LinkedIn ads and buy a cold calling list for $1,000 to generate 100 leads, your lead cost is $20. 

Here are other types of lead generation costs to consider:

1. Using lead generation tools

It lets your sales teams get rid of the manual labour involved with generating qualified prospects, which significantly speeds up the sales process. The tools may include marketing and email automation platforms, CRMs, sales intelligence platforms, and more.

2. Buying lead lists

Buying qualified lead lists may be a boost your company needs to grow. However, the lead quality varies depending on the B2B data provider. It is a good idea to purchase leads verified by humans because accurate data produces the highest ROI.

Getting outdated contact lists from unreliable companies is simply a waste of time and money.

3. Lead generation agencies

You don’t have to build a team of lead-gen specialists in-house. You can outsource your lead generation efforts to marketing specialists and tap into new lead sources. But the downside is that you might be getting non-exclusive lead lists. To lower lead price, pick services that prioritise lead quality rather than quantity. 

Check out the best lead generation companies.

4. Paid ads and promotion costs

These types of lead gen costs involve social media marketing, email marketing google ads costs, etc. The budget for digital ads can be a significant cost of your lead generation efforts. It also involves the cost of salaries of a team of marketing specialists who run and monitor the campaigns.

5. Funding incentives and immediate rewards

Nothing adds a human touch to lead generation like a personalised gift sent to your most valuable leads. There are plenty of gifting platforms that deliver physical gifts or experiences to your target customers around the world. 

At Cognism, we have run a campaign in which the incentive was a hardcover copy of Diary of a first-time CMO—a book by our CMO, Alice de Courcy, in which she shares her experience.

6. Hiring and training marketing specialists 

This type of cost involves paying experts in-house who have the necessary experience and know-how to run campaigns on different platforms and learn your product inside out. It is a great investment, but it might take time to hire and train the team properly.

How to optimise the cost of lead generation?

Most business owners don’t want to spend a lot of money on leads or, better still, get them for free. But effective lead generation campaigns require funds. If you find that the cost per qualified lead is higher than the lead’s value, it means it’s time to redesign lead generation strategies. 

Check out the best tips for optimising lead generation cost:

1. Use a high-quality lead data provider

Instead of creating a database of prospects manually or, worse, purchasing generic lead lists online, buy a compliant contact database from a reputable provider. Different providers source their leads differently, which impacts the lead cost—inaccurate data means higher CPL.

Cognism is one of the best lead providers because we make sure our company and contact data is up to date and compliant. We provide B2B emails and verified cell phone numbers so you can email CEOs and speak to decision-makers in companies directly. 

Here's what one of our customer's says 👇

3. Target leads when they are ready to buy

Sometimes lead gen cost is not just about the channels and how you distribute the message. It’s more about intent. Considering the fact that only 3% of leads are ready to buy and up to 7% of them are open to it, even the best sales pitch will fall flat if you don’t reach the “buying now” segment. 

To find qualified leads that are actively looking for your or your competitors' solutions, use intent data tools and sales triggers. Both help you combine "who" with "when" and amplify your sales and marketing efforts.

💡Lower your lead generation costs with targeted email lists:

• CMO email lists
• CFO email lists
• C-level executives email lists
• IT-decision-makers email list
• CTO email lists
• Marketing directors' email lists

4. Narrow down your target audience

It’s hard to get optimal CPL when targeting broad audiences with the same messaging. A clear understanding of your ideal customer profile and different audiences’ pain points and needs improves the cost-effectiveness of our lead gen efforts and ensures a quicker return on investment.

Depending on the size of your audience, adjust the campaign’s objectives—are you aiming at reaching a broad audience or conversions?

5. Adjust ad frequency and messaging on different channels

Analyse if higher ad frequency translates to higher company revenue. You might notice different patterns for different campaigns or channels. For example, Canberk Beker, Cognism’s Head of Paid, noticed higher ad frequencies might cause ad fatigue in the social proof ads but not in product value ads.

That’s why it’s important to diversify content for different channels—the audience intent on LinkedIn is different from Facebook or Instagram.

6. Use inbound marketing methods

SEO content marketing is a great way of capturing qualified leads who are more likely to convert. For example, you can create an organic content strategy that aims at attracting leads with high purchasing intent. BOFU content, like comparison pages and listicles, allows you to simplify your sales funnel. It has a low lead cost if your content is evergreen.

You can offer different types of content—from video to podcasts—for every stage of the funnel and nurture contacts through to the sale. It doesn’t always have to be a landing page with gated content!

7. Improve your landing pages design

If you’re paying for traffic on any channels, make sure your landing page is optimised for conversions. Make sure you’re using above-the-fold space and sidebars. Try out different messaging, such as product-led, social proof, etc.

Test the landing page before launching! For example, you can show it to someone and ask if they understand the offer at first glance.

8. Eliminate poorly performing marketing channels

Whatever method of capturing potential customers you choose, always monitor the cost of leads in each campaign. It will help you focus your resources on the most effective ones and get rid of those that drive up the cost per lead.

Check out the best B2B marketing tools  we use at Cognism to control and optimise the cost of B2B lead generation.

How to calculate cost per lead (CPL)?

Cost per lead (CPL) is commonly used to determine if a marketing campaign was successful. It’s a simple formula:

Total Marketing Spend / Total New Leads = Cost Per Lead (CPL)

For example, if you spend $1,000 on a cold calling list with 1,000 contacts, and only 10 people convert into leads, your cost per lead is $100:

 $1,000 / 10 = $100.

You can apply the CPL formula to any campaign, whether you run it on LinkedIn, Facebook, Google Ads, etc.

Alternatively, you can use a CPL calculator to do the math. It will also help you calculate how many leads you need to obtain profit.

What is a good cost per lead?

Generally speaking, a good cost per lead is less than your gross profit per sale. For example, if your average sale is $5,000 after subtracting costs and expenses, a good CPL should be less than that. In other words, the lower the lead cost, the better. 

In SaaS and B2B, to determine whether lead generation cost is a good deal, you can also consider your customer's lifetime value or average deal size.

Let’s follow a simple lead cost example.

If your clients spend on average $3,000 on your products or services from the time they first become your paying customers to the time they churn, and your gross profit is, say, 50%, it leaves you with $1,500.

Next, consider the rate at which your sales team closes deals. For the sake of simplicity, let’s assume they convert one in 10 leads, so their conversion rate is 10%. 

In this example, a good CPL would be below $150.

What is the average lead cost?

According to the latest Demand Generation Benchmarks Report, the average cost per lead was $198. 

But that’s a useless stat— 

Hubspot removed it from its latest reports because the cost-per-lead benchmarks vary dramatically depending on the industry you’re in. Other variables may include your target market and the competition in your sector. 

According to Marketing Charts, leads cost the most in the technology sector, followed by healthcare and finance. And the cheapest leads are in the retail industry and non-profits.

Average cost per lead by industry

Learn more about generating logistics leads and finance leads.

Average Cost of Lead per Lead Generation Channel

How much should a lead cost your business?

Lead generation is an essential part of every consumer’s journey to becoming a paying customer. It remains a top priority for the majority of B2B marketers.

But before you jump on the bandwagon and add more funds to your lead gen spending, you should know your cost per lead like the back of your hand. Otherwise, you risk paying more per lead than they are worth.