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Pay-Per-Lead - More Cost-Effective Than Advertising
Many businesses find that Pay-Per-Lead is more cost-effective than press advertising such as magazine advertising as it produces guaranteed results and the average cost per lead is lower.
With advertising you pay a fee upfront and there is no guarantee of the number of leads the advertisement will generate. With Pay-Per-Lead you only pay when you receive a lead and the average cost per lead is lower than magazine advertising according to data from independent research.
Cost per lead for each publication calculated using following formula:
Price of half page ad / (circulation * average response rate)
Average response rate for magazine advertising: 0.17% (source: The DMA 2005 Response Rate Report)
Minimum investment figure is upfront cost for half-page ad not including design costs
Response rates may vary for each individual publication but none of above publications have accurate response rate data so industry average from DMA report used.
Calculate Your Return On Investment (ROI)
Please use the calculator below to calculate your Return On Investment:
Example:
A direct mail company buys leads off The Seed for £16 per lead. It converts 5% of leads into new customers. The average lifetime of a customer is 5 years. The average number of orders per customer per year is 2.25. The average value of each order is £2475. Therefore, the average lifetime value of a customer is £27,843.75. This means that for every £500 investment at The Seed they will get a £43,505.86 Return On Investment (ROI)! That is a 8701% ROI!
As you can see from above example it is important to assess the lifetime value of a customer when calculating ROI. Remember, you only pay once for a lead but each new customer is potentially a customer for life that could go on to buy off you every year, every quarter or even every month.
It also illustrates the point that it is important to not judge the quality and ROI on just a handful of leads. The benefit of The Seed is that it works on a fixed price per lead model. It is logistically impossible to judge each lead on its individual merits and adjust each lead price accordingly. The cost per lead is therefore calculated as a median value that reflects the fact that some leads will be exceptional quality and some leads will be of poorer quality. In most business categories this is what you can expect:
50 Leads - Breakdown
- 5 – 10 Below average quality
- 5 – 10 Average quality
- 20 – 35 Above average quality
- 5 – 10 Hot leads! Exceptional quality
(Source: Customer Survey 2005)
For this reason, we recommend to our customers to allocate a budget for 50 leads and then judge the quality and ROI over the full range of leads. After all, even 1 new customer could potentially pay back the investment! If 50 leads is too many, we strongly advise customers to buy at least 10 leads in order to be able to make an informed decision about whether they wish to continue using the service.
