Common lead generation pricing models
The next question to ask is how much does lead generation cost?
In reality, it’s hard to define this figure because lead generation prices and pricing models vary tremendously.
Many lead generation companies charge based on the work done, perhaps with an hourly rate. For example, a company could charge $2,000-$4,000 per month for 40 hours of work in cold calling and email nurturing, much like an outsourced SDR service.
Another common pricing model is to charge based on results — i.e. leads delivered. This is called a ‘pay per lead’ model or leads as a service. Our advice is to stick with this option to ensure you’re getting clear returns on your marketing dollars.
What are pay per lead generation companies?
Pay per lead generation companies deliver performance-based marketing. Pay per lead generation works by establishing a mutual agreement with a lead generation agency for a “per action” fee of services. In other words, they must deliver results in the form of quality leads to get paid. Many companies like this option because they see it as low risk and cost effective.
The best pay per lead companies also filter the leads they generate and deliver only viable prospects to their clients. If any lead is not good, the agency simply replaces it. This ensures a level of predictability to the process of outsourcing demand generation as a service.
The three leading advantages of pay per lead model are:
- Fee: Only pay for the results you receive with no monthly fees or extra changes ensuring an optimized average cost per lead. This means that lead generation agencies are extra careful about lead quality since they only earn an income if their clients get results.
- Guarantee: Guarantees a consistent flow of qualified leads. Many pay per lead agencies specialize in accessing the best sources of in-market leads.
- Savings: Prevents wasting the marketing budget. You can spend a lot of money on lead generation services that don’t meet your needs. The pay per lead model prevents losses.
Understanding cost per qualified lead
So, what can one expect to spend on leads with a lead generation company? A good way is to analyze cost per lead and cost per qualified lead of various vendors and your existing approach.
Cost per lead is the gross marketing cost a company spends to gain a new lead. It is calculated by dividing the total marketing spend by the total number of new leads generated from a specific source, such as an agency.
The formula for calculating your cost per qualified lead is:
Total marketing spend / Total new leads = Cost per lead (CPL)
So, for example, if your total market spend was $20,000 and you generated 100 new leads your cost per lead would be $200.
Now, cost per qualified lead uses a similar metric, but with the inclusion of the cost of qualifying a lead. This could be marketing dollars spent on weeks of email nurturing, creating and distributing evaluative content assets, or initial discussions with a rep. As expected, these steps are expensive, which is why the cost of a qualified lead is much higher. For example, leads generated through an appointment setting program could cost thousands per contact.
As such, the average cost per lead for B2B lead generation companies in the USA can be a difficult metric to quantify because it varies widely according to several factors, including industry, quality of lead such as warm or cold, and whether it was generated through paid or organic lead generation tactics.
According to a recent study on the average cost per lead before qualification and by industry, here are examples of the wide range of cost per lead metrics in four sectors of the technology industry:
- Software development: Paid $680; Organic $510
- B2B SaaS: Paid $180; Organic $164
- Cybersecurity: Paid $411; Organic $406
- Fintech: Paid $490; Organic $413
