The Value of Business Goals
What is the value of a lead to your business?
It’s not a question people often ask. The most common answer is “My cost per leads is $x.xx.”
But that doesn’t answer the original question. It tells me what it cost you to acquire the lead but it doesn’t tell me how valuable a lead is to your business.
Assuming you know your “cost per lead”, the follow up question must be “Is this good?”
Everyone has seen adverts claiming they are generating leads for 25¢ or some other low figure.
Is that good for your business? Are those leads helping you grow?
All analytics and ads platforms have built in “Goal” or “Conversion Tracking”, where you are prompted to assign a monetary figure to a goal.
The majority of setups that we see fall into the bucket of “having no value associated to a goal” or they are using an arbitrary figure like $10.
Let’s have a look at how you can accurately use data to determine the value of a goal or conversion for your business and use it to make data informed decisions.
In our hypothetical scenario, we are tracking people who sign up for a 14 day free trial of our SAAS platform.
We are running paid ads and remarketing to a specific audience which generates 200 people to sign up for a free trial.
Of those 100 people, 10 of them purchased our product on a 12 month contract. The total value of those sales is $10,000.
Here is the calculation to calculate the value of our goal. (free trial in this case)
Total value of sales / total number of leads = value of goal.
$10,000 / 200 = $50
In our hypothetical scenario, we can see that a free trial is worth $50 to our business. As well as knowing what the conversion is worth to the business, we now know what price we can afford to pay per free trial generated.
You will need to adjust this calculation month to month as more goals and purchases occur. It is possible to automate this calculation using spreadsheets or different dashboarding software.
Once we have this information, we can use it to start asking lots of data driven questions as well as identifying areas for improvement such as:
- What if the cost per lead is higher than the value of the conversion?
- What is the lifetime value or LTV of a user and how does that impact the value of a goal?
- If your goal or conversion is a newsletter signup, white paper download or webinar opt in, what did it cost you to create that resource?
- How can you increase the percentage of people who opt in to buy?
- How can you lower the cost to acquire a lead?
- Are you working on something that is not adding any value?
By Dan Wheatley, Co-Founder
CEO/Co-Founder of Straight Talk Consulting, a business consultancy that gets our hands dirty. We work with organisations to achieve product market fit before transitioning into scalable and repeatable growth