The ins and outs of lead generation for your business, and the cost of acquiring new customers boils down to one thing: how much each new customer costs to acquire…
Today, I’m looking at the difference between new leads and old leads, considering the balance of starting from scratch and reigniting old leads, and the benefits of including both in your lead generation strategy.
The balance between brand new leads and reigniting old leads: There are significantly more new leads to be found, but they come at a higher cost. And whilst there are fewer old leads that will convert, they are at a lower cost because you’ve already started the process.
So what is the cost of lead generation from new customers?
To work out the cost of lead generation, first look at your existing customers and work out their lifetime value.
For example – How long do you retain a customer for, on average? And how much is that average customer lifetime worth?
Then, decide how much you are willing to pay from that value, to generate another lead that converts to a paying customer.
Bear in mind at this point that you’re unlikely to have a 100% conversion rate, so make adjustments according to that.
For example – How many customers did you make proposals for last year? How many converted to paying customers? What was your overall marketing investment in that same period? Now take this total spend and divide by the number of customers won, and this gives you the acquisition cost per customer. Of course, you can also calculate that for cost per lead.
From here you can look at your revenue streams – What marketing activities did you take part in last year? Which activity provided the most leads? Which activity provided the highest conversion rate? (These could differ from each other).
Now it’s more clear which activity you could pay more money into, and spend more time doing – remembering that your time has a value too.
This example is based on meeting a new potential customer for the first time. Reigniting an old lead, who you didn’t get over the line should be a quicker process at a lower cost.
Reigniting old leads and how to convert them to customers
To say that it costs less to reignite old leads rather than to start one from scratch is a bit misleading because at one point you would have put that time into them as a new lead, BUT there is little sense in letting that warm lead go without reminding them that they had an interest and a need at some point. That would be a waste of your time and you business’ money.
So, reigniting old leads… Did you reflect on your experience with the customer? Were you able to gain any learns that perhaps made you change a part of your process or approach? Now’s the time to revisit those contacts that are sitting in your database, that you’ve either forgotten are there, or are hoping they’ll contact you one day.
Check in with old leads
Even if you lost that lead to a competitor, you could check in with them to see how things are going. And the important thing to demonstrate is the lesson you learned from losing the lead… Keeping your brand and your message in their sights may open a door that was left ajar.
Think again about your cost per acquisition and consider how you will approach them – Will you see them networking? Are you willing to buy lunch or a coffee for them, or simply drop an email in their inbox?
One more consideration for you on reigniting old leads – how old are you willing to go? One month isn’t old, but I wouldn’t be averse to looking back three years and contacting someone with an offer, a piece of value or a new process that was missing last time you spoke.
An old lead doesn’t always represent a hot lead, but we know from experience it’s easier to keep someone warm than to get them from cold.
A balanced lead generation strategy includes the new AND old
While it’s your decision on how to balance the number and costs of lead generation activities, I would recommend that you consider including your old leads in your marketing and sales strategy.
Old leads are more cost-effective and could lead to a faster sales cycle, plus reigniting old leads that convert is a way of strengthening your relationship with that customer. If this topic has been of interest to you, I have more advice on sales strategies in the blog, or see how I can help you by booking some free business consultation time with me on the phone.