Mastering lead gen is about smart spending. And the key to kickstart this? Selecting the right lead gen pricing models to double down on your marketing spend.
According to a 3-year-old McKinsey & Company survey, marketing budgets are the first to be cut off under economic uncertainties.
But this purview is short-sighted. Cost-cutting for short-term gains can have a substantial impact on long-term performance. Most leading companies have already adopted this shift.
Marketing is now widely perceived as a significant driver of growth. And stakeholders have adopted a growth mindset, one that focuses on the long-term perspective.
But with economic uncertainty constantly looming over their shoulders, CMOs must remain cautious. They must adopt a more molecular approach to their marketing spend.
CMOs have to implement an investor mindset, i.e., cut back on divisions where they’re most likely overspending. And reinvest it in segments that have the potential to drive higher long-term ROI.
However, as the very first step, they must grasp where the marketing dollars are being spent. And subsequently cut down on the fat and invest it all in the right patches of growth.
This is why understanding diverse lead generation pricing models has become widely crucial.
Lead Generation Pricing Models
The logic goes beyond just saving money. It’s about taking strategic and informed steps.
Without grasping the actual effectiveness and cost of their lead generation efforts, business leaders constantly feel that they’re leaving money on the table. There are often blind spots that result in misguided growth.
A high volume of leads doesn’t translate into sustainable and profitable growth without any context. Which channels are truly driving value, and which are generating noise?
This gap can cost you opportunities. And lead to misallocation of resources.
And logically, every dollar spent is one less dollar towards another marketing channel.
This can haunt business leaders with what-ifs- what if we had spent more money on this campaign? Could our ROI have been higher?
This uncertainty can paralyze these leaders from strategic decision-making.
Understanding lead generation pricing models helps you strategize and avoid overspending.
But this raises a widely echoing question-
How Much Should Lead Generation Cost?
The mean cost of generating leads is $198.44.
You can calculate the lead generation rate to gauge whether your efforts, outsourced or internal, are proving successful.
⇒ Lead generation rate = (Converted Leads / Total Leads) * 100
The truth is, there’s no generic answer. Lead generation pricing varies according to different markers, such as industry, agency, business model, or even brand.
It’s also dependent on other intricate elements, namely, strategy, software, tools, marketing channels, paid media, and whether agency-driven or in-house.
Lead generation pricing models (by agency)
For agency-driven lead generation efforts, some offer comprehensive services while others only help with specific segments of your lead generation.
The primary step is actually about discerning whether outsourcing lead generation from external providers is actually worth it:
- Do you require a full-service agency?
- Or merely developing campaigns?
- Or just appointment setting?
There are questions you should first address before deciding to outsource lead generation.
Then comes the cost of partnering up with an external lead generation agency. Different agencies entail varied pricing models, and the most common ones are:
1. Cost-per-lead model
In this model, clients pick and choose among actual high-quality and relevant leads.
But the definition of a qualified lead is predefined by the agency and the brand they’re partnering with. The total payment that the external provider receives is based on the number of leads that fit the outlined criteria.
Then the agency is paid a preset amount depending on every qualified lead it delivers to the client.
For the agency, there are specific risks pertaining to the campaign’s performance. They are offered incentives and directives to optimize these campaigns for lead volume and quality. This way, the provider can illustrate their value based on tangible deliverables.
Even for clients, this is quite a straightforward lead generation pricing model. Knowing the cost-per-lead, they can assess the CAC (or CPA) and forecast the potential ROI. All that the client must focus on is translating the delivered leads into profitable sales.
2. Cost-per-appointment (CPA) model
The services delivered according to this model include lead generation and appointment setting efforts. It doesn’t just require the agency to generate and capture high-quality leads. But also qualify and consistently nurture those prospects to block appointments.
The cost-per-appointment model is a relatively higher-stakes one than CPL. The payment isn’t contingent on each appointment, but a certain number (like a packet) of them, which the agency will aim to block.
The provider bases its pricing structure on successfully booking qualified appointments or even establishing a meeting between the prospect and the client’s sales team.
How does this work for the external lead generation provider?
This pricing model entails a higher risk for agencies because there’s added effort and pressure when it comes to nurturing leads. And even scheduling appointments in a timely fashion. So, they must focus on high-quality leads that are ready to meet with your AEs.
But this model works wonders for clients. They don’t need to waste time on qualifying leads, and the weight of appointment setting is transferred from their shoulder. Clients can now focus on refining their comms strategy to close sales successfully.
3. Monthly retainer model
Monthly retainers are a popular option among all lead generation pricing models. It works like a subscription service would, offering you the maximum advantage.
But the pricing differs according to the tiers, even if it’s the same provider. It typically ranges from $3,000 to $25,000, depending on:
- The company size
- The channels leveraged
- The number of appointments generated
- And any other add-ons used?
Clients pay a defined and recurring fee, generally monthly, depending on the scope of work. The scope would entail specific services (such as content creation or ad development), a particular number of leads, or a specific number of appointments set.
For lead generation agencies, this model offers a key benefit. The recurring pricing guarantees them a consistent revenue stream. It’s stable and predictable. And facilitates them to invest the cash flow into polishing their knowledge base and tools.
The service provider is paid for its effort and time, regardless of the outcome.
Why does it work?
The monthly retainer model demands a significant upfront investment. And a high level of trust. But this model is leveraged by most businesses due to a chief advantage.
The agency isn’t just siloed from the client’s organizational operations. Instead, it functions as an extension of the client. And integrates its own working into the client’s marketing efforts.
It’s a strategic partnership, not merely an investment. And works effectively for the long term.
This lead generation pricing model isn’t about give or take. But about building value and nurturing a collaborative relationship towards the same goals.
4. Project-based model
In this pricing model, the client pays for a single project (or campaign) that’ll run for a definite period and scope. It’s typically a fixed and one-time fee.
And generally comprise either a 6-month contract or a 12-month one.
The agencies break down the overall charge into two, where one-half is for kick-starting the project, and the other half is paid after the project is finished. It means that the payment could be broken down into installments according to project milestones.
But the overall pricing depends on more than just the scope or campaign length. It varies according to complexity, expected number of appointments or leads, and customization level.
Agencies don’t typically offer a fixed number upfront, which means there’s no flat fee. They must have the particulars in hand to outline the final customer quote. The final pricing model would range from basic packages to comprehensively tailored ones.
For resource planning and consistent revenue, this pricing model is predictable and advantageous, especially for a defined scope of work. But if the overall goals aren’t defined intricately, it could lead to “scope creep,” i.e., the agency ends up doing more than compensated for.
The project-based model is adopted by agencies that specialize in specific services, such as appointment-setting.
From a client’s perspective, this pricing model allows for strategic budgeting. They can either outsource a specific service for a short-term campaign or test a strategy without committing to an agency with a retainer model.
The only major ask is that clients must have confidence in the agency’s capabilities. It’s risky to an extent because the payment is often made based on project completion, not lead quality.
So, ensure collaboration with a lead generation agency that holds credible expertise in the industry. And entail the ability to offer you tangible results.
5. Commission-based model
The overall pricing is contingent on the service the agency provides, i.e., the number of appointments booked or the leads generated. It’s all dependent on the performance or results delivered to the client.
Here, the outsourced agency becomes their client’s true partner and collaborator. The agency’s payment becomes directly tied to sales, not just the number of generated leads.
But a commission-based model poses a crucial risk for agencies.
Their incentive and payment are based on the client’s ability to close sales and the total profitability of the deal. This means that the agency and the client’s incentives and goals are inherently aligned.
While the clients focus on closing deals, it’s not about generating leads. But high-quality leads that have a promising potential to convert.
Is this model truly effective?
Yes, for businesses that don’t have a huge marketing budget, a commission-based model can prove effective. But only through reputable agencies that entail the capability to take high risks.
Understanding lead generation pricing isn’t about cutting corners but rethinking your marketing investments.
Lead generation pricing models allow you to commoditize on an agency’s strategic value. It’s not just about the tangible results and transactions, but also about building a partnership.
And linking value directly with the business.
The correct pricing structure can help the outsourced agency become a partner in growth. And align the incentives with the true objective: sustainable revenue growth.
This is only possible when companies stop obsessing over the bottom of the funnel and the total ROI. Brand and commercial outcomes must be tied together. And help outline the right goals to curate a long-term growth strategy.
The final choice you make to accelerate your lead gen efforts could be a rewarding next step, resulting in high incremental growth.
But it all starts with strategic choices.
