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Home Insider Blogs Frederic Guitton's Blog Can you estimate to value of a lead? What about the cost?
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Jun 15
2010

Can you estimate to value of a lead? What about the cost?

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Posted by: Frederic Guitton on Jun 15, 2010 09:35

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In any business it is critical to generate leads in order to acquire new clients. Marketing is the engine we all use in achieving that objective but how good are we about measuring the cost and value of a lead generated.

A simple example would be a platform that cost $340 per month and gets you 17 leads out of which you get an average of 2 leases. If you assume a value per lease to be $1000 then that $300 was converted into $2000.

  • The cost per lead is $20 ($340/20)
  • The value per lead is $117 ($2000/17)

When done this way it looks simple but we all know it is not that simple... You have to factor in time and effort as well as concessions for each lead source. I am confident that you all have a sense of what these numbers look like for you (Should I be?).

Managing these figures is very important to gauge the effectiveness of your marketing strategies and will often help remove the X factor (how we feel about it) and let us focus on what the true results are. A white paper I read recently mentioned that $36 is the average cost per lead coming from an ILS, does that sound right to you? How well do you track conversion rates?

I look forward to your thoughts!


Comments (3)Add Comment
162
written by Amanda Schneider, June 15, 2010
It's important to define what a "lead" is. A Lead should be counted only if it is a renter inquiring about your property. We all know that salespeople and current residents sometimes use the contact forms on the ILS sites to contact properties. Those are not real leads and should not be counted. Also, some ILS sites report "views" as leads, which is misleading. I'm looking forward to hearing what people report as their cost-per-lead. I hope you get lots of comments!
1610
written by Rick Hevier, June 23, 2010
@Frederic: my focus is less on cost-per-INQUIRY and more on cost-per-LEASE (@Amanda- I agree that a true lead is when a prospective customer contacts the property in some manner).

I've monitored marketing sources that were prolific when generating leads, but the cost-per-LEASE was outrageous. In fact, these kinds of sources are time-consuming with less return on the time invested than other choices.

In the end, revenue comes from a lease. At the same time, new leasing is also the result of sufficient INQUIRY traffic.

I've seen costs-per-LEASE of $150-$500 for ILSs, with print magazine in mid-$400.

Using your proposed $340/month medium generating 2 leases per month, I arrive at a cost-per-LEASE of $170. That's a heck of a deal!

3407
written by Frederic Guitton, June 23, 2010
Thank you Rick,
The cost per lease is certainly the true measurement that one should focus on. The $340 figure was theoretical. I appreciate the feed back you provided in the actual cost per lease you have observed.
A way to get to a lead value is to simply look at conversion ratio.
The point that we both agree upon is that the number is strictly driven by how many actual leases are signed. I just think too many stop to look at the lead cost without digging down to how many actual leases are signed. They end up with legacy expenses that offer 0 return even though they get leads... That cost per lead is too much smilies/smiley.gif
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