How do you explain why leads are worth a $$$ amount if you know the conversion rate?

Discussion in 'General Marketing' started by cosmolito, Sep 11, 2010.

  1. #1
    My client was asking me the other day why she would by a lead from me in case it goes nowhere...

    I tried to explain because most of them will convert. But then she said well why would I pay for the ones that dont and I didn't do a very good job of convincing her why it is a good idea.

    Here is the beginnings of an email I am trying to write to her:


    You said that out of every 10 leads you get, you sell about 7 houses. This means you have a conversion rate of about 70%

    This means if you had 20 leads, you would sell around 14 houses - 70% conversion rate.

    So what is a lead worth to you if you are making 7 sales out of every 10 leads that comes your way. Well, with a 70% lead conversion rate, they are worth a LOT to you because you only need to talk to a couple people before you've made a sale or two!

    And lets say you make $2000 on each sale. Then that means if you talk to 10 leads, you will make on average $14,000. (7 x $2000 = $14000)

    What if you had to pay for those leads?

    Well then you would have to factor in marketing expenses.

    Say you had to spend $350 per lead for 10 leads (10 x $350 = $3500), but converted 70% of them into sales (7 sales x $2000 = $14000). Well you would have to subtract the cost of the marketing from the overall sales to see what the profits were to your business:
    $14,000 - $3500 = $10,500 profit

    Would you say the marketing costs were worth it? What would you say the average value of a lead was to you then? Wouldn't you throw money all day long at leads that made you that kind of money?

    Yes, it is true you worked on 3 that went nowhere but the work you did on them was paid work because of the other 7 that proved profitable.

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    Please tell me if there is a more concise way of explaining this that is ABSOLUTELY irrefutable. What is the argument that is logically impenetrable?


    Thanks yalls
     
    cosmolito, Sep 11, 2010 IP