Lead Generation Pricing: Factors, Models, and Costs
- Lead generation costs are impacted by the budget allocated for lead generation, the target audience and its accessibility, the channels used for lead generation, the software and tools utilized, and the expertise of the marketing team or agency.
- One advantage of in-house lead generation is the direct control over the process while a disadvantage is the need for significant investment in hiring and training personnel.
- A lead generation agency can fullfil the service thanks to their expertise very well but they often lack industry knowledge, resulting in the delivery of low-quality leads that are simply not a good fit.
Imagine you are the head of a creative agency that primarily gets clients via events and referrals. Now, you’re ready to invest in lead generation to grow your customer base and of course, increase revenue.
As you’re planning your strategy, some questions keep plaguing you such as:
How much will it cost?
How much should you budget?
Do you generate leads in-house or hire another agency?
What’s the average cost per lead?
Have you ever been in this position? If so, then you’re not alone. These are common lead generation pricing FAQs that give agency owners sleepless nights. The truth is: there’s no one-size-fits-all answer. Several factors will determine the costs of sourcing leads for your business. But you can’t just budget any amount and call it a day.
You need to carefully break down and analyze the costs involved in generating leads before allocating a budget. This will lead to a higher chance of finding high-quality leads, and getting the best return on your investment.
In this guide, you’ll learn more about the costs associated with generating leads in-house and via an agency. I’ll also share some lead generation agency pricing models and things to consider before hiring a company.
Factors that influence lead generation pricing
Here are some factors that have a direct impact on the costs of getting leads.
This is the amount you allocate for lead generation. Companies with big budgets can afford to hire agencies and spend thousands of dollars across different channels.
But if you’re working with a small budget, you don’t have that luxury. As such, it’s best you manage your resources efficiently to get the best results.
The nature and size of your target audience can have a big impact on your lead sourcing costs.
Are you targeting a broad audience?
Do you have a specific niche market?
Is your target market easily accessible?
These are questions you should consider when analyzing the costs of generating leads.
The channels you use for lead generation also play a role in pricing. Each marketing channel has different costs associated with it. As such, you need to factor this in when choosing which channels you want to use to bring in potential customers.
For example, a digital marketing agency using SEO and content marketing to generate leads will spend less money compared to a web design agency that relies solely on Google and Facebook ads.
Tools like customer relationship management (CRM) software, a client portal solution, or a white label form builder helps to streamline the lead generation process. While some are free, you might need to pay for those that have advanced features.
If you have a small marketing budget, you can start with tools that offer free plans like HubSpot CRM, Google Analytics, and Mailchimp; then upgrade to a client portal such as SPP.co as the need arises.
You’ll save costs on hiring if you already have in-house marketing experts. Otherwise, you may need to partner with a lead generation agency.
If you do opt to go with an agency, it’s important to consider their level of expertise and experience in your industry. Of course, an agency with a proven track record will charge more.
Now, let’s take a look at the costs involved in generating leads in-house and via an agency.
In-house lead generation
This entails creating and implementing lead generation strategies within your organization. You use internal resources, software, and personnel to find and convert leads into clients for your agency.
Here are a few lead generation challenges to keep in mind, including their pros and cons.
You have direct control, transparency, and visibility over the entire process of lead sourcing.
You can tailor your strategies to fit your business.
Allows for flexibility and customization, as you can experiment with different tactics and channels to find what works best.
Higher chance of getting qualified leads as you have more product or service and customer knowledge.
Requires significant investment in hiring and training skilled personnel.
Low-quality leads if staff lack experience or are not adequately trained.
Requires more time to build a sales funnel from scratch.
You bear the cost of software, salaries, paid ads, and equipment.
May take time to optimize your strategies and achieve desired results.
Costs involved in generating leads in-house
There are various costs associated with in-house lead generation. Though they can vary depending on your business size, industry, target market, and the strategies you use. Let’s look at some of them.
Hiring and training: costs involved in hiring and training employees such as recruitment fees, onboarding fees, salaries, training fees, and employee benefits. Of course, hiring experienced marketing professionals who don’t require training will be more expensive.
Skill Development: training and professional development costs to boost your team’s skills.
Equipment: the more employees you have, the more tools, software, and hardware you’ll need to purchase.
Software and tools
Customer Relationship Management (CRM) systems: costs involved in setting up a client relationship management system to store and manage leads data, track interactions, and automate workflows. Examples include Hubspot, Salesforce, Zoho, and Pipedrive.
Marketing automation tools: According to Ruler Analytics, 80% of marketers are convinced that marketing automation helps them generate more leads. This shows how important automation tools are in streamlining your lead gen processes. Examples include MailChimp, Marketo, Keap, and Hubspot.
Analytics and tracking tools: expenses associated with tools to measure and track key metrics such as website traffic, conversion rates, click-through rates, content performance, and conversion rates. Examples include Google Analytics, Kissmetrics, Optimizely, Semrush, and Mixpanel.
Conversion Rate Optimization (CRO) tools: budget for CRO tools to analyze and optimize lead generation efforts. Examples include Crazyegg, Google Analytics, and OptinMonster.
Content creation and advertising
Content creation: costs associated with creating engaging, high-quality content, such as social media posts, email newsletters, graphic design, videos, and infographics.
Content distribution: expenses involved in distributing your content through relevant digital channels such as social media, email, website, and relevant groups.
Advertising: budget for running paid advertising campaigns such as Google Ads, social media ads, programmatic ads, and influencer marketing.
Lead generation campaigns
Lead magnet creation: cost here involves creating a lead magnet—a free item or service you give in exchange for a prospect’s contact information. Examples include e-books, whitepapers, guides, checklists, and webinars.
Lead capture tools: costs associated with tools to capture prospect information and generate leads such as landing pages and form builders. Examples include Leadpages, Unbounce, and ClickFunnels, and SPP’s form builder.
Remember, the costs of generating leads in-house can add up quickly. So it’s essential to keep track of your expenses so it aligns with your budget and growth objectives.
Hiring an agency
Businesses that don’t have the required skills and manpower to source leads in-house, do the next best thing—partner with lead generation agencies.
You get to work with experts who are well-grounded in lead generation.
Saves you the stress of hiring, training, and managing a team.
You don’t have to purchase software, equipment, or tools as the agency already has everything in place.
Outsourcing allows you to focus on other core activities like product development, customer service, or even physical networking.
You get weekly or monthly reports on lead generation activities.
Some agencies lack industry knowledge. So they may not understand your product or service and your ideal clients, which will result in low-quality leads.
Little or no control over the lead sourcing process.
Communication gaps can prove to be an issue over time.
When you stop paying, you stop getting leads.
Types of lead generation agencies
There are four main types of lead generation agencies:
Traditional marketing agencies: these types of agencies use traditional marketing methods such as television or radio ads, billboards, print, and direct mail to source leads for businesses.
Digital marketing agencies: these agencies use online channels such as social media, search engines, content marketing, paid ads, and email marketing to generate leads.
Pay-per-lead agencies: these are strictly lead generation companies that charge based on the number of qualified leads they help their clients generate.
Appointment-setting agencies: these organizations go beyond generating leads by helping businesses schedule appointments with interested prospects.
Lead generation pricing models
Agencies use different lead generation pricing models to charge for their services. Here are the most common ones.
Cost Per Lead (CPL)
This pricing model involves agencies charging based on the number of leads they generate for your business. Research by DeTorres group shows the average cost per lead is $198. However, it can also vary depending on your industry, company size, company revenue, and marketing channel.
For example, the cost per lead for marketing agencies is $173 while a company size of 51 –200 people averages $180 per lead.
Here’s a comprehensive overview of the average cost per lead by industry, company size, and company revenue:
An example of a company using cost per lead pricing model is ServiceDirect.
Cost Per Appointment
Agencies that use this pricing structure charge based on the number of appointments they schedule for you. Typically, it costs more than CPL because the leads are sales-qualified.
Expect to pay an average of $150 to $350 per appointment. Again, the prices vary depending on your industry, target audience, and revenue.
Examples of appointment-booking companies are Belkins and BlueZebra.
Most traditional and digital marketing agencies use this pricing model to charge for their services. Besides lead generation, they also handle other activities like content marketing, SEO, content creation, and email marketing.
You can expect to pay a monthly retainer of $2,000 to $50,000. In addition, contracts can last anywhere between three months to five years.
Examples of agencies using this pricing model are WebFX, Ignite Digital, and Smart Sites.
Bulk data pricing
Some agencies sell data containing people’s contact information. They get cold leads from data companies, social media groups, or events.
These agencies charge you based on the number of leads they provide. Though these leads cost less to purchase, they mostly result in low conversion rates because of their poor quality. As such, it’s not recommended to buy them.
Costs involved in hiring an agency
Setup and onboarding
Some agencies may charge an initial setup or onboarding fee to cover the costs of getting your lead gen campaigns up and running. This may include activities such as account setup, campaign creation, and integration with your existing software.
Agencies have different pricing structures for their services. Some include monthly retainers, project-based pricing, or revenue-sharing.
Finding new leads organically is never enough. Sometimes you need to run paid ads to reach a wider audience. As such, promoting your business on Google Ads, social media ads, and other paid channels will attract extra fees.
If your business requires specific lead generation strategies, customized campaigns, or extensive research, the agency may charge additional fees for these services.
Contract length and commitment
Agencies have different contract terms and requirements they charge their clients with. Some offer flexible per-month contracts, while others require longer-term commitments.
Grow your industry knowledge
Some agencies may demand to make a three to six months’ payment upfront before commencing work. Ensure you’re aware of the contract terms and conditions before putting pen to paper.
5 things to consider before hiring a lead generation agency
Selecting the wrong agency will cost you time, and money. Here are five things to keep in mind before hiring a lead gen agency.
Before choosing an agency to generate leads for your business, research their expertise, track record, and ability to deliver results. Look for social proof like testimonials and case studies to learn how they have helped other clients.
2. Industry knowledge
You’re better off partnering with an agency that specializes in lead generation in your industry rather than a generalist agency.
How well do they know your industry and understand your target market? Are they familiar with the lead generation channels and tactics that are most effective in your industry? These are questions to keep in mind when choosing an agency.
3. Communication and collaboration
Communication is crucial for any business partnership to thrive. So, before hiring any agency, evaluate their communication style and responsiveness. For example, Outreach Magic, an appointment-setting agency uses a dedicated client portal for seamless onboarding and day-to-day communication with its clients.
Also, assess their eagerness to collaborate with your internal sales team, listen to your feedback, and adapt their strategies based on your business goals and requirements. It will go a long way in ensuring the success of your lead generation efforts.
4. Reporting and analytics
Reporting helps you track and measure your lead generation efforts. A reputable agency will provide regular data on the performance of your lead generation campaigns.
Therefore, you should ask about their approach to reporting. Also, inquire about the metrics they measure and the reporting frequency. Bonus points if they can provide actionable insights to optimize your marketing campaigns.
5. Contract and terms
Review the agency’s contract terms before signing any contract. Look out for crucial information like confidentiality, data ownership, intellectual property rights, and termination clauses. It will help to avoid any future legal problems.
Generate qualified leads and scale your business
Lead generation is the lifeblood of any business. According to the aforementioned recent Ruler Analytics survey, 91% of marketers say generating leads is their most important goal. This shows how crucial it is to B2B marketers and business owners.
But clearly understanding the lead generation costs associated with doing it in-house or hiring an agency will lead to even more success. This way, you can set more realistic goals and measure the success of your lead sourcing campaigns.