Lead Conversion Rates: Metrics and Tips for Tracking

October 14, 2023 | Uncategorized

Lead conversion is marketing’s primary objective. Your lead generation initiatives and marketing activities must successfully turn leads into sales and business opportunities.

For many marketing professionals, lead conversion is a huge hurdle. This problem is made worse because many business owners and marketers don’t know their lead conversion rate, which means they are unaware of how well or poorly they are converting.

It is crucial to understand lead conversion and how to quantify it. Then, you can create plans to raise lead conversion rates and maximize the return on investment from your lead generation efforts.

 

What is Lead Conversion?

Lead conversion is the act that converts a qualified prospect into a lead. Lead conversion can also be thought of as any time a prospect moves from one step of the lead generation process to another (for instance, a lead becoming a paying client). 

Lead conversion entails turning visitors into leads by utilizing a variety of strategies. It may take various tactics to turn qualified leads into customers. 

On their journey from leads to customers, leads go through several processes.  The conventional conversion procedure comprises nurturing:

  • Website visitors who convert to leads
  • Leads that are qualified for marketing purposes (MQLs)
  • Sales-qualified leads (SQLs) develop from MQLs
  • SQLs to become customers.

You must provide possibilities at each stage for the lead to act to proceed to the next. Every firm has a unique lead conversion process, but turning leads into customers is the end aim for all of them.

Why Does it Matter?

Every lead has a potential financial worth for your company. You can determine how many leads need to be generated to sustain and expand your business if you know the value of each lead and the percentage of leads that will turn into customers.

 

The Key Lead Conversion Metrics

These metrics are meant to assist you in measuring your campaigns’ and the teams’ effectiveness in turning leads into paying clients. Although you can use the metrics as they are, it’s best to compare them to the industry standards to more accurately gauge performance. 

1. Lead Conversion Rate

This measures how successfully you turn website visitors into leads. Divide the number of leads by the total number of visits, then multiply the result by 100% to determine the lead conversion rate. For example, if your website has 500 visits, 20 of whom complete your lead capture form, so in that case your lead conversion rate is 4%. 

 

2. Lead-to-Sale Conversion Rate

The lead-to-sale conversion rate takes the thing to the next level since it quantifies how successfully you convert leads into paying customers.  This rate is relevant to marketing and sales teams because it indicates the proportion of leads that turn into sales and generate income. You can calculate this by dividing the total number of leads by the number of converted leads (those who make purchases). If 5 of 20 leads make a purchase, your lead-to-sale conversion rate is 25%. 

How It All Comes Together

The link between these two rates indicates that the quality of leads is more important than the quantity. Marketers frequently make the mistake of judging their leads list by the number of contacts on it; if the conversion numbers need to be better, they push for additional contacts. Creating a qualification process to determine whether a lead is more likely to convert into a customer is a great starting point before running campaigns. 

 

Why Your Lead Conversion Rate is Important

Your lead conversion rate is essential because it lets you determine how much you can spend on lead acquisition. If your lead conversion rate is 5% and your product costs less than $20 monthly, you should adjust your marketing budget.

Knowing your lead conversion rate also enables you to develop a more precise financial model.

You have to project your projected future client growth while creating a model. You can create a more accurate financial model if you know how many leads you’ll receive each month and what proportion of those leads will turn into paying clients.

 

Note: It’s important to comprehend how long it takes to turn a lead into a paying customer. Depending on your product and price strategy, it may take multiple discussions, touchpoints, or nurturing efforts to convince a lead to sign the contract.

 

With that in mind, you can’t just assume that a lead will become a paying customer as soon as they schedule a meeting.

For example, suppose you own a SaaS business and your average lead conversion rate for Facebook Ads is 7%. You anticipate that your Facebook advertisements will generate 1,000 new leads every month. So, out of every 1,000 leads you receive 70, 70 will convert into paying clients.

The error might occur here.

Even if you offer a free trial, it’s unlikely that all 70 customers will convert immediately. They are still leads until they sign up for one of your premium programs.

 

What’s a Good Lead Conversion Rate?

Similar to how no two startups are alike, no two SaaS marketing programs are alike.

To find your firm’s ideal lead conversion rate, you’ll frequently need to use your own data. You can use your target Customer Acquisition Cost (CAC) and customer LTV if you still need historical data to compute these figures.

This calculation aims to determine how much money you will make from the expenditure on your marketing campaign. You will eventually run out of money if it finally costs you more to attract a customer than they would pay over their lifetime.

Suppose our PPC campaign spend is $1,000 and our customer LTV is $600. Using these figures, the chart below can be used to get an ideal lead conversion rate to keep your CAC below your LTV.

Lead Conversion Rate

# of Converted Leads

CAC

1%

1

$1000

3%

3

$333

5%

5

$200

7%

7

$143

10%

10

$100

 

Our benchmark for lead conversion rate would be 3% or higher based on these figures.

How to Improve Your Lead Conversion Rate

You’ve determined that your lead conversion rate may be slightly less than anticipated. Not to worry! You can employ a variety of tactics to raise your lead conversion rate.

The proverb “the customer is always right” also holds true when it comes to leads in the sense that the customer (or lead) should always come first.

You can only expect prospects to visit your website, complete a form, and be ready to buy after a period of time. Additionally, you must explain what they are getting from your solution and why you are the best option for them.

To increase your lead conversion rate, take into account the following tactics:

1. Nurture Your Leads Over Time

The typical number of touchpoints before a prospect considers purchasing your goods or services is seven. The “marketing rule of 7” has long been used as a benchmark to support sales and marketing operations. These rules help you decide how often you should connect with a lead.

In light of this, you should nurture your leads over time by providing them with pertinent information, product offers, sample videos, and information to help them make an informed decision. 

 

2. Align Sales & Marketing

Marketing cannot take place in a vacuum. Sales and marketing initiatives should work hand in hand so that the sales team is prepared to take action as soon as a website visitor fills out a form to download a whitepaper, webinar, eBook, or other resource.

This could be an automated email from your marketing automation platform, a phone call from a sales or business development professional, or a customized email from an account executive asking to set up a demo.

3. Create Engaging Content

Last but not least, if you don’t showcase your product, your leads won’t convert! Your website needs to be jam-packed with material that convinces potential buyers that your solution is the best option for them.

Having an up-to-date blog, social media presence, and excellent landing pages with obvious CTAs will allow you plenty of possibilities to move leads through the buyer journey.

 

Other Relevant Metrics 

There are several other variables worth looking into if you want a more thorough examination of your conversion performance.

 

3. Lead-to-Opportunity Conversion Rate

This crucial indicator calculates the proportion of your leads that become opportunities, allowing you to evaluate and enhance your sales performance. It offers advice on pipeline construction and forecasting assistance. It varies from lead to sale in that it assesses how well you influenced leads to reach a particular stage before completing a buy.

The formula is straightforward. The number of leads divided by the number of opportunities created is multiplied by 100. Industry, company, and even marketing approach all impact what constitutes a “great” lead-to-opportunity conversion rate. However, the majority of lead-to-opportunity conversion rates average around 12%. Of course, you may dramatically increase that number by changing your general approach to leads and your plan for turning them into opportunities. 

4. Cost Per Conversion

Divide your overall advertising and marketing expenses by the number of actual conversions to calculate your cost per conversion. This statistic will give you a general idea of how much you spend acquiring those conversions. Though prices vary depending on several circumstances, these metrics may not be spot on each time. However, it’s sufficient to assess your conversion campaigns’ success swiftly. Spending excessive amounts of money on something that yields insufficient results may indicate that you need to change your approach. 

5. Lead Value

To calculate lead value, multiply the entire sales value by the total number of leads in your pipeline. This broad estimate can guide your decision-making about generating more leads since it provides an approximate idea of the value that leads add to the overall success of your company. Additionally, it assists in predicting revenues and, importantly for marketers, assuring that expenditure on attracting more potential customers is justified. Simply put, it’s the lifetime worth of each lead you acquire and convert. 

6. Conversion ROI

You may calculate your return on investment for each lead conversion by subtracting the cost from the lead value and dividing the result by the cost. You end up with a percentage value that you may compare to see how successful your efforts were. Please note that this ROI is based on the supposition that your marketing effort directly caused the increase in sales you experienced month over month. This formula doesn’t take into account sales activity, which has a significant impact on conversion. 

7. Time to Conversion

The final metric you may employ is known as time to conversion (or sales cycle), and it precisely tracks how long it takes a website visitor to convert into a lead. You divide the overall number of leads by the sum of the time spent by visitors to your website. It’s an excellent technique to determine which website entry points you can improve for lead generation. It can be possible that a more extended time simply indicates that your visitors are taking their time to read your content, which is a good sign. 

 

The Bottom Line

Knowing your lead conversion and lead-to-sale conversion rates will help you assess how well your lead management approach works. Then, you may use lead conversion tactics to boost your performance and convert more site visitors into paying customers.

With MRP, you Can Expand Your Reach, Increase Engagement, and Skyrocket Your Revenue on a Global Scale. Schedule a meeting with us now!

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