There is no metric on what a “good” closed leads ratio is, as it is different for every industry and offering. If you have a lower priced offering, you can expect a higher closed leads ratio… if you have a higher priced offering, you can expect a lower closed leads ratio.
Personally, I aim for a 1/4 ratio – meaning for every 4 leads we receive we plan to turn 1 of those into a paying customer. When we’ve worked on behalf of clients in the past, the closed leads ratio varied quite widely… a client that sold high end granite products was happy with a 1/12 ratio, as his customer lifetime value was a staggering $100k+.
To figure out what a good ratio is for you, you must first know (or estimate) a customer value. From there you can determine a profitable closed leads ratio.
Say your customer value (CV) is $2,500, and your cost per lead (CPL) is averaging around $50. You’ll need a closed leads ratio higher than 1/50 to be profitable. If your CLR is 1/20, this would mean for every $1k you spend, you can expect $2,500 back in your pocket.
That’s a pretty simplified example, but you should get the point. If we want to look at this in real life terms, we can look at metrics from a former client of ours… I won’t mention the company name out of respect, we’ll call them XYZ Solutions (they provide I.T. consulting for small – midsize companies).
XYZ Solutions had an average project fee of $42,000, and out of that $42,000 they would see just shy of $8,000 in total profit – for simplicity sake we’ll say their CV was $8,000.
XYZ Solutions was spending $3,500/month on lead generation services, in which they averaged 18 qualified leads per month. This gives them a CPL of $195.
This meant that for them to break even (but who wants to do that…), they would need a CLR of 1/41 or better.
Over a 16-month period, they saw an average CLR of 1/11 – thus meaning for every $1 they spent they could expect back $3.73 in profit. Or, in more clear terms, each month they spent $3,500 they expected to see a return of $13,050… not too shabby, right?
Also, for honesty sake, it’s important to mention their campaign was a failure for the first 3 months – barely breaking even. It took a lot of analyzing & optimizing to get the campaign as profitable as it was.