How much should you spend on a qualified lead?
It’s budget season, so we’re getting lots of questions about how much money should be spent on marketing. What % of revenue? How much per lead? What’s the right baseline or benchmark?
Unfortunately, there is no single easy answer. And I’d argue it’s the wrong question to begin with.
Rather than ask how much you should spend on a lead, ask how much you’d be willing to spend to acquire a customer.
Remember that your acquisition cost is sales plus marketing – ideally everything material it takes to get a signature on the line that is dotted.
How much you’re willing to spend on acquisition should be based on your deal size, likely lifetime value, and a business decision on how much margin (short-term and long-term) you want.
The answer might change over time. I’ve seen some early and growth-stage companies willing to spend far more to acquire customers initially, then tighten the screws when the focus goes from growth to profitability.
Your answer might also be vastly different for small targets vs enterprise accounts.
Yes, this is harder to manage and measure. But it’s silly to focus instead only on how much you’re willing to spend on a Facebook click.