Skip to content

What is Lead Value? Definition & How to Calculate

What is a Quality Lead?

Leads are the lifeblood of any business, which is why they can be so expensive. With the immense competition in the market, lead generation has become one of the most competitive activities out there. 

A lead refers to anyone who is a prospective customer. However, as a business owner, you will want to focus your efforts on attracting high-quality leads from dependable lead sources. A quality lead is the most important ingredient in the sales pipeline. A quality lead refers to any prospect that is ready to access your services immediately, boost your return on investment, and provide a high lifetime value.


In this article, we will review what lead value means for small and local businesses like yours and how you can begin improving the quality of your leads through lead optimization strategies. 


Signpost can help your business answer all inbound customer inquiries through our mobile app and instant response features. Try our demo today and never miss a lead again!


What is Lead Value?

Defining lead value is an important step in understanding how the marketing funnel works. Lead value is defined as the value of each lead, also known as a prospect, to your business. It helps businesses to better understand their customers and what they are looking for.


Lead value helps in a variety of business decisions. For example, you need to decide whether to hire more salespeople or support staff. One way to figure this out is to run reports on sales and support, but another way is to analyze the leads that come in across all of your sources—your website, your social media channels, and your paid programs, such as Google, HomeAdvisor, Thumbtack, and more.


When you know how much each lead is worth, you can measure how much time your sales and marketing team spend working leads versus how many leads they close, and then use this information in making decisions about where you’ll make further investments. You can also see which kinds of leads are worth more than others and where you should be focusing your marketing efforts.


How to Calculate Lead Value

Lead value is a metric that simply means the value of a lead, or the amount a lead is worth to your business. It showcases the value in sales that a lead can bring to your business.


Simply put, you can calculate the lead value as total sales value divided by the total number of leads your business has. You can also calculate the value of various lead channels, such as your website, your social media channels, and your paid programs. Make sure you define the time period you are considering for the calculation as well.


For example, if you’re a contractor and you had 10 sales in the last month amounting to $150,000 in revenue, but you had 30 leads in that time, then your lead value is $5,000.


Comparing this figure with your cost per lead can also give you an insight into the value you’re getting for each dollar spent in attracting the lead, providing a more complete view of your marketing campaigns. 


Tips to Increase Lead Value & Improve Lead Quality

One of your business’s marketing goals should be to improve your lead quality. This can grow your sales returns and also the value of each dollar you spend in lead generation, as it helps boost conversion rates and profits in the long run. 


Here are some tips on how you can increase your business’s lead value.


Create detailed customer personas and segments.

Customers are not all the same. Your ideal customers, who are the most likely to use your services, are the ones who share the same demographics and psychographics (how they think). 


How do you create a detailed profile of your ideal customer? Talk to your salespeople and find out what kind of questions they ask customers to determine if they’re a good fit — then do the same yourself. Pay attention to the language they use with these potential customers and what resonates with them. This will give you insight into how you can describe your product or service in a way that is meaningful to them.


You can also segment your existing customers by using the same process. Then you’ll be able to see where there are gaps in your marketing – for instance, is there a particular segment of customers that no one is targeting? Create targeted marketing messages based on this knowledge.


Be as transparent as possible about pricing.

Transparency is key to a strong relationship with leads. If a prospect feels like you aren’t being completely truthful about the costs involved in working with your company, then they will be unlikely to trust you moving forward.


Transparency is also important because it gives your prospects the ability to make better decisions for themselves. Many professionals feel uncomfortable revealing pricing information because they don’t want to price themselves out of a sale. However, the truth is that more prospects will be likely to buy from you if they know what their options are.


If you are transparent and honest about pricing, your prospects will more likely build trust in you and your business, and be much more likely to refer their friends and colleagues.


Don’t over-promote with incentives and gifts.

Lead generation is a numbers game. This means that, as a marketer, you have to be willing to spend hours upon hours sending emails, making calls and even sending out direct mail pieces. Some of your leads will be terrible, others will be pretty good, and a few of them will be great.


If you are looking for ways to improve lead quality, then don’t go overboard with the incentives. Your customers are interested in you because they want to know about your products or services, not because they always want a freebie. If you give them a freebie too soon, you may be perceived as just another spammer, and the quality of the leads you get will drop.


Incentives and giveaways work best when used sparingly and at appropriate times in the sales funnel. 


Shorten your lead forms

If your lead form is too long, you can lose valuable leads and instead, get poor quality leads.


Longer lead forms are more likely to be abandoned by visitors, because they don’t have the time or motivation to fill them out.


However, short lead forms also have consequences.


For example, if you get someone who barely spends any time filling out your form and clicks submit right away, you won’t be able to segment your leads according to criteria like income or interest level—information that can help separate qualified leads from unqualified ones. 


This form does not provide the prospect with any drop-down selections of what services they need or what they are looking for, preventing the business from accurately segmenting the lead. The prospect must also write in their own message, which may cause them to leave your website. 


Make sure your lead form is short and easy to fill out, but includes critical information. Don’t make them work too hard to give you their information.


In this example, notice the drop-down menu for “Reason for Contact”. This form is succinct and provides the relevant information your business may need. You can find more examples of effective lead capture forms here!

Gain More Qualified Leads with Signpost

All leads are not created equal, and neither is the value of your leads. Knowing your lead value can go beyond just being a number by helping your sales team stay on top of sales goals and boost your total revenue in the long run through a stronger digital marketing strategy. 


The process of selling products or services can be long and tedious, but with Signpost, you can shorten the distance from lead generation to sales conversion by providing potential customers with the best and most responsive customer experience. 


Signpost can help your business answer all inbound customer inquiries through our mobile app and instant response features. Try our demo today and never miss a lead again!

Related Articles

SMS Marketing 101: 4 Hacks to Connect with Customers

What is SMS Marketing? For many local businesses, SMS Marketing (short for Short Message Service Marketing) may seem like a complicated or near-impossible task. This tactic of marketing simply involves the use of text and…

5 Best Answering Services for Small Businesses in 2023

Answering services allow small businesses to provide a great customer experience to everyone who calls in. Choosing the right one can be difficult, with a variety of options. By focusing on the benefits that are…

Everything You Need to Know about SMS Short Codes for Texting

On average, Americans check their mobile phone about 344 times a day! SMS short codes might be one of the reasons why.