The Right Way To Charge For Lead Generation

Lead generation is important. In fact, if done right, it’s a crucial part of helping businesses grow; even more importantly, it’s the foundation for helping us create a better B2B marketplace. This makes lead generation pricing one of the most important topics in our industry and possibly one of the most complex.

The topic is not just about how much you should charge per lead, but also which model to use for your business, and how you can maximize profits for yourself and your clients. To help you understand why this is an essential subject to tackle, let’s take a look at each of the 19 main models we’ve seen companies use over the years so far.

What To Charge Per Lead | Pay Per Lead Calculation 2022

Takeaways
1. Understand Different Pricing Models: Explore various pricing models such as Pay-Per-Lead (PPL) and subscription-based options to find the right fit for your business.
2. Calculate Cost-Effectiveness: Calculate the cost per lead to determine the efficiency of your lead generation campaigns and make informed pricing decisions.
3. Consider Value Delivered: Set your pricing based on the value you provide to clients, considering factors like lead quality, industry standards, and potential ROI.
4. Effective Pricing Negotiations: When negotiating pricing with clients, emphasize your expertise, track record, and the potential benefits they can gain from your lead generation services.
5. Transparent Communication: Address challenges and expectations openly with clients to build trust and ensure a mutual understanding of lead generation pricing and outcomes.

1. Project-Based Lead Generation

This type of lead generation model is the most common. It requires you to provide a fixed price for your services, no matter how much time you spend on completing that project. Project-based lead generation can be a one-off project or an ongoing project which consists of several stages with fixed pricing for each stage.

Disadvantages: You are not rewarded based on your performance and efforts and Most clients don’t like to buy something they don’t know the final price

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2. Flat Rate

Flat rate lead generation is when you charge a flat fee for your lead generation services. This means that you get paid a fixed amount of money to generate a lead. This is usually a one-time payment and is the most common type of lead generation model. It’s like getting paid for the amount of work you put into it and not the result from it which makes sense based on the circumstances.

3. Cost Per Lead (CPL)

Cost Per Lead is a great way to monetize your own leads. A good use case of this payment model is when you create a landing page that generates leads for another company. You can either sell those leads to the highest bidder or charge the lead generation company a flat fee for every lead you generate for them.

4. Cost Per Acquisition (CPA)

Cost per acquisition is the ideal lead generation pricing model if you have a set budget. CPA is a pricing model where you only pay for leads that acquire your product or service. This model is ideal if you have a set budget or are testing new products and services. By using CPA, you can attract new customers and expand your company’s reach.

Charging for lead generation services can be a tricky aspect of freelancing. To navigate this challenge, take a look at our article on How to Charge for Lead Generation: 14 Tips. You’ll find practical advice on setting fair rates and effectively pricing your lead generation services.

5. Cost Per Mille (CPM)

Cost per mille, or CPM, is a term used in advertising to measure the cost of 1,000 impressions. In lead generation, this can be used to calculate the cost of 1,000 impressions. The formula for CPM is CPM = Total Budget/Number of Impressions*1000.

As an example, if you spend $500 on 1 million impressions, your cost per thousand would be $500/1 million*1000 = $0.50 per mille. This is because there are 1 million impressions and each impression costs $0.50 when divided by 1000.

6. Clicks In A Pay-Per-Click Model

Pay-Per-Click is a model of internet marketing. It is a way of buying visits to your website, rather than attempting to earn those visits organically. Pay-per-click is often associated with first-tier search engines (such as Google Ads and Bing Ads). With search engines, advertisers typically bid on keyword phrases relevant to their target market. In contrast, content sites commonly charge a fixed price per click rather than use a bidding system.

The term “PPC” can apply to paid ads on social networks, like Facebook, Twitter, and LinkedIn. However, many marketers use “PPC” specifically to refer only to paid search advertising; that is the topic we’ll cover here.

7. Cost Per Click (CPC)

Cost per click (CPC) is a payment model in which you only pay when someone clicks on your ad. Simply put, CPC means you get charged each time someone clicks on your ad. Your charge will be based on the bid price you set for that specific keyword multiplied by the quality score of that keyword. You can determine how much you’re willing to spend per click and set a maximum budget for your campaign.

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8. Pay For Performance Pricing Model

One of the major benefits of this model is that it incentivizes the lead generation agency to do a better job. If they’re only being paid when a sale is made, they have no choice but to put in their best effort. The risk for your client? None.

With this model, you will be expected to provide high-quality leads who are more likely to convert into sales. You’re not just going to slap together a generic email list and hope for the best if that’s all you’ve got, you might want another way to charge for lead generation services. It can be risky if the client ends up paying for a lot of leads that don’t convert.

Then again, if you end up doing such an amazing job that their sales take off like never before, then everyone wins!

9. Revenue Share Lead Generation Model

In a revenue share model, you pay your lead generation partner a percentage of the revenue you receive after closing a deal. This model is risk-free because if you don’t close the deal, like in other models, you don’t have to pay anything.

For example, let’s say that an insurance company wants to enter into a revenue share agreement with its lead generation provider. The company sets their rate of 5 percent per deal closed for qualified leads provided by the provider. If the lead generation partner sends 50 business opportunities (qualified leads) and 15 successfully buys insurance from them, they get paid 7500 dollars at 5 percent rate.

10. By The Hour

Pricing by the hour is a way of charging for your services that’s solely based on how much time you spend working on the project. You don’t have to worry about whether the project succeeds or not, because you’re only concerned with your time spent. The con: If it takes you longer than expected to get things done, you could lose money.

Plus, if there are any emergencies or problems with the campaign, and you have to work extra hours under pressure you can be compensated for that as well! And if any of these situations arise (which they will), the client can see exactly where their money is going each month.

11. Hybrid Model

In this model, you set different prices for different types of leads. For example, if you run a company that generates leads for law firms, you might sell: Personal Injury Leads – $100 per lead; Real Estate Leads – $125 per lead; Bankruptcy Leads – $150 per lead; The Hybrid Model works on a two-fold basis; You can charge more when generating high-value leads that require multiple services and resources to generate. It allows you to pass on the savings when generating low-value leads that don’t require as many resources.

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12. Tiered Pricing Model

Tiered Pricing Model is a pricing model that you can use in three different ways: You can choose to set a fixed price per lead. Then, there are other variables like geography, industry, and the lead profile that drive the price of each individual lead: You can also choose to charge a lower fee for the first few leads and deliver to get prospects started with your product or service.

Then, you can increase fees according to certain performance metrics (e.g., number of conversions) that drive your business growth.

You can create a sliding scale fee structure where clients pay more per lead as they buy more leads from you. For example, client A buys 10 leads in month 1 but 50 leads in month 2 and 100 leads in month 3. So their cost per lead will decrease over time with an increased volume of sales.

Advantages: Tiered Pricing Model allows businesses to offer maximum value at minimum prices so that clients have an incentive to try out their product or service without having high expectations from the first few deliveries. It also makes it easier for businesses to manage expectations by offering them lower prices for fewer leads initially and then charging them more when they’re ready for bigger commitments!

13. Volume Discount Model

The volume discount pricing strategy is a pricing strategy wherein the seller rewards the buyer for buying in bulk. For example, you can buy a pack of 10 units at $1 per unit or buy 50 units at $0.75 per unit. This strategy can be used to attract large buyers and encourage bulk purchases.

Furthermore, it can be used by companies that are not looking to generate immediate revenue but are interested in building up long-term client relationships through repeat sales. The volume discount pricing strategy is often used in conjunction with the penetration pricing strategy, which involves setting a low initial price while competing aggressively on other grounds like the quality of service delivered or product performance to gain market share.

14. Retainer Based Lead Generation Model

Retainer-based lead generation model is also called “pay for performance”. If a client wants to pay you on a monthly basis, it means that he/she claims that you will generate qualified leads and sales appointments for them every month. Nevertheless, there are some other types of businesses that can be profitable for you if operated in this way too.

There are several reasons why this model is perfect for clients: They have a fixed cost in their budget every month; They get more flexibility since if they want to change the number of leads they get per month, they can do it by simply changing the amount of money they pay; And they don’t need to worry about managing your work or making sure that everything goes well.

15. Value-Based Pricing Model

If you’re charging for lead generation based on what it’s worth to your clients, rather than its cost to you, that’s value-based pricing. This could be hourly rates (so much per hour), or based on the size of their audience or the amount of traffic you send to their site.

Many agencies report that this is the most effective charging method for them. If you know the impact of your service and can place a dollar figure on it, value-based pricing works best. You also don’t need to worry about how many hours you spend working with your clients (and if they get upset because all they see is how many hours you’ve spent in their account.)

While outsourcing has its benefits, there are situations where freelance lead generation should be handled in-house. Explore the reasons behind this choice in our informative piece on 12 Reasons Why You Shouldn’t Outsource Lead Generation, and gain insights into making the right decisions for your lead generation strategy.

17. Incentive Based Pricing Model

The incentive-based pricing model is primarily used to entice consumers to buy more. It’s commonly seen in retail stores and restaurants. For example, a restaurant may offer two dinner entrees for the price of one and a retail store might incentivize shoppers with the promotion of “Buy Two Get One Free.”

In B2B, this approach can be used through referral programs or discounts for early payment of invoices. When deciding on your models, it’s important to consider whether the incentive you offer will help your business achieve its goals (e.g., moving inventory, encouraging long-term partnerships, etc.).

17. Subscription-Based Pricing Model

Subscription-Based Pricing Model: A type of pricing model that charges a customer a recurring fee for a service or product. Examples: Netflix, Amazon Prime, and subscription boxes.

Advantages: Recurring revenue. You know how much you’re going to make each month. This is incredibly important when it comes to budgeting, hiring, and scaling your business. Predictable income is another advantage. When you know what you’re making each month from subscriptions, it gives you the ability to budget accordingly and forecast future earnings (more on this later).

It helps with retention as customers are more likely to stick around in order to get the most out of their subscription fees being paid on a monthly basis.

18. Pay Per Call Marketing (PPCM) Pricing Model

Pay-per-call marketing (PPCM) is a form of lead generation that guarantees the lead generation company a certain amount of money in return for sales calls. This pricing model is based on the concept of cost per acquisition (CPA), which means that you as a business owner don’t pay for advertising space but instead pay only when you receive a qualified lead.

The main benefit to Pay Per Call Marketing is that it eliminates guesswork and provides certainty about what each sale will cost. You know exactly how much value your leads are generating and have no surprises at the end of the month.

In addition, PPCM encourages advertisers to be more creative with their online strategies because they are rewarded when people contact them directly rather than just clicking through an ad or landing page on another website. Unfortunately, there isn’t really any downside to using this model except perhaps having less control over who sees our ads or how many times they’re shown.

19. Price Skimming Method Of Lead Generation Pricing Strategy

The price skimming method is a decent choice for a lead generation pricing strategy. It works in three stages. First, you set the highest rate possible for your product/service (i.e., how much your early adopters will pay). Next, you decrease the rate to attract more customers as time goes on. Finally, you lower your prices even more over time and continue to do so until they reach a point where they match what competitors are charging.

Let’s say that you own an online store that sells backpacks and want to test out the price-skimming lead generation pricing model which I’m not saying is the best pricing model for lead generation by any means. You start off with a high price tag of $250 per backpack and then gradually lower it as time goes on until it reaches an industry-standard $50 per unit or less. By doing this, you’ll be able to generate leads that have a greater lifetime value after making sales at the end of each “price skimming” period. You should be aware that some potential drawbacks exist when using this pricing strategy:

You may have trouble getting early adopters if your price is too high. This might limit early revenue because there are fewer customers willing to buy at that point. Some people may think you’re engaging in predatory behavior if they feel like they were tricked into paying a higher rate than they would have otherwise had to because they weren’t aware of how much your prices would fall (or rise) over time.

Final Thoughts

In the end, what really matters is that you’re providing value to your clients. If you know this, then everything else will fall into place.

At the end of the day, it’s their decision to pay for your services. If they feel that your services are too expensive and would like to negotiate a lower price here are some suggestions: Offer more flexibility with larger projects. For example, if they don’t want to pay upfront fees and want more flexibility with payments over time, offer them a discount on a larger project in return.