Lead generation is a key part of any mortgage or insurance broker – but knowing which metrics to track and analyzing the Return on Investment (ROI) of your lead generation strategy is a must. But, do you know how to do it? Do you know which advertising metrics to monitor?
In this blog post, I am going to show you exactly which metrics you can monitor and how you can calculate your ROI.
First things first.
If someone asked you which lead is better, what would you answer?
A $5 lead?
Or a $500 lead?
The answer is neither.
CPL vs CPA
The CPL (Cost Per Lead) does not matter. In fact, leads will not pay your wages, but paying customers will do! That’s because CPL is meaningless without context.
It's no use having 500 leads if they are all low quality and none convert. And $500 leads at a 100% close rate are unquestionably better than $5 leads that close at 0%.
Avoid measuring things in CPL. It’s irrelevant and a horrible way of evaluating marketing.
So, where do you start?
The best "Cost-Per" metric is CPA (Cost Per Acquisition) which refers to how much it costs to acquire a CUSTOMER (not a lead).
You simply divide your ad spend (2K) by # of new clients (4) = $500 CPA
This is based on your bottom line or ROI. ROI is particularly difficult to measure when it comes to marketing efforts.
That’s why we use ROAS in advertising.
ROAS = return on ad spend
You know your internal margins and financial goals... And using those, you can set your goals for both CPA and ROAS.
Then you can evaluate your monthly stats to determine if those goals are being met.
This is where the micro-metrics come in handy, so if you are not meeting your macro-metrics (ROAS / CPA) you can hopefully troubleshoot the problem.
What are micro-metrics?
· Advertising Spend (Cost Per Lead X # of leads)
· Leads in contact with (contact rate)
· Application / Deal rate (leads that proceed to the next step in your sales process)
· Closing rate (deals that close where they payment clears, revenue is generated, etc.)
When you calculate these numbers each month, you get to figure out what your CPA and ROAS are.
Let’s see some examples now:
Mortgage - Home Buyer
Let’s see this example for a lower close rate, harder to close purchase (bigger price), and bigger revenue.
The average mortgage in Canada is $500,000 approximately, and most brokers are getting about $5000 commission per deal.
Let’s say you pay $100 per lead and close 5%.
20 leads will therefore cost you $2000, and you should get 1 deal.
Therefore, your cost per acquisition would be $2000, and on a $5000 commission deal, your ROAS would be 250%.
Mortgage – Refinance
The average refinance mortgage in Canada is $300,000 approximately, and most brokers get a $3000 commission.
Let’s say you pay $100 per lead and close 10%.
20 leads will therefore cost you $2000, and you should get 2 deals.
Therefore, your cost per acquisition would be $1000, and on a $3000 commission deal, your ROAS would be 300%.
Insurance - Life
For this example, we will consider an $80 per month insurance policy.
Let’s say you pay $100 per lead and close 20%.
20 leads will therefore cost you $2000, and you should get 4 deals.
Therefore, your cost per acquisition would be $500, and on a $1000 commission deal, your ROAS would be 200%.
Understanding the above-mentioned metrics and measuring profits is a vital part of your success.
If ROAS/CPA are profitable, then you have a scalable system. If you want to grow your sales, just get more leads.
Here at FinanceVine, we are experts in generating ROI-positive results in the financial services space through online lead generation.
Schedule a call with us and discover how we can help your business.