New leads are the fuel that keeps your sales machine running. Regardless of what you’re trying to sell or who your audience is, your approach to lead generation can make or break your sales team’s success.
That’s why most companies invest heavily in lead generation—and why it’s considered one of the most challenging aspects of sales and marketing.
If you’re successful, the time and resources you spend to generate high-quality sales leads will earn a considerable ROI. But without a strategic approach, lead generation can eat into your schedule and budget—with no guarantee of results.
So, how do you know if your lead gen strategy is paying off? And how can you find ways to optimize your sales prospecting?
It starts with defining your lead generation key performance indicators (KPIs) so you can quantify and track your results.
In this article, we’ll cover what sales lead generation KPIs are, why they matter, and list the top lead generation metrics you should start tracking ASAP.
What Are Lead Generation KPIs (and Why Do They Matter to Your Sales Team?)
Key performance indicators (KPIs) are measurements used to gauge the success of your business objectives.
Whether you’re trying to measure your growth over the past year or the impact of a new marketing campaign, KPIs help quantify your success. Unlike generic sales metrics, the best sales KPIs are closely tied to specific business benefits.
For example, if your general objective is to improve profitability, you can create a KPI by setting a clearly defined goal (say, increasing sales revenue by 15% this year).
Next, you would make it actionable by assigning it to a team member and defining how it should be measured. Schedule a cadence for how often it should be reviewed. In the example above, the COO is set to review sales revenue monthly to see how closely reality aligns with our goals.
Why Should Your Sales Team Measure Lead Gen KPIs?
As for why sales teams should care about lead generation KPIs?
Not only do KPIs help you understand how well you’re performing, but they also inform your next steps. Tracking core KPIs helps you find ways to improve your approach to lead generation and alert you to any major issues so you can correct course.
When it comes to optimizing your lead generation process, there are three main levers you can pull to improve your results:
- Increasing lead value;
- Increasing lead quality; and
- Increasing lead volume.
If your pipeline is full of leads (volume) who have purchasing power (value), are likely to convert (quality), then you’ve hit the lead gen jackpot. However, if you’re weak in any one of these areas, then defining and tracking the appropriate sales KPIs is the first step to turning it around.
Whether your objective is to increase lead value, quality, or volume, you need the right B2B lead generation KPIs to quantify, measure, and improve your results. These three characteristics are crucial to measuring the effectiveness of your lead generation efforts—and figuring out how to optimize them.
What Are the Most Important KPIs for Lead Generation?
Now, let’s dig into the top B2B lead generation KPIs for modern sales teams. We’ll cover what each metric can tell you about your lead generation efforts, why you should measure it, and how to track it.
Cost Per Lead (CPL)
What does CPL measure?
Cost per lead measures how much you must spend to generate a single new lead.
Why should you track it?
Knowing your CPL provides valuable insight into how cost-effective your lead generation process is and whether your efforts are paying off.
The higher your cost per lead, the less efficient your process is—especially if your leads aren’t necessarily making huge purchases. For example, a high CPL could suggest that you’re casting too wide of a net and wasting your budget on channels that don’t produce viable leads.
How to calculate it:
CPL = (Money + Time Spent) / Number of Leads Acquired
Customer Acquisition Cost (CAC)
What does CAC measure?
Customer acquisition cost is a similar metric to cost per lead—and the calculation is virtually the same—but with one important difference: CAC only factors in leads who have fully converted into customers.
Why should you track it?
CAC adds more dimension to your understanding of business development costs. Whether you’re looking to grow quickly or forecast your budget for the next quarter, there’s power in knowing how much it costs to acquire new customers.
While CAC is typically higher than CPL, a major discrepancy between the two could reveal inefficiencies in your lead qualification process.
How to calculate it:
CAC = (Money + Time Spent) / Number of Customers Acquired
Average Lead Value
What does average lead value measure?
Your average lead value measures how much revenue every lead represents. That is, how much each lead is worth, on average–which also tells you how many leads you would need to generate to earn $X in sales revenue.
Why should you track it?
Value can be defined in a number of ways, but this metric allows you to assign a dollar value to every lead you generate. If you’re trying to hit a specific sales target or volume, knowing your average lead value helps you predict how many leads you need to generate to make your quota.
How to calculate it:
Average lead value = (Total sales value / Total leads)
Customer Lifetime Value (CLV)
What does CLV measure?
Customer lifetime value refers to the total monetary value provided by a customer.
Why should you track it?
CLV tells you how sustainable your business model is, simplifies b2b sales forecasting, and helps identify your most valuable customer types.
You can calculate CLV for individual customers to determine their value to your company and you can measure average CLV across all of your customers to develop a clear understanding of your ROI.
How to calculate it:
CLV = (Annual revenue per customer * Customer relationship in years) – Customer acquisition cost
For one-off customers, CLV is the equivalent to their single purchase less the cost of customer acquisition. For SaaS customers or scenarios where annual revenue per customer is relatively flat, you can multiply their average annual spend by the number of years they’ve been a customer.
For repeat buyers with irregular purchase sizes and intervals, you can determine CLV by adding up every payment made over their lifetime as a customer and subtracting any initial acquisition costs.
Monthly Recurring Revenue (MRR) / Annual Recurring Revenue (ARR)
What do MRR and ARR measure?
MRR tells you how much revenue you’re earning consistently each month; ARR is the same metric converted to an annual measurement.
Why should you track it?
Both MRR and ARR are important metrics for sales reporting, especially for B2B SaaS providers. Tracking these KPIs allows you to accurately measure long-term growth and observe seasonal trends in your sales revenue and volume—and see how your lead generation activities directly influence revenue.
How to calculate it:
If your business operates on a subscription model, you can calculate MRR by multiplying the monthly rate (or your average revenue per user if you use variable rates) by your total number of customers. For ARR, do the same thing and then multiply the final number by 12.
If your users pay annually, then you can multiply the yearly rate by your total number of customers to find your ARR. Or you can divide the yearly cost by 12 to get the average monthly cost and use this number to calculate MRR.
Return on Ad Spend (ROAS)
What does ROAS measure?
ROAS reveals how much revenue you’re earning for every dollar spent on ads.
Why should you track it?
If you’re allocating a monthly budget to paid ads, it’s important to know which channels are working (and how well) so you can optimize your ROI. ROAS calculates how much you earn in revenue for every dollar spent on ads.
How to calculate it:
ROAS = Revenue / Ad spend
To get a more precise measurement, calculate ROAS by lead source using attribution channels.
Attribution Channels
What are attribution channels?
Attribution channels refer to how and where your leads discover and first interact with your business. Depending on your lead generation strategy, this might include social media platforms (especially LinkedIn for B2B prospecting), PPC ads, organic search, cold emailing, cold calling, or specific pieces of content used as lead magnets.
Why should you track it?
Tracking attribution channels allows you to identify your best lead sources and most profitable marketing channels. Once you know where your best leads are sourced from, you can invest more heavily in those channels and generate leads who are more likely to convert into customers.
Understanding which lead sources produce the most value enables you to focus on the best channels and optimize your outreach to target high-quality leads, increase your win rate, and maximize your ROI.
How to track it:
To find out where your highest-converting leads come from, you need to track lead touchpoints and conversions across your lead generation channels. There are a few different ways to do this. You might use CRM software to track outbound leads generated from cold emailing and use UTM tags to track leads from specific inbound marketing campaigns.
If you create a landing page with a contact form, you can track lead sources by creating different variants for each attribution channel—so you can see which channels are generating the most leads.
Lead Conversion Rate (Lead CVR)
What does lead conversion rate measure?
Lead conversion rate is the total percentage of leads who complete a desired action or convert between specific stages of your sales funnel.
Why should you track it?
Whatever step of the funnel you’re trying to optimize, it can help to know how many leads are converting vs. churning at a particular touchpoint. This allows you to identify bottlenecks that cause leads to lose momentum or fall through the cracks.
How to calculate it:
Look at your total number of leads at a given touchpoint vs. the number who move on to the next step. You can plug these numbers into the following calculation to get your lead conversion rate as a percentage:
Lead CVR = Total conversions / Total number of leads
Time to Conversion
What does time to conversion measure?
Time to conversion measures how long it takes for a lead to convert between two steps in the sale process.
Why should you track it?
The longer it takes for a lead to move through your funnel, the less likely they are to convert into paying customers—and, therefore, the less qualified they are as sales leads.
If your time to conversion is slow, there may be a chronic bottleneck in your pipeline. Longer time to conversion also means slower sales velocity, which is typically associated with fewer wins.
How to calculate it:
Simply count the number of days it takes for a deal to move from lead to customer or between two specific steps. You can start with the first day your sales or marketing team interacts with the lead or the amount of time spent engaging with your website before submitting a demo request, so long as your tracking methods are consistent.
How to Choose the Right Lead Generation Metrics for Your Business
When it comes to choosing which metrics to focus on for your business, there are tons of options. The right choice ultimately comes down to your current goals and challenges.
So, how should you decide which lead gen metrics to prioritize? Here are the most important factors to consider:
Your Target Audience
Who is your audience? B2B leads require very different lead gen tactics than B2C leads, and small business owners respond to different messaging than enterprise VPs.
Your audience informs the best channels to use, how many leads you need to keep your pipeline healthy, and how much you should spend on acquiring leads.
Your Product Type
Since high-end products tend to have higher margins but lower sales volume than low-cost solutions, your product type can greatly influence which sales metrics can provide the best insights for your team.
Your Pricing Model
Does your sales team rely on cross-selling or upselling to hit targets? Is your product typically a one-off purchase or do your customers renew an annual subscription? Pricing factors can influence which core KPIs you choose to focus on.
Your Sales Process
How your sales team defines leads, touchpoints, and attribution channels can also influence which KPIs are the most impactful. Consider how you define SQLs vs. MQLs, when exactly a lead converts into an opportunity, and whether your sales process is product-led or sales-led.
How These Factors Influence KPIs
Your audience, product type, pricing, and sales cycle all play a role in determining which KPIs are most valuable.
For instance, if your business model hinges on converting a small number of very high-value leads, then cost per lead and customer acquisition cost wouldn’t be very useful key performance indicators (at least, not without additional context). Instead, you’d want to compare the value represented by each lead (i.e., total lead value and CLV) to ensure that your lead gen tactics are worth their while.
Moving the Needle in the Right Direction
Once you identify the right KPIs and begin data collection, it’s important to understand what you can do to improve the lead generation results. With the right tools, you can learn more about how well your lead generation process is working and identify areas of improvement.
Looking for ways to improve the quality of your leads? Here are some tips to keep in mind:
- Get to Know Your Ideal Leads: Learn more about your leads (interests, pain points, preferred channels, etc.) and create an ideal customer profile to help your sales team target more qualified leads.
- Make Automation Work for You: Use marketing automation and CRM software to manage your sales leads, nurture prospects with appropriate messaging, and schedule automatic followups.
- Verify Your Contact Data: Don’t waste time and resources trying to reach leads at outdated email addresses or old phone numbers. Ensure your lead data is up-to-date and accurate with a tool like Datanyze for prospecting.
- Find and Connect with Leads Faster: Use technology to source lead contact information easily and quickly—at scale. Datanyze simplifies sales prospecting and lead generation by allowing you to find and connect with leads more efficiently.
Ready to enhance your lead generation efforts and improve your overall sales performance? Sign up for Datanyze today and download our Chrome extension to see how easy generating high-quality leads can be!
