Cost Per Lead

In prospecting for new customers there are many ways to target.  Three important measures successful companies use to evaluate the effectiveness of any successful marketing campaign are “cost per prospect,” “cost per lead,’ and “cost per sale.”  Let’s look at all three terms and then talk about the most effective ways to gain new customers.

Cost Per Lead Resized

Cost per prospect is the acquisition price of specific names of companies, typically from a list.  In commercial automotive this can be a list the dealership buys such as an R.L. Polk list (Acquired by IHS Markit).  If you had a list with 100 names and you paid $100 dollars for the list, the cost per prospect would be one dollar.

Cost per lead is defined as “interested prospects.” If we take the same list and after doing a mailer we had 10 prospects reply, the cost per lead would be $10 dollars per lead (10 X 10 = 100) We still have not sold anything but it gives us a measurement point.

Cost per sale is the actual dollar amount you invested to make one actual unit sale.  If you took your ten leads and sold two units, your cost per sale would be $50 dollars per unit.  Two sales would equal our investment of $100 dollars to acquire our list.  You then take your total profit minus marketing expenses to come up with a gross profit after marketing costs.

The actual true cost of marketing would be far more than the cost of the list.  It would include printing, postage, hourly time invested and more.  Too often the commercial department does not have a true measure of the success of any marketing program.  This leads to a few questions, “What is the best marketing strategy for commercial and fleet vehicle sales?  Let’s take a close look at each of our options and you can decide what works best for your department.  We are not going to talk about mass media advertisement which is very costly and frankly not as effective for commercial and fleet as it is on the retail side.

  1. Lists-  I encounter a lot of stories about commercial and fleet departments doing a 5,000-piece mailing at a cost of well over $1.50 per send or $7,500 total print and mailing cost.  Due to the size of the mailing it is impossible to follow up with all the leads. It has been our experience that these types of mailings result in less than a one half of one percent return.  For a 5,000-piece mailing that would be 25 leads which is not bad.  The key is what I call the conversion rate.  The average conversion rate on this type of marketing specific to commercial and fleet is 10% or 2.5 vehicles sold.  If we attracted the prospect with a low price we have most likely reduced our price or margin of profit.  I am not saying lists are bad but how we use the list as well as the origin and size of the list is critical.  Here are our guidelines in using lists:
    1. Know the source of the list and more important know the “leverage factor” of the list.  This means, what advantage does the list present over the competition such as special incentives, problems with the competitors produce such as recalls, mechanical problems, etc.
    2. Be able to rearrange the list (Excel Spreadsheet).  We like to mail based on proximity to the dealership first or by zip code.  The closer the businesses are located to the dealer the higher “take rate.”
    3. We advise mailing only ten per week per sales person so we can follow up by telephone.
    4. Have a word track prepared in advance to improve your appointment ratio.  This is extremely important.
    5. Make sure inbound calls come back to a prepared source.  This means you, not the Internet department or the dealership receptionist.
  2. Internet- This is an option but it really limits the marketing effort if the Internet publication is for targeted sales purposes.  Why? The CAN-SPAM laws that carry heavy fines if we email to businesses that report us as SPAM.  With Internet marketing We take a very soft approach.  Here is what we recommend and why:
    1. Selling without selling- Sounds strange but we mean providing value through business articles, automotive articles that help them improve fleet efficiency and motivational stories.  We produce a newsletter for dealerships that gets an incredible response based on this soft approach.
    2. Smartphone friendly- 67% of our newsletters are opened on smartphones.  If you are not Internet readable (single column) they will not read your email newsletter.
    3. Tracking capable- You need to be able to track opens, bounces and forwards.  These can be great tools to further target leads.  If someone forwarded your newsletter twenty times they saw value and you need to contact that company.
    4. Content is king! Your articles should be relevant to business owners and their employees.
  3. Placement advertising- Placing ads in newspapers, television and radio can be expensive and it is hard to measure results on a cost per lead and cost per sale basis. There are certain publications however that we do recommend:
    1. Business journals- These are read by business professionals and most of these targeted publications will give you discounts.
    2. Farmers or agricultural co-op publications get very good results and have a high readership by their subscribers.
    3. Association magazines and newsletters- These publications are targeted to members and have a high readership.
  4. Technology marketing- In today’s world this can be your most effective marketing tool available.  A prime example is Commercial Truck Trader. They do a great job of getting their site ranked high on search engines and they get an incredible number of hits on a daily basis.  A few things to think about when using Commercial Truck Trader:
    1. Premium ads are a key to your success.  Make sure you use them wisely.
    2. Make sure your descriptions are detailed and you have filled out your photo limits.  Online shoppers want details before they make a decision.
    3. Avoid stock photos!  Prospects what to see every detail about the vehicle they want to purchase.
    4. Go online daily to check out your competition and to track your hits.
    5. Respond quickly.  Online shoppers move fast.  If you get a call, respond within the hour and sooner or you lose.
    6. Have unique product to place, especially on your premium ads. A service body with a crane is a rare upfit and someone looking for this unique vehicle will pay a premium.

A few things to remember when you do use any of these marketing channels:

  1. Make sure the response emails and phone numbers go directly to the commercial department. The last thing you want to happen is someone who knows nothing about commercial vehicles takes the incoming call.
  2. Be prepared to ask all incoming calls, “How did you hear about us?” This sounds simple but is seldom followed.  You cannot track your cost per lead or cost per sale if you don’t know how the prospect hear about you.
  3. Have questions prepared and let the prospect talk.  The more they talk the more you win.
  4. Once you feel comfortable with the conversation find out why they responded. This gives you valuable feedback on why your advertisement worked

Advertising and marketing are critical to your success, having a very targeted plan and using the tools that are at your disposal can dramatically increase your results.


About Ken Taylor:

ken-taylor-a  Ken Taylor’s training, consulting, and coaching have been used on individual, regional, and national business levels to achieve ultimate success! Known as an industry leader and as “America’s Corporate & Personal Coach,” Ken has consulted for companies like General Electric, General Motors, FCA, Ford, Commercial Truck Trader, and Equipment Trader.

One thought on “Cost Per Lead

  1. I am in the Heavy Truck business in Ontario Canada. I sell medium duty and heavy duty trucks. I have been trying to stay relevant with computerizing my prospecting, with some success. I am surprised that some of the large leasing companies have not tried to better control the sale of heavy trucks. There is a company called Force Trucks in Toronto, and they started as a used truck dealership. They are now buying new highway tractors at fleet pricing from truck dealers, and retail leasing them to owner-operators. There is an ethnic content to this, since the principals, sales people and the lease reps are East Indian, and East Indians are their target market. The response from the the franchised dealers ranges from dis-satisfaction to elation, since trying to gear up to deal with ethnic groups is difficult, and some of the franchised dealers would prefer to delegate that to the people at Force Trucks!

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