In Part I  we discussed how to determine the cost of a qualified lead, the probability that a qualified lead will result in a sale, and the additional investment required to increase sales revenues using a firm's current market research strategy. We established these for a hypothetical provider.

Here we discuss how to determine the dollar value of a qualified lead. 

For our hypyothetical provider, if $5 million in contracts yields $500,000 in first year net profit, the net expected first year value of each new qualified lead is $1600 ($500K/300 qualified leads). If the average client will make purchases of roughly the same size for the next 5 years each qualified lead is even more valuable.

Now the marketing director in our hupothetical firm has bounded the problem - each qualified lead is worth $1600 in its first year and costs $630 to find. A crude but useful benchmark for comparing current practice to alternative research strategies would be 60 new leads for under $100,000, and freeing up over 50 days for sales staff to sell rather than locate leads. In principle, our provider's marketing manager should be prepared to pay up to $630 for every new qualified buyer research can identify,  

The basic measure of merit  for any new RFP service is the cost of each qualified lead the service locates. For our hypothetical firm, and using K-12Leads and Youth Service Markets Report as the example, at $1500 per year, if K-12 Leads yields one such lead per week ($1500/52 weeks), the cost per lead is $28; one per month, $125; one per quarter, $375. 

Each of these scenarios is so far below both the current cost and value of a qualified lead to our provider as to be trivial. 

To take the assessment one step further, if either the probability that a qualified lead will result in a sale for our provider or the average size of its contracts were cut in half (from 10% down to 5%, or from &170,000 down to  $85,000) K-12Leads would still be an obvious value in all but the case of one lead per quarter - and even here the multi-year payoff a new client should be  considered.

For our hypothetical firm, with this math, it almost certainly makes sense to purchase three or four RFP services in the range of $1000-5000, as long as each service produces at least some unique leads. When a budget of perhaps $10,000 will cover all the bases, this strategy rates well against the increase in staff salary required to generate 60 leads. The major k-12 firms do cover all the bases, but the strategy is not a better or worse because of the size of their firms, the numbers plugged into the equations discussed here tell market research managers  how to allocate their resources. Every market manager can and should do this math for all market research activities.

As a the current cost and expected value of a qualified lead declines (because of very low sales probabilities or the small size of the average contract) the comparative value of RFP services matters more. Moreover, these costs must be incurred before sales are generated and some very small firms may lack $10,000 at the start of the sales cycle.

Where the decision is to purchase a single RFP reporting service the choice must account for cost per lead and lead coverage. This writer is prejudiced, but for school improvement providers that choice is K-12Leads, because of its 1) low cost, and 2) total coverage of the school improvement market which is captured by eye (not filtered through a search engine prowling the web for RFP words) and presented for all to see (not hidden from a client forced to guess at the right word search to ferret leads out ) from the database. But again this is something marketing managers can calculate for themselves.

Next : Market research investment in contract RFPs.

More on K-12Leads here.