What a qualified lead actually costs in a fragmented category

Per-lead pricing only makes sense against two numbers you already have: what a customer is worth to you, and how many enquiries you convert.

The arithmetic

Take your average job value, multiply by how many times a typical customer comes back, and subtract delivery cost. That is your gross margin per customer. Divide by your enquiry-to-customer conversion rate and you have the most you could pay per lead and still break even.

If a customer is worth $2,000 in margin and you convert one in four enquiries, break-even is $500 a lead. A sensible target is a fraction of that, but knowing the ceiling stops you arguing about a $60 lead that would have been profitable at four times the price.

What changes the number

Fragmented categories (dozens of small operators, no dominant brand) usually have cheaper leads and slower response times. Speed to first call matters more than anything else in the funnel. If nobody in your office answers within five minutes, assume the enquiry is gone and price accordingly.

The cap nobody asks for

We cap monthly volume per advertiser. Unanswered enquiries make the directory look useless to the person who submitted them, which costs us more than the extra lead earns.