Cost per lead figures quoted online are close to meaningless without context, because the same lead is worth twenty dollars to one business and two thousand to another. The useful exercise is working out what you can afford before looking at what anyone charges.
Work out what a lead is worth to you first
Take your average job value, multiply by your gross margin, then multiply by the proportion of leads that become customers. That gives you the maximum you can pay per lead before it stops making sense. Most businesses have never calculated this, which is why they cannot tell whether marketing is working.
Rough cost by channel
Wide ranges, because competition varies enormously by industry and location.
- Google Ads — fastest, fully measurable, cost driven entirely by how contested your terms are
- Organic search — high upfront cost, falling cost per lead over time as it compounds
- Purchased leads — cheap per lead, usually sold to several businesses simultaneously, poor conversion
- Referrals — effectively free, highest conversion, hardest to scale
- Email to existing contacts — nearly free, consistently under-used
Why purchased leads disappoint
Lead sellers typically sell the same enquiry to three to five businesses. You are then competing on speed and price with everyone else who bought it. The headline cost per lead looks attractive and the cost per customer usually does not.
What agencies charge
Either a monthly retainer or a percentage of ad spend. Percentage models create an incentive to increase your spend, which is worth knowing rather than avoiding. What matters is whether the total cost per customer works against your margins.
The honest test
If nobody involved can tell you your cost per customer after three months, the programme is not being measured properly, regardless of what the reports say.
Frequently asked questions
How much does lead generation cost in Australia?
It varies enormously by channel and industry. The useful number is what a lead is worth to you, calculated from average job value, margin and close rate.
What is a good cost per lead?
Anything comfortably below what a customer is worth to you. There is no universal figure.
Are purchased leads worth it?
Usually not for service businesses. They are typically sold to multiple buyers, so conversion is poor even when the per-lead price looks low.
Is SEO or Google Ads cheaper for leads?
Ads cost more per lead but work immediately. SEO costs more upfront and less over time. Most businesses benefit from both, in that order.
How do I reduce my cost per lead?
Improve conversion before increasing spend. The same traffic converting better lowers cost per lead without costing anything extra.
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