Lead Generation Metrics- the Equation for Leads
I wanted to talk about a crucial lead generation metrics that require specific steps that can easily go wrong mathematically with lead generation.
To be precise, the mathematical equation for revenue generation, which applies to every business.
If you think of a mathematical formula for revenue, it's going to be...
(Addressable Market Size x Conversion Rate) x Price per client = REVENUE
Addressable Market Size = the number of people that you can talk to.
Conversion Rate = how many of the addressable market you'll actually convert into new clients
Price per Client = the Average price across your programs or services
That's the lead generation metrics formula above equals your revenue.
Your revenue is a lead generation metrics mathematical formula. This is true for everybody. I don't care who you are or what business you're in. That mathematical formula works.
What goes wrong then?
Here's the thing we get wrong so often.
We're trying to maximize the revenue.
When we're trying to increase our revenue there are three things we could do:
- We can increase our addressable market size.
- We can increase our conversion rate
- We can increase our price.
I’ve previously mentioned that a lot of people get nervous about increasing price because they think if they increase the price, they'll actually reduce their conversion rate and reduce the addressable market size because people can't afford them anymore. But there is a specific lead generation metrics formula.
And so, people are scared that even though one of those variables are going up, the other two will go down faster and therefore total revenue will go down fast.
But here's the other thing.
You've heard these many times about how important it is to find a very specific avatar and an addressable audience that wants what you offer, and that the addressable audience needs to have high felt pain.
First of all, that's not true, and I'll explain why.
This is going to be a relatively small group of people compared to the overall population as a whole, or all business owners in general. What happens is, as you niche down, you reduce the addressable market size, and the fear that most entrepreneurs have is that as you reduce that variable, the whole thing goes down.
Another Lead Generation Metrics Measurement: Reduction in Addressable Market Size = Reduction in Revenue
(because I'm leaving money on the table.)
However, what actually happens is, as you niche down, your conversion rate in that audience actually goes up.
And so, as the addressable audience size goes down, the conversion rate goes up and your ability to charge more goes up, too.
What happens as you reduce that one variable; the other two variables increase.
So that lead generation metrics mathematical formula at the end is actually higher because your conversion rate and your price go up faster than your addressable market size goes down.
I hope you understood and enjoyed reading all about my lead generation metrics mathematical formula!
