How to Measure Internet Lead ROI for Your Agency
Published · Updated
Work out whether a lead source makes you money, so you know which ones to keep and which to cut.
The four numbers
| Number | What it is |
|---|---|
| Cost per lead | What you pay for one lead |
| Quote rate | The share of leads you can quote |
| Close rate | The share of quotes that bind |
| Cost per policy | Cost per lead ÷ (quote rate × close rate) |
Example. A $10 lead, a 50% quote rate and a 20% close rate: $10 ÷ (0.50 × 0.20) = $100 per policy.
Cost per policy is the one to compare. A cheap lead nobody can quote costs more per policy than a dearer lead that closes.
The ROI formula
ROI = (what you earned − what you spent) ÷ what you spent.
For a lead source, that is (first-year commission from its policies − lead spend − service cost) ÷ lead spend.
Example. You spend $5,000 on Northwind Leads in a quarter and bind 25 policies. They earn $20,000 of first-year commission and cost about $2,500 to service. ROI = ($20,000 − $5,000 − $2,500) ÷ $5,000 = 2.5, a 250% return.
The number to add: cost per kept policy
Two sources can cost the same per policy in the first year and still differ, because their customers stay for different lengths of time.
Example. Two sources each cost $100 per policy. After 18 months, 65% of the first source's policies are still on the books and 45% of the second's. Per policy still on the books, the first has cost $154 and the second $222.
Give a new source time
A rate worked out from a few leads moves a lot with each sale. With 50 leads, one more sale moves the close rate by 2 points. With 500 leads, it moves it by a fifth of a point. Judge a new source once one sale more or less barely moves its rate.
How Agency Edge works it out
Agency Edge matches your leads to your sales and lists every source on the Marketing ROI tab of the Leads page, with its spend, policies, ROI and when it pays back. Its ROI column is Net today ÷ spend, and Net today takes off producer commission but has no service-cost line, so it will not match the formula above to the dollar. It does not record quotes by lead source, so its Close rate is leads converted ÷ leads billed. Its pay-back estimate applies your office's one lapse rate to every source, so compare retention by source from your own renewal records. Read the ROI page walks through the tab.
Frequently Asked Questions
How do I track lead spend by provider?
Spend comes in with your leads file when it has a cost column. You can also type each month's amount in Settings › Revenue & spend › Lead & ad spend: see Add a lead vendor and its spend.
What about shared leads vs. exclusive leads?
Track them as separate providers, so each gets its own cost per policy. Put together, the cheaper shared leads hide how the exclusive ones do.
Do I count referrals in ROI?
Yes, as a source that costs nothing, so your paid sources are compared with the customers you did not pay for. With no spend entered, its ROI on the Marketing ROI tab reads as a dash, so compare it on Policies and Net today.
See your own lead ROI
Every lead source on one table, with its spend, policies, ROI and when it pays back.
Run your own numbers with the free insurance lead ROI calculator.