Why cost per lead is a misleading metric in solar

▶ 0:00Hello, today we're going to talk about cost per lead. Oh, boring. No one likes cost per lead. Solar and renewables companies, should you focus on cost per lead or should you focus on something else? Obviously, you should focus on cost per acquisition per marketing channel that you engage in. Simple as that. However, cost per lead can be a good metric and it can be one that you can basically manipulate. Now, there is such a thing as too low a cost per lead and there's such a thing.

▶ 0:29Obviously, it's too high a cost per lead. We've seen both. We've had both ourselves. Too low a cost per lead. Well, actually, no, let's start with too high a cost per lead. That's pretty obvious. If you've got a £200 cost per lead and you're not closing at least one in two of them, then you're probably not acquiring customers in a very profitable way. So, the marketing channel isn't really working for you. That's done. Too high a cost per lead. What about too low a cost per lead? Because this is the one that people often get confused on. Why would you not want £1?

▶ 0:59There's quite a few reasons, right? So, first of all, when your cost per lead drops dangerously low, unless you've had some sort of viral event or made an ad that still has incredibly high friction and qualification and everything, you're still getting really low leads, then low cost per lead, then fantastic, carry on.

▶ 1:16But typically, what people do to get the cost per lead lower is they make pretty ludicrous claims or offers. So, maybe they do like a 50% discount. They do free iPad when you install 25 panels and 3 batteries. They do free EV charger. They do all of this silly stuff that is just going to get you inquiries that are going to be a nightmare to deal with. They just want something for nothing. And quite often, they haven't read the small print or they haven't read the main print. So, they just think they're getting a free iPad for no reason, right?

▶ 1:52So, that's quite often what people do to drop the cost per lead. They will also remove qualification. So, they will just ask for name, email, phone, postcode. It's probably the bare minimum you can possibly get away with, right? To call it a lead, so to speak. Now, the problem with that is that it's so easy to auto-fit. You can have that on one page and you can set it so that Meta's lead forms, literally someone clicks a button.

▶ 2:20I don't even know if they have to click a button anymore, but they click the ad and their information just gets pumped into it and then they just click submit. And it's that easy. Like, you cannot overestimate how easy that is. Like, we used to use lead forms like over a year ago and we had people saying that their kids filled it in.

▶ 2:40Their kids filled it in. Like, toddlers filled it in because it was that easy and that frictionless and they didn't really know what they were doing, okay? So, the problem with too many low-quality leads or low-cost leads is that there's too many and they're too low-quality. I kind of said it the wrong way around. The problem is there's probably three or four absolute gold-dust leads in their 15K systems. They're going to be a pleasure to work with.

▶ 3:06They want to work with you for you rather than the price that you're offering. And are they going to get the necessary attention, time, care, bespoke solutions, kind of a bespoke approach, as they would have done if you'd had 20 leads or 40 leads or 50 leads? Probably not because you've got 200 leads to deal with. And, of course, you can put automations in place, you can put systems in place and processes to ensure that you are covering the bases.

▶ 3:33But the sheer fact of the matter is you're going to be dealing with more people, more inquiries. And that's not necessarily a good thing because it may cause you to let some slip through the cracks. And that's the last thing you want to do. Because the cost per acquisition is your North Star, everything has to come from that.

▶ 3:48So, if you have a specific ad that is generating leads for £100, it's like, whoa, astronomical. Like, turn the ad off now. Joe, quick, get that ad, delete it, bid it right now. But, if you're closing 75%, actually, I'm going to make the maths easier for myself. If you're closing 50% of the leads from that ad, you're getting deals for £200.

▶ 4:10And if those deals are solar and battery, an average deal value of £10,000, you're probably pretty happy with that. So, we probably shouldn't turn the ad off, even though the cost per lead is astronomically high. The cost per acquisition is actually very low, right? Vice versa. You could have, and this all, trust me, it comes full circle.

▶ 4:27Vice versa. You could have an ad that's getting you leads for £2, right? Very low cost per lead. But, if you're closing one in 1,000 of them, which we've literally seen, you're paying £2,000 cost per acquisition. So, you're paying 10 times more per deal than the one that is generating leads 50 times as much money. Like, you can start to see how too many leads at too low a price is actually a problem, more, and it is more of a problem than it's worth, compared to actually generating higher quality inquiries.

▶ 5:01So, that's my little rant for today. Don't let that make you think that we only generate expensive leads. We've had someone say that before. It's quite amusing because we've got campaigns that are running at £14 cost per lead with purely video ads. So, rapport-focused video ads, no free iPad. It's not the case, but you need to consider that you might actually want a higher quality of lead for a slightly higher cost than what is otherwise available.

▶ 5:26So, yeah, I'll catch you in the next one.