How to calculate the LinkedIn Ads ROI for lead generation
Before launching a LinkedIn Ad campaign for lead generation, it’s essential to analyse if the campaign is going to get a return. Calculating the ROI has a crucial in that analysis. According to LinkedIn, 58% of digital marketers need to prove ROI to justify the spent and get approval for future budget asks. So, you need to know how to calculate the LinkedIn Ads ROI for lead generation.
Some marketers make the mistake of comparing platform costs by the CPC. LinkedIn Ads average CPC is around 6€, and for Facebook and Google Ads is between 1€ to 2€. However, you should not take the CPC as a basis to compare platform costs. The goal being generating leads, to compare platform costs, you should take the CPL (Cost per Lead) as a basis. Let’s deep into this.
Let’s see how to calculate LinkedIn Ads ROI in sixteen steps:
Step 1: Set your yearly / lifetime customer value
Customer value / year: As a result of the mentioned LinkedIn average CPC, your client’s value must be higher than 4.000€ per year, as it will be hard for you to get a positive ROI. For a better understanding, let’s translate all the theory into an example. So, let’s imagine your customer’s value is 9.000€ per year.
Step 2: Define your investment
Media investment: You need to know how much you are going to invest. If you don’t already know that, read now our post. As the B2B sales cycle is typically longer than the B2C one, we would recommend measuring ROI within 1 year. Here, let’s say your media investment is based on five months, with a total media investment of 11.500€.
Step 3: Set your expected CPC (Cost per Click)
Average CPC: Based on our experience, in Europe, depending on the country, the average CPC should be around 6€. To calculate your expected cost per click, read this post where we explain it with an example too. Following the example, let’s say your expected CPC is 4€.
Step 4: Calculate the number of clicks your campaign will make
Number of clicks or opens: To estimate the number of clicks, you have to take your media investment and divide it by the average CPC, as follows:
Number of clicks = Media investment / average CPC
So, according to the example: Number of clicks = 11.500 / 4 = 2.875 clicks.
Step 5: Estimate the conversion from click to lead
Conversion click to lead: At this point, you need to estimate the proportion of clicks that will result in a lead. According to LinkedIn, the average conversion rate is around 6.1%. Based on the example, let’s say your conversion rate is 7.5%.
Step 6: Measure the total number of leads
Number of leads: After knowing the number of clicks and the conversion click to lead, you will be able to calculate the number of leads. To do that, take the number of clicks and multiply it by the conversion rate click to lead.
Number of leads: Number of clicks x Conversion click to lead.
In our example, that’s: Number of leads = 2.875 x 7.5% = 216 leads
Step 7: Calculate the cost per lead generated
Cost per Lead: The LinkedIn Advertising average CPL is 65€, according to research by HubSpot, Statista, MarketingCharts.com, Survey America, Matchcraft, Prospect Marketing, and Pulse Local Marketing.This value is calculated by taking the total media investment and dividing it by the number of leads.
Cost per Lead = Media investment / Number of leads
According to the example, that’s: Cost per Lead = 11.500 / 216 = 53€.
Step 8: Estimate the conversion leads to SQL
Conversion leads to SQL: After calculating the cost per lead, the next step you have to do is to estimate the proportion of leads that will result in Sales Qualified Leads (or SQL). In our example, let’s say your conversion lead to SQL is 50%.
Step 9: Quantify the SQL (Sales Qualified Leads)
Sales Qualified Leads: To know how many leads are qualified for sales treatment, you have to take the number of leads and multiply by the conversion leads to SQL, as it’s shown below:
Sales Qualified Leads = Leads x Conversion leads to SQL
In our example, Sales Qualified Leads = 216 x 50% = 108 SQL.
Step 10: Determine the conversion SQL to request
Conversion SQL to Request: This value represents the proportion of SQL that will result in a request. To be precise, a request indicates that there has been a formal sales document exchange with the prospect, for instance, a quotation. Based on our example, imagine your conversion SQL to request is 70%.
Step 11: Identify the total number of requests
Number of requests: In order to estimate how many formal exchanges you are going to get, you need to take the sales qualified leads and multiply it by the conversion SQL to request.
Number of requests = Sales Qualified Leads x Conversion SQL to Request
Following our example, there will be a total of: Requests = 108 x 70% = 75 requests
Step 12: Calculate the cost per request
Cost per Request: To know how much it is going to cost each request, take the media investment and divide it by the number of requests, as it’s shown below.
CPRequest = Media investment / Number of requests
In our example, that’s: CPRequest = 11.500 / 75 = 153€.
Step 13: Evaluate the conversion request to customer
Conversion Request to Customer: This percentage represents the proportion of requests that will result in customers. In our example, let’s say your conversion request to customer is 50%.
Step 14: Quantify the total number of customers you’ll get
Number of Customers: Finally, to conclude how many customers you are going to get with the campaign, you need to take the number of requests and multiply it by the conversion request to customer, as it’s indicated below:
Number of Customers = Requests x Conversion Request to Customer
According to our example, that’s: Number of Customers = 75 x 50% = 38 customers.
Step 15: Identify the 1-year revenue of your LinkedIn Ads campaign
Revenue (1 year): After following all the previous steps, you will be able to calculate the total revenue of 1 year and so the ROI of the campaign. To identify the revenue, take the number of customers and multiply it by the customer value / year.
Revenue (1 year) = Number of customers x Customer value / year
In our example: Revenue (1 year) = 38 x 9.000 = 342.000 €
Step 16: Identify the ROI of your campaign
ROI (1 year): As a final step, it’s time to know the return of your investment, calculated on a 1-year revenue. To do that, take the 1-year revenue and divide it by the media investment, as it’s shown below:
ROI (1 year) = Revenue (1 year) / Media investment
Based on our example, ROI will be = 342.000 / 11.500 = 29.74 €
In conclusion, knowing how to calculate the LinkedIn Ads ROI is key to understand if it makes sense to launch the campaign. In addition, we have created a LinkedIn Ads ROI calculator to prevent ROI easily. You only need to add some requested information (for example, media investment, customer value, among others), and the calculator will do the rest for you!Calculate your ROI