What is Cost Per Lead?
Cost Per Lead (CPL) is a metric used in online marketing that lets you know how much it costs advertisers to acquire a single lead.
The CPL is of great importance in marketing because it serves to measure a marketing campaign’s profitability when generating new leads and represents one of the best ways to make money with a website or blog.
What is Cost Per Lead Used for in Marketing?
Any company that needs to know if a marketing campaign is being effective must consider what the cost per lead is But, what is a lead? A lead is nothing more than that person who enters a website or landing page and has shown interest in a product or service by providing data requested by advertisers.
The cost per lead metric is used in marketing to know how much companies should spend in a convenient way to acquire new potential customers.
For example, in direct response marketing, which includes a call to action, is very useful because it is easy to quantify the cost per lead by tracking the user’s action with this metric. With this information, you can also evaluate and make decisions to decrease the CPL without decreasing the number of leads.
How to Calculate Cost Per Lead?
Knowing the Cost Per Lead of a campaign is very simple. To do so, you must have precise information on the following variables:
- The exact amount of money invested in marketing campaigns and strategies in a period of time.
- The number of leads gained through these campaigns.
Once these data are available, the total amount is divided among the leads in the following way:
Cost per lead formula:
CPL= (Customer acquisition costs per month)/(Leads per month)
Once the CPL value of a given digital campaign is obtained, it becomes very useful data when planning marketing strategies and making decisions because this metric can help, among other advantages, too:
- Know which is the main source of sales to focus most of the budget and efforts towards it.
- It can help to know in general what is the profitability of the business. For example, comparing the Cost Per Lead with a product or service prices can help to know if these are the most appropriate.
- To specify what the conversion rate is to analyze the effectiveness of the interaction of the public with the brand.
- With this data, you can also calculate the Customer Acquisition Cost (CAC).
Recommend Reading: Everything you need to know about Customer Acquisition Cost
How To Reduce Your CPL for Online Campaigns?
In general, when companies need to reduce costs, they reduce advertising and marketing expenses; however, this should be analyzed because it may mean that fewer customers are reached, and therefore, less revenue is obtained.
This is why it is not recommended to reduce the investment in advertising and marketing but to establish strategies that allow increasing the acquisition of more leads at the minimum cost.
In the case of online campaigns, there are several ways to decrease the CPL. Some of them can be:
- Reducing bids. You can establish a middle ground where the bidding is lower without decreasing the results of your campaign.
- Use other ways to generate leads organically such as SEO strategies to improve the website’s visibility in search engines.
- Social media accounts can be used to impact and attract potential customer’s attention because the CPL of this type of advertising is low compared to that of display advertising.
- Another way to lower the CPL is to target specific audiences. If, for example, a campaign is made on Facebook, this platform allows targeting the audience based on gender, age, education, demographic location, among others. This helps to segment the audience and make it more specific so that more leads see our ad and thus keep the cost low.
- Limit the number of ads. You can prevent the public from losing interest in the ads of a campaign and at the same time decrease the CPL by limiting the number of ads published, as well as having several versions of the same ad to rotate them from time to time.
- Search for other market niches. It is possible that if the product or service is focused on a different niche that has not been exploited, better results can be achieved, and the Cost Per Lead can be reduced.
- Do A/B testing of ads. Frequently performing A/B testing in digital campaigns helps to know which ads cause more effect on the public and provides information to improve a specific campaign’s ads and thus get the most out of the investment.