Cost Per Lead (CPL) is the average amount of money spent for generating a lead that meets the qualifying criteria for your product. CPL is frequently used in digital marketing campaigns, particularly in pay-per-click (PPC) advertising. It is predominantly employed in B2B businesses that are strongly focused on a sales-led growth model.
What is the formula for cost per lead? 🤔
✅ CPL = Total cost of marketing campaign / Total number of leads generated
For example, if a marketing campaign cost $10,000 and generated 500 leads, the cost per lead would be:
CPL = $10,000 / 500 = $20 per lead
This means that each lead generated through the campaign cost the business an average of $20.
Why is Cost per lead important? 🦘
1. Optimise your marketing budgets 📈
CPL can help you identify the marketing campaigns that are producing leads of the highest quality. This helps you find the acquisition channels that are producing the best leads but at a comparatively lower cost.
2. Improve budget allocation across teams & channels 🪓
You can enhance your return on investment and generate more leads within your budget constraints by prioritizing the channels that are most cost-effective. This helps you get some level of sanity & structure on how to allocate budgets across your teams & channels.
3. Improve the overall efficiency of your sales team 🚀
With CPL data, you can gain a basic understanding of the leads that are more likely to convert, allowing you to concentrate your sales efforts on them. This can enhance the overall efficiency of your sales teams and lower the expenses of acquiring new customers.
4. Build long-term acquisition strategies 👽
CPL is important if you operate in fiercely competitive markets, where the expense of acquiring new customers can be substantial. By monitoring CPL, you can remain competitive by focusing on the channels that are more cost-effective. This approach can help you create a profitable business in the long run.
5. Helps in making data-driven decisions 💽
By tracking CPL over time, businesses can identify trends and patterns in their marketing performance. This information can be used to make data-driven decisions that can even change the overall GTM and positioning strategy of your product.
Click-through rate (CTR): CTR is the number of clicks an ad receives divided by the number of times it was shown. A higher CTR indicates that the ad is more relevant and appealing to the target audience, which can lead to a lower CPL.
Conversion rate (CR): It is the percentage of visitors who become leads by filling out a form or taking another desired action. A higher CR means that the landing page or form is more effective in converting visitors into leads, which can lead to a lower CPL.
Quality score: It’s a metric used by platforms like Google Ads to measure the relevance and quality of an ad and landing page. A higher quality score can lead to a lower cost per click (CPC) and a lower CPL.
Ad relevance: It measures how closely an ad matches the user's search intent. Ads that are highly relevant to the user's search query can lead to a higher CTR and a lower CPL.
Targeting: It refers to the specific audience that a marketing campaign is aimed at. Targeting the right audience can lead to a higher CTR and a lower CPL, as the ad is being shown to people who are more likely to become leads.
Ad placement: This refers to the location where an ad is displayed. Ads placed in prominent positions can lead to a higher CTR and a lower CPL.
Thanks for reading 🤟🏼
P.S: If you loved reading about this growth metric, you will find this list of 23 growth metrics incredibly helpful 💪🏼