Successful lead generation is one of the hallmarks of great marketing and the fuel for successful sales operations. That’s why knowing how effective your lead generation activities are is critical for gauging the health of both departments and identifying areas for improvement.
The cost per lead is one of the most essential indicators for determining efficiency (CPL). We’ll go through how to calculate cost per lead, see an overview of what it may look like in reality, and explore how to verify if your CPL is up to standard in this section. Let’s get started.
What is Cost Per Lead ?
The cost per lead is a crucial marketing indicator that helps you to assess how effective your marketing is at producing new leads for your sales force. Simply said, cost per lead is the expense of acquiring a new lead for your organization.
A lead is a visitor to your website who has demonstrated interest in your product or service. This stated interest might be for the purpose of downloading gated material, scheduling a demo, or achieving another important conversion objective.
Other important marketing variables, such as cost per acquisition, are inextricably tied to cost per lead. You may assign a monetary value to your leads by quantifying your cost per lead, which will help your marketing team better understand how much money is required to acquire new leads.
Cost per lead may be applied to all aspects of your marketing strategy and content. It may also be split down by channel and campaign so you can see how different components of your marketing work together to generate new leads.
How to calculate Cost Per Click ?
To determine cost per lead, all you need is the total leads and the total marketing expense. It’s simple to figure out your cost per lead. The cost per lead formula is straightforward. Simply divide your overall marketing expense by the total number of new leads. This will tell you your lead cost (CPL).
You ensure that your result is correct, be sure to calculate your leads and marketing budget within the same timeframe. By dividing your advertising budget by the total number of new leads, you can figure out your cost per lead:
- Add up all of your marketing expenses.
- Make a list of all of your new leads.
- Divide your marketing budget by the number of new leads.
Cost Per Lead= Cost of Campaign/Total new lead
Example of Cost Per Click:
Assume you invest $1,000 in a Google Adwords campaign that results in 30 new leads. In this example, your campaign’s cost per lead would be $33.33. Your industry, company size, annual revenue, marketing budget, and the pricing of your service all play a role in determining if that statistic is solid or not. If your product or service costs $30, a CPL of $33 won’t help you much; however, if it costs $1,000, you’ll be in a better position.
Why is Cost Per Lead Important ?
One of the two figures you need to determine your marketing cost per sale is the cost per lead. For instance, if you require five leads to close a transaction and your cost for each lead is $100, your cost per sale will be $100 x 5 or $500. You would anticipate making 1 sale if your marketing team produced 5 leads. Let’s say you decide to only count leads that are qualified. Your sales staff reports two qualifying leads, however, only half of them will be closed. The cost per lead in this instance is $250, while the cost per sale stays the same at $500.
Making wise choices regarding how much money to spend on marketing activities is difficult without understanding your cost per lead and conversion rate. No matter how you define leads, you will eventually wind up with the same cost per sale because the conversion rate will be bigger for the better-qualified leads. Just keep in mind to monitor these figures steadily throughout time.
By keeping track of this data, you will be able to analyze and estimate the effects of increasing your advertising budget and understand how an improvement or decline in your lead flow may impact sales. According to the aforementioned example, you will need to discover a means to produce 5 more leads of comparable quality and double your marketing spend to $1000 if you want to earn 2 sales from your inbound marketing efforts.
What counts as a good cost per lead ?
There is no single, conclusive CPL figure that any company may use to determine the ideal efficiency of a marketing campaign. As previously said, your optimum cost per lead depends on a variety of criteria, including your industry, degree of competition, target demographic, size of the company, annual turnover, marketing expenses, and the price of your offer.
The cost per lead varies depending on the marketing channels you utilize – leads created through trade exhibits will cost less than those obtained through email marketing.
Determining what constitutes a fair cost per lead is essentially a case of having to feel it out. If your cost per lead for a given channel is abnormally high compared to how well those leads convert, you might want to reconsider whether that tactic is actually worthwhile.
You need to grasp how to calculate cost per lead if you want to improve or better comprehend your lead generation efforts. Your marketing initiatives should be lean, effective, and productive, and figuring out your cost per lead is a good place to start to see if you’re there.
How to optimize marketing when the cost per lead is known ?
Knowing the cost of leads will help you decide where to concentrate your marketing efforts. Google advertisements versus print ads. Webinars versus trade shows.
Compared to outbound marketing, inbound marketing can produce leads at a considerably cheaper cost per lead. You can concentrate on increasing marketing efficiencies in those areas once you’ve calculated Cost Per Lead for various initiatives.
You must determine what Cost Per Lead is appropriate for your business as a marketer. A greater Cost Per Lead can indicate a higher-quality lead and a lower total cost of client acquisition if the quality is what you’re after. Even if the leads aren’t as qualified, you can choose to cut your cost per lead if you want more leads.
Cost per lead vs Cost per acquisition
Cost per acquisition, or CPA, is a measure that keeps track of consumers who not only click on ads but also proceed to make purchases after doing so. At first look, it appears that CPA should mostly replace CPL expenditure because generating acquisitions is the golden grail of marketing.
But it’s not quite that easy. There are uses for both CPA and CPL bidding. CPL may be far more successful for marketers with a more long-term, comprehensive approach than CPA, which is appropriate for those who want to create sales straight away. CPL campaigns provide advertisers the freedom to connect with potential clients at several touchpoints by gathering lead information. If you want to start rewards programs, email retargeting campaigns, or email list building, this is essential. With CPA campaigns, you are adopting an all-or-nothing stance; if the user doesn’t make a purchase, you might not be able to reach them again.
Who should calculate the cost per lead ?
Knowing how to calculate their cost per lead is essential for anyone who wants to analyze their marketing efficiency in detail. You’re doing it well if you can reduce your cost per lead while still producing the same amount of income from each lead.
For direct response marketing or marketing that contains a call to action, CPL is a particularly crucial measure. Digital display advertising with CTAs like “Click Here to Buy” or “Get the Guide” are examples of this form of marketing. Because user behavior can be quickly recorded in these situations, calculating the cost per lead generated through the channel is simple. Simply divide the amount you spent on the channel by the number of leads it produced.
How to reduce cost per lead ?
To lower your cost per lead and allocate funds to business growth, use the guide below.
- Make use of retargeting campaigns: You may have observed that a significant portion of website visitors who examine your items or even add them to their shopping cart leave without making a purchase. They might not become customers because of a difficult checkout, a high total, or even their own company. By giving these consumers one more push—a retargeting campaign—instead of generating new leads, you might encourage them to return. They can notice your pertinent advertisements urging them to place a purchase when they visit various websites. By doing this, you may convert warm leads for less money.
- Focus on a smaller population: You should be aware of your target market if you want to sell your items successfully. Find out which groups respond to your advertising the most by analyzing your reports. Consider the gender and age of these individuals as well as the reasons why other users aren’t engaging with your advertisements. As a result, you’ll be able to spot potential customers who aren’t interested in your goods and avoid wasting money on them.
- Minimal fields should be used: Examine your opt-in form carefully, as if you were a customer. Estimate how much time it takes to complete each question by providing answers to all of them. Only request pertinent information, please. Make careful to keep the number of fields to a minimum because extensive forms might exhaust and even upset users. You may always ask them for further information afterward.
- Optimize the loading speed of pages: Remember the last time you clicked on an advertisement. How long did it take for it to load? Would you hold off for five or ten seconds? Companies lose more potential sales opportunities the longer consumers must wait. It’s important to monitor and optimize your page’s load time on a regular basis.
Few things are more crucial to a digital marketer than gathering, evaluating, and profiting from leads. Your business’s bottom line will benefit greatly if you can put methods into place that enhance income while lowering expenses. I hope you can utilize the knowledge and suggestions in this post to excel at marketing in your workplace.
Don’t worry that much if your CPL is higher than average because it will vary depending on the type of business. You’ll achieve your goals if you keep tweaking your content and advertisements. Put some of the suggestions in this post to use, and report back on the outcomes.
When your campaign is over, it’s time to evaluate its success. Was the quality of the leads you produced with this campaign high? Did you produce the anticipated amount of leads? Is your CPL in accordance with your spending plan and your established objectives? Consider all of these factors before deciding whether or not your campaign may be deemed successful.