Cost per Lead: Understand This Metric for Your Strategy
Let’s talk here about another important indicator for you to monitor in your marketing planning: Cost per Lead (CPL).
Understand better the process, what it means, its importance, how to evaluate it, calculate it, and much more.
Take advantage of the article to clear up your doubts, let’s go!
What Does a Lead Mean?
A lead is simply a sales opportunity for the company; it is the step after the visitor and before the much-anticipated customer.
The lead provides some personal information to the company, such as name, email, and phone number, in exchange for some offer on your site, which could be a free evaluation, a discount, tool, content, among others.
Learn more: How the Impac.to Agency Increased Lumma Construtora’s Qualified Leads by 40% Using Leadster
What is Cost per Lead (CPL)?
Cost per Lead is an indicator that measures how much a lead cost to acquire.
Some users will be converted into leads right on the first contact, while others may take longer, requiring more interaction and persuasion.
These factors, along with the price of paid media ads and the budget for other marketing strategies, influence your CPL.
Read also: How to Reduce Response Time to Leads to Increase Sales and Customer Satisfaction
How to Evaluate if My Cost per Lead is Good?
Your lead’s value will not always be the parameter for determining whether your CPL is good or not. Other metrics can influence this indicator and, consequently, the marketing results of your company.
Consider how many leads were necessary to close a sale, then look at your profit margin and understand the most you can spend on a lead while still getting the desired profit.
For example, an e-commerce business probably needs to generate a large number of leads to close a lower-value sale.
On the other hand, a B2B company offering a complex product needs fewer leads to close a high-value sale.
In other words, a cost per lead that is considered good for one company may be unfeasible for another.
To know if your CPL is good, your company must identify the closing rate and the average ticket of the product/service offered.
However, keep in mind that to define an ideal cost for your company, both the closing rate and the average ticket must be taken into account.
Why Should I Always Calculate My Cost per Lead?
As another digital marketing metric, Cost per Lead is essential for planning the next steps of your business.
With CPL, you’ll know if your attraction and conversion strategies are working and whether the leads are qualified or not.
From these results, you will have an idea if the plan is working or if it needs adjustments.
Learn more: Leadster Tips: How to Qualify a Lead Generated with Leadster?
How Do I Calculate the Cost per Lead?
To calculate CPL, you will use the following formula:
CPL = Marketing Investment / Number of Leads Captured
Remember that Marketing Investment includes all expenses related to your marketing planning, whether for content production, paid media, software, maintenance, etc.
Let’s look at an example: if you invested R$ 15,000 in marketing campaigns and captured 1,500 leads, your Cost per Lead was R$ 15.00.
Below you can see the calculation in the formula:
CPL = 15,000 / 1,500
CPL = R$ 15.00
It’s also possible to calculate Cost per Lead for a specific paid media campaign, for example.
In this case, only consider the investments for that specific campaign when doing the calculation.
Read also: How to Integrate Leadster with a Sales System to Help Your Company Sell More?
The Main Metrics That Help Measure Cost per Lead
As we mentioned at the beginning of the article, CPL is one of several digital marketing indicators.
Therefore, it’s essential to monitor other metrics to further improve your marketing plan.
Here are some of them:
Cost per Click (CPC)
A metric that measures the average cost of a click obtained in campaigns that use paid media on social networks, YouTube, Google, etc.
Its formula is:
CPC = Investment Value / Number of Clicks
Lead per Sale
Lead per Sale (LPV) is an indicator that shows how many leads were needed to generate a conversion and result in a sale.
LPV can be calculated using the following formula:
LPV = Number of Leads / Number of Sales
Customer Acquisition Cost
Customer Acquisition Cost, or just CAC, is the investment made in direct efforts to acquire a customer.
This number, divided by the number of new customers acquired, will result in CAC.
CAC = (Marketing Investment + Sales Investment) / Number of New Customers
Return on Investment
This metric indicates the return obtained from a certain amount of resources, in other words, Return on Investment (ROI) is calculated as follows:
ROI = (Total Revenue – Marketing Investments) / Marketing Investments
Cost per Sale
Finally, Cost per Sale (CPS) is the combination of cost per lead and lead per sale.
In this metric, production costs, sales team, and maintenance are ignored.
Its formula is:
CPS = Cost per Lead (CPL) x Lead per Sale (LPV)
What is the Ideal Cost for Each New Customer for Your Business?
The cost of each lead varies from company to company, there is no one-size-fits-all answer to this question.
However, keep in mind that to define an ideal cost for your company, the closing rate and the average ticket must be taken into account.
How to Reduce the Cost per Lead in My Marketing Strategy?
We already know that the CPL indicator doesn’t work alone, that other metrics and actions influence its results.
With this in mind, Leadster has highlighted some key points to focus on, improve, and, consequently, reduce your Cost per Lead.
Let’s go through them!
Know Your Persona
If you know your audience, you will understand which actions will produce better results.
Your strategies will be personalized and will reach the right leads, improving your results and increasing your sales.
Increase Organic Traffic
Compared to paid media strategies, organic actions have a lower cost for the company.
Content from organic strategies delivers long-term results, meaning your ROI improves over time.
Produce Engaging Content
Create rich and up-to-date content for your users.
This way, engagement is much higher because both Google and your audience recognize that the content is relevant, informative, and current.
Invest in Digital Marketing
Digital Marketing improves all your business metrics.
However, it’s up to your company’s planning to decide which measures, strategies, software, and tactics to implement.
Now that you know what CPL is, its importance, and how to calculate it, how about lowering it?
Leadster’s main point of existence is exactly that: making sure your CPL stays low by automating lead generation.
Want to learn more? Check out our free trial by clicking the banner below.
