Is your spending on lead even justified? Knowing CPL gives you clearer picture on how much you should spend on lead acquisition 

One performance indicator that would be worth noting is the Cost-Per-Lead (CPL). CPL assesses the cost of generating a new lead, and knowing how to determine it properly can enhance your marketing approach and financial allocation.

Here, we’ll walk you through how to calculate the cost per lead and the importance of a cost per lead in your business. 

What is Cost-Per-Lead (CPL)? 

Cost-Per-Lead (CPL) is the cost incurred per each additional potential new customer or participant in any activity that a marketing campaign can support. This metric is greatly beneficial to the organization as it allows them to measure the level of success in the generation of leads and the effective distribution of budgetary funds. Once you know Peer-Group Cost per Lead (CPL) you can determine which channels work very well and which need to be improved. 

How to Calculate CPL?

Calculating CPL is not difficult at all. You require two essential pieces of information which are the complete cost incurred while running the marketing campaign and the overall number of leads that were affected.

Here’s the formula: 

CPL=Total Cost of Campaign/ Total Number of Leads 

Let’s break this down with an example.  

Example: 

Let us take an instance, where you say you put in $5,000 on a digital marketing campaign. You found 500 leads during this campaign period. For your CPL calculation, you may apply the following approach: 

CPL + 5000/ 500 = 10 

Assuming that you use that approach and costs are fixed, your Cost-Per-Lead is 10 dollars. This translates to the fact that during the said campaign, 10 dollars was spent on average to get 1 lead. Also, do not get confused between CPL and CAC; 

Steps to Calculate CPL 

1. Determine Campaign Costs:

Make a list of resources spent on your marketing campaign including and not limited to ads, creation of content, software tools and relevant costs. 

2. Count the Leads:

You must tally the number of leads acquired during the period within the campaign. Make sure that such leads are relevant to your business. 

3. Use the Formula:

Substitute the cost incurred with the number and leads computed against the CPL formula. 

4. Examine the Outcomes:

CPL is assessed against the budget and benchmarks. In instances when your CPL is lapping your expectation lets assumes its very high, then it’s time to put a red pen on your campaign. 

Why CPL Matters?

1. Budget Optimization:

Controlling CPL helps figure out which marketing channel gives the best ROI. This informs the effective redistribution of the budget towards the most efficient channels making one’s marketing endeavors better. 70% of marketers stated that reducing CPL is their highest priority. 

2. Campaign Effectiveness:

How able a marketing effort has been successful in terms of obtaining leads is illustrated by the costs per lead metric. A high CPL can mean further components are required as your marketing material is not strictly working. 

3. Performance Benchmarking:

Similarly, CPL will help performance management in the context of different campaigns. The same analysis can be made with respect to various channels and campaigns in terms of CPL assessing any changes and determining results. 

4. Profitability Assessment:

It is where CPL comes in handy. If lead generation strategies are designed in a way that assumes conquering leads through expenditure regardless of the CPL then upon revenue generation the profit margins might turn out negative. 

Tips for Reducing CPL 

1. Targeting and Segmentation:

Focus on reaching a more targeted audience to improve lead quality and reduce CPL. Use segmentation to tailor your marketing messages to specific groups. 

2. Allocate Your Advertising Budget More Efficiently:

Determine the ads or campaigns that are responsible for the highest number of leads at the lowest cost. A portion of your budget should be reallocated to these successful areas to reduce your CPL. 

3. Increase Lead Generation of Target Market:

In all your lead generation activities, focus on high-quality leads with greater chances of conversion prospects. With better-quality leads, you often have a lower CPL. 

4. Adapt And Evolve:

Try out various marketing strategies, messages, and channels until you find the best combination that yields the best results for your business. Fix your CPL on a routine basis and adjust accordingly. 

In Conclusion, 

Cost-Per-Lead (CPL) focus in lead generation is certainly essential for any company that seeks improvement in marketing strategy or a need to reallocate its resources. Do not forget – effective conditions are formed not only due to the ability to calculate the cost of the lead, – within the framework of these conditions, it is most effective to improve the marketing approach. 

Understanding CPL guarantees that your decision-making process is fact-based, your budget is well allocation and lead generation campaigns are optimized for better results. Connect with Vereigen Media and get your lead generation process more effective and efficient. 

By Akash Bhagwat