How To Calculate Cost Per Lead

How to Calculate Cost Per Lead

Cost per lead (CPL) is a term that gets thrown around a lot these days with organizations that don't do lead attribution well and understand if that lead converts or gets disqualified.

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What Is Cost Per Lead

Marketers get stuck on this metric because it is a good measurement to understand the cost of each of your leads in a marketing campaign, but relying on the CPL to measure the success of your marketing campaign can lead you down some bad paths.

Where This Metric Gets You In Trouble

The way you get deceived is a lot of marketing agencies will tell you they can get you lots of leads and at a low CPL, sounds to great, right?

When it gets tricky is when you start processing those leads.

Although they may have been cheap, as they say, you get what you pay for.

A low CPL doesn't mean quality; it means cheap, and you often find these cheap leads don't convert into paying customers very well.

A High CPL Can Actually Be Good

Now, let's play devil's advocate and try to understand how paying more for a lead can be good.

So once you convert the visitor into a qualified lead, you then ensure you have a well-designed attribution model that tracks that lead in its entirety so that you can understand if it converts into a sales qualified lead (SQL) and most importantly into a paying customer.

Running The Scenarios

Going back a few steps, you could have a low CPL, say $3 a lead, but only 3 out of 1,000 convert into paying customers. The math would be $3 X 1,000 leads / 3 Customers. That means you paid $1,000 per customer. Now let's shift to a higher CPL, say $10 per lead, but those leads convert at a much higher percentage, 3 out of 100. The math would be $10 X 100 leads / 3 Customers. Now you only paid $333.33 per customer.

Be Careful With Your Metrics

A metric is only as good as the story told about it. Make sure when you present data, you ask what it means and ask your colleagues if it makes sense or if it's just garbage.

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