What Is Cost Per Lead (CPL) and How Is It Calculated?

by Stephen Graveman

4 Min Read

Depending on your industry, the cost of acquiring a new customer can be as much as 25 times higher than that of retaining your existing ones. Knowing your cost per lead (CPL) can help you evaluate your marketing strategies and come up with ways to structure them in a way that reduces your expenses while attracting new clients.

What Is Cost Per Lead?

Cost per lead (CPL) is the amount you spend to generate a new lead for your business. Your CPL will be different for each marketing campaign since some channels are more expensive than others. Its purpose is to measure the success of your performance marketing campaigns, and it’s an important key performance indicator for calculating the return on investment for each of them.

Why Is Cost Per Lead Important?

Knowing your cost per lead helps you prioritize your marketing efforts, allocating resources to the most successful channels. It also helps you set sales goals and marketing budgets and estimate the potential ROI of each ad strategy before you get started.

More importantly, knowing your CPL lets you develop solutions for lowering the number, making your marketing efforts more effective. By comparing your CPL across channels, you and your marketing team can look at areas with higher numbers and refine your strategies.

You may find that your CPL for performance TV is higher than you initially thought. In this case, you could learn more about your audience to appeal to potential leads in a different way. When you have an idea of the average CPL in your industry, particularly across marketing channels, you can set realistic expectations for each ad campaign.

You may start researching a new channel, like over-the-top (OTT) video ads, and initially think the cost is excessive. Knowing the average CPL for this marketing channel could sway your decision-makers to give it a shot anyway.

Related: What Is Demand Generation? Everything You Need to Know

How to Calculate Cost Per Lead

The cost-per-lead formula is simple:

Total amount spent on campaign / number of new leads generated

If you’re interested in sorting your CPL by various campaigns, make sure to tie each to a separate landing page or use another tracking tool to get an accurate lead count. For connected TV ads, you might tie each offer to a specific promo code or ask new customers where they found you.

If you don’t have a way of tracking lead sources, you can calculate CPL by dividing the total amount spent on all marketing and ad campaigns over a specific period and dividing it by the number of new leads you generated in the same time frame.

An Example of How CPL Is Used

You can use CPL to evaluate the effectiveness of each campaign and determine how to prioritize your ad spend. For example, if you spent $600 on a monthly newsletter in one quarter and generated eight new leads in the same time period, your CPL would be $75.

During that same time period, you may have spent $600 on social media ads that generated 30 new leads. In this case, your CPL would be $20. Using this data, you could try new strategies with your newsletter to generate more interest and secure more leads, or you might choose to switch to a lower-cost plan since the newsletter hasn’t been as successful as your social media campaign.

What Is a Good CPL?

CPL benchmarks vary based on marketing platforms and across industries. What works for a B2B firm specializing in professional services may not be as effective for an e-commerce retailer. For example, in the travel industry, the average CPL is $106, whereas the average CPL in retail is $34.

Check out various trade publications and marketing studies to find information on the average CPL for your industry. Or better yet, benchmark against yourself. Once you’ve calculated your CPL for each marketing channel over time, you may start seeing trends that will help you tweak your ad strategies. You can also compare current campaigns to those of the past to see if you’ve managed to generate more leads and reduce your CPL.

Cost Per Lead: Final Thoughts

Knowing how to calculate cost per lead is an important part of measuring the effectiveness of various marketing campaigns. Without it, you might be tempted to spend money on marketing channels that don’t work for you, or you might have unrealistic expectations for what you should be spending on marketing.

MNTN’s platform offers important analytics for each campaign, including CPL. Use the data to refine your performance TV ads, reach more people, and generate more leads.