Cost Per Lead (CPL): What Is It & How To Calculate

Cost Per Lead (CPL): What Is It & How To Calculate

5 Min Read

In the realm of digital marketing metrics, understanding cost per lead (CPL) is vital for optimizing lead generation strategies and budget allocation. CPL provides insights into the financial efficiency of your marketing campaigns, helping you determine the cost-effectiveness of acquiring new leads.

This article will cover the significance of CPL and provide a comprehensive guide on how to calculate this crucial metric.

What Is Cost Per Lead (CPL)? 

Cost Per Lead (CPL) is a digital marketing metric that measures the expense incurred to acquire a lead through marketing efforts.

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. 

Importance of Cost Per Lead

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.

How to Calculate Cost Per Lead

To calculate cost per lead, divide the total marketing cost by the number of leads generated. This metric helps businesses evaluate the cost-effectiveness of their lead generation efforts.

CPL Formula

CPL = Total Marketing Cost / Number of Leads

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 It’s 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 Cost Per Lead?

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. 

Strategies to Improve Cost Per Lead

Improving cost per lead requires strategic enhancements across various aspects of your marketing approach. Here are five effective strategies:

  • Targeted Advertising: Focus your ad spend on specific audience segments that are most likely to convert, ensuring higher lead quality.
  • Content Marketing: Develop high-value content that attracts and engages potential leads, positioning your brand as a trusted resource.
  • Landing Page Optimization: Design landing pages that are relevant, visually appealing, and optimized for conversions, reducing bounce rates.
  • Use Retargeting Campaigns: Implement retargeting to re-engage visitors who have shown interest but haven’t yet converted, increasing lead opportunities.
  • Leverage Social Media: Utilize social media platforms to reach a broader audience and engage with potential leads through targeted campaigns and organic content.

Cost Per Lead (CPL): 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.