CPL: Cost per Lead

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Cost Per Lead

CPL: Cost per Lead. One simple question to consider in all marketing efforts is this: how much are you willing to pay for the chance to make a sale? The answer is obvious. It depends on the amount of the sale, but what if you do not know? This is where some analysis needs to come into play. To determine the minimum price that  you are willing to pay to buy a lead, you should analyze your cost per lead from previous campaigns. If the cost per lead for this opportunity is lower than the minimum you are willing to pay, you should consider it. If the cost per lead is higher than your minimum, you should not consider it.


How to Calculate

CPL or cost per lead is simply the total cost of an advertising campaign divided by the number of leads it generated. For your own internal purposes, you can define lead however you’d like, but you should apply the same definition to every campaign to truly make a proper comparison.


Things to Think About

  • CPL is different than ROAS (see the article on ROAS) because ROAS looks at the total sales generated by a campaign. CPL only consider the number of leads the campaign produced.


  • A great benchmark to consider here is how much you are willing to pay for a customer referral. If Mrs. Smith tells her neighbor about your services and her neighbor asks you for a quote, how much money, if any, are you willing to pay Mrs. Smith for the referral? If you are willing to pay $100 for this lead, there is no reason you should not seriously consider a lead from elsewhere that might only cost you $25.


  • Not all leads are equal. The quality of the lead should come into play. Mrs. Smith’s referral is a higher quality lead than a random lead from a lead generation website, but you can use your experience and judgement to rank them. This will help you determine the quality you should demand of a lower quality lead by ranking it against a higher quality lead.


  • The type of work should also be considered. A lead for a high margin project is worth more than a low margin project, but you must also take into consideration your closing ratio. How likely are you to close this type of lead? Tracking your history will give you the data you need to calculate these numbers.


Learn more about marketing benchmarks in our article about ROAS or Return on Ad Spend.


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