The cost per lead metric measures how cost-effective your marketing campaigns are when it comes to generating new leads for your sales team. A lead is an individual that has expressed interest in your product or service by completing a goal. This metric is closely related to other key business metrics such as the cost to acquire new customers. The purpose of this metric is to provide your marketing team with a tangible dollar figure so they understand how much money is appropriate to spend on acquiring new leads.
Cost per lead (CPL) is one form of performance-based adverting. In some ways, it’s a middle ground between online advertising models like cost per impression (CPM) where a publisher is not directly rewarded or punished tied to how that traffic performs, and cost per sale where the publisher bears complete responsibility for how that traffic converts… even though they can’t control everything that happens on the advertiser’s site.
Unlike cost per sale, the company generating the leads doesn’t have their compensated directly to the sales conversion of those leads. However, for an advertiser to keep paying for leads from the same source, the leads ultimately must produce an acceptable conversion rate.
The Cost per Lead metric also provides important data to use in your return on marketing investment calculation. In fact, each stage of the purchase funnel should have similar metrics associated with it, such as cost per visitor and cost per win. Likewise, these metrics can be used to monitor individual campaigns such as AdWords, banner ads, or social ads, or the sum of your marketing efforts.
Cost per Lead Example
It’s actually a very straightforward formula. Simply divide what you spend on a campaign or channel by the number of leads that came in from that channel.
For example: consider your company spent $2,000 on your pay-per-click (PPC) campaign and 10 users convert to leads: Cost per lead = $2,000/10 = $200
The cost per lead will be different depending on your industry, channel or the quality of a lead. If you want quality, a higher cost per lead might mean a higher quality lead, and a lower overall customer acquisition cost. If you want quantity, you might want to lower cost per lead, even if the leads aren’t as qualified.
Cost per Lead (CPL) Benchmarks
Once you have your magic number, you can compare it to previous campaigns, your industry average or among different channels. To acquire these numbers isn’t an easy task.
Based on an extensive desk research and analyzing over dozen of articles on cost per lead and lead generation. We combined that with some data of our own to uncover the average cost of an online lead.
It became clear that the what you pay per lead depends on the industry you’re in and on the channel you use.