Understanding Cost Per Lead (CPL): What You Need to Know

Knowing Your Cost Per Lead is Vital to Your Business

Understanding Cost Per Lead (CPL): What You Need to Know

Business owners often ask: “What’s a good cost per lead (CPL)?” The answer varies depending on your business goals and marketing effectiveness. CPL refers to how much you spend to generate a single lead through your marketing efforts. Knowing this number is essential, as it impacts profitability.

Key Factors:

1. What is CPL?

It’s the amount spent on a campaign divided by the number of leads you gain. For example, if you spend $1,000 and receive 10 leads, your CPL is $100. If you have a high-ticket product, you can spend hundreds of dollars on each lead. If you sell a $20 book, however, you can’t spend much on each lead. So knowing what you are spending is crucial.

2. Why CPL Matters

Understanding CPL allows you to track the effectiveness of your marketing. It’s important to monitor this metric so that you’re not overspending and can adjust your strategies to stay profitable. It will vary though from week to week and month to month, so looking at it from an overall perspective is key. Don’t get too worried if you have a down week.

3. CPL vs Cost Per Acquisition (CPA)

While CPL focuses on leads, CPA measures the cost to acquire an actual paying customer. Both are crucial for evaluating your marketing’s return on investment (ROI). If you are getting leads, but not closing them at a reasonable percentage, you will be paying too much for your customer acquisition. This key performance indicator will help you know how well you are leading a potential customer down the path to becoming a paying customer.

4. What You Should Pay Per Lead

There’s no one-size-fits-all answer. A lead’s value depends on your service type, average project cost, and close rates. If a lead costs $100 but brings in a $20,000 remodeling job, that’s a win. On the other hand, paying $100 per lead for a smaller service might be too much. If you pay $100 and get a client that pays on a monthly recurring revenue model at $30 per month, and they continue paying for 3 years on average, that $100 might be worth it. You should also know your margins so you can tell how much you profit from each new customer.

5. Targeting Realistic CPL

Your target CPL should align with your revenue goals. For example, if you want more profit, you might aim for a lower CPL, while if growth is your priority, you may tolerate higher costs.

Deciding how much to invest in each lead and how you use those leads depends entirely on your specific goals. Different types of advertising are going to be better at driving towards your specific goals. Some businesses want every opportunity to get in front of people for the chance to close some business. However, other companies would rather meet only with highly qualified and strong potential customers. As your marketing company, we can advise you on which approaches to use based on your goals. Some businesses prioritize profit, while others focus on growing revenue—that’s your call. Your marketing strategy should align with your objectives, not just industry standards or what marketing experts say.

Our campaigns are designed to be flexible and customized to your needs. Including SEM is a key part of these efforts. Feel free to ask for an analysis or discuss it in a marketing audit meeting. Schedule Here.