Varos Glossary

Cost Per Lead

What is Cost Per Lead?

Depending on the context, “lead” may have a variety of meanings. However, a lead is often a potential customer who is interested in what your business has to offer, but isn't quite ready to buy just yet.

Accordingly, the cost of acquiring a single new customer lead is known as the Cost Per Lead (CPL).

The Cost Per Lead metric tracks how much a lead costs. It’s used to evaluate the success of marketing initiatives. With this number in hand, your marketing team will have a better grasp on just how much money must be allocated toward the pursuit of new leads. There must be a problem if the cost of generating a new lead exceeds the revenue generated from selling that lead.

The Cost Per Acquisition statistic also supplies critical information for figuring out your marketing return on investment. In fact, comparable measures, such as cost per visitor, should be used across the board in the purchasing funnel. You can also use this data to track the success of specific advertising, whether they're banners, PPCs, social media posts, or anything else you're trying to promote.

How to Calculate the Cost Per Lead

The Cost per Lead is easily calculated; divide the total amount spent on the campaign by the total quantity of leads generated by the campaign within the same time period.

Cost Per Lead formula:

  • CPL = Cost of campaign / Number of leads

Good CPL

The definition of a good CPL is very context-dependent, requiring knowledge of your target consumer, market, competitors, and company and industry.

If you're looking to cut down on client acquisition costs without sacrificing quality, a higher CPL might be the way to go. There is a trade-off between quality and quantity in lead generation; if you're after more leads, you could be willing to accept a lower cost per lead.

Set up analytics and a dashboard to monitor activities for roughly 60-90 days to establish performance standards if this is your first digital marketing campaign or the introduction of a new service. When you have sufficient information, you may make changes to your budget, message, or techniques depending on key performance indicators to arrive at a CPL that is in line with your marketing goals.

The average CPL varies by industry and marketing channel, so you may evaluate how you're doing relative to the competition. For example, the average cost per lead by industry is: 

  • IT: $208 
  • Financial services: $160 
  • Business services: $130 
  • Healthcare: $160
  • Education:$ 55  

You can thus more accurately estimate the cost per qualified lead.

How to Lower Your Cost Per Lead

If you want to spend less on acquiring new customers and more on growing your company, consider using the following strategies.

  • Refine your target audience. Knowing your target market is essential for successful product sales. Examine the data to see which demographic responded well to your advertising efforts. Find out what kind of individuals they are in terms of age and gender, and consider the reasons why other users aren't responding to your advertisements. In this way, you may isolate the consumers who have no interest in what you have to offer and cut them from your spending completely.

  • Conduct remarketing efforts. You have undoubtedly seen that many visitors to your website who look at your items or even put them in their shopping basket ultimately decide not to complete the purchase. They could not become a paying customer due to factors such as a lengthy checkout process, high overall cost, or concerns about their own company. Therefore, a retargeting campaign may be used to bring back these users instead of obtaining new leads.

  • Lessen the total amount of blanks. Examine your opt-in form carefully, pretending you are a customer. Find out how long it will take you by answering all of the questions. Make sure you just inquire about vital details. Having too many fields in a form might be frustrating for users and cause them to leave your site. In any case, you may always follow up with them for further information at a later time.