Know your cost per lead and never lead your marketing dollars astray again. Cost per lead is the one metric that will guide you past seemingly low costs and instead clearly show you the true cost of acquiring a lead. Cost per lead evaluations let you compare—apples to apples—how different tactics perform. Let’s get into calculating cost per lead and using it to create the ideal marketing mix for your next campaign.
Related Article: What’s a Good Cost Per Lead?
Refresher alert! Before we dig in, let’s brush up on cost per lead (CPL) and how you calculate it.
Cost per lead is the amount you spend to convert an unknown prospect into a lead in your database. Here’s an example of how to calculate CPL based on the number of total leads generated rather than their level of qualification:
**These cost examples are just for ad placement/deployment costs and do not include projected content creation costs.
Cost Per Lead = Total Cost ÷ Number of Leads Generated
The Cost of a Sales Qualified Lead
There are two types of leads that lead generation campaigns seek to convert—marketing qualified leads (MQLs) and sales qualified leads (SQLs). MQLs are easier to get and therefore cost less per lead than SQLs. MQLs are typically converted through an exchange of contact information for lead magnet content such as a webinar or ebook download. Comparatively, SQLs are usually generated by requesting prospects opt-in to a meeting.
Here is an example of how an SQL campaign performance might compare to that of an MQL campaign example above.
Evaluating the Quality of Sales Qualified Leads
Evaluate the performance of each channel and every individual ad to see what’s working and what’s not. After you’ve collected your leads, you’ll want to continue evaluating data to understand your conversion rates. For example, make sure you understand your SQL to sale conversion rate by channel. This will help you evaluate which channels brought in the best SQLs.
SQL to Sale Conversion Rate = (Total SQLs ÷ Number of Sales Deals Closed) x 100
Evaluating the Cost Per Sale
Finally, understand the cost per sale by channel and by ad. This will show which channels resulted in the least expensive cost per customer acquisition. When evaluating these numbers keep your original marketing strategy in mind. For example, perhaps you were leveraging a social campaign to attract technician interest, but they’re not buyers. This could indicate your social campaign had a higher cost per customer and higher cost per lead but was still effective.
Cost Per Customer = Total Ad Cost ÷ Number of Sales Deals Closed
Using Cost Per Lead to Choose Your Media Mix
Using CPL data can help you evaluate which paid placement will work best for your campaign. Often, it’s difficult to evaluate different paid media options by just comparing pricing. Use this method to evaluate your estimated CPL before you lock in your media strategy:
Estimated Clicks = Audience Size Ad is Served to x CTR*
Estimated Total Number of Leads = Estimated Clicks x Estimated Click to Lead Conversion Rate
Estimated CPL = Cost for Ad ÷ Estimated Total Number of Leads
*Make sure you ask if the click data is the percentage of total sends or the percentage of opens. This will have a significant impact on your estimated CPL.
Understanding Cost Per Lead-Based Media Programs
Looking at estimated CPL helps you compare apples to apples. On the surface, the $8,000 media buy in the example above may look less attractive than the $3,000 buy; however, by CPL estimations, both campaigns would yield the same CPL, but the $8,000 campaign would result in more leads.
Similarly, the $5,000 buy would yield a lower CPL than both the higher and lower-priced options. Audience engagement plays a major role in estimated CPLs. Often smaller, more engaged audiences produce the same CPL results because you’re not spending money on wasted impressions.
Here are a few key things to keep in mind when evaluating a media program for your campaign.
Cost Per Impression vs. Cost Per Lead
Some media programs offer a guaranteed number of impressions, and others offer a guaranteed number of leads. But the main difference between the two programs is the guarantee of MQL results. You can pay a low price for a certain number of impressions, but there’s no guarantee those impressions will convert.
Use CPL estimates to compare the projected performance of each campaign. For example, if you’re paying for guaranteed impressions on a banner ad with a meager conversion rate, you may actually be paying more per lead for that placement.
Conversely, guaranteed lead programs, often referred to as CPL programs, allow you to lock in a set CPL and lead quantity upfront, enabling predictable campaign outcomes. These types of programs often allow you to target the type of leads you want.
Whether your campaign goal is to generate a large number of leads to build your database or convert a small number of SQLs into buying-ready conversations, you can customize CPL programs to meet your particular needs.
For example, you may want to convert leads based on:
- Level of Qualification
Targeted MQLs or SQLs based upon your qualification criteria. - Prospect Demographics
Convert veterinary leads based on the size of their practice, job title, years of experience, and more. - Prospect Behavior
Target leads who have demonstrated engagement behaviors indicating they are an ideal target buyer of your product or service. - Prospect Location
Find your geographic niche. Use CPL programs to target prospects in specific target geographies. - New Prospects
Is your goal to generate additions to your database? You might want to exclude existing customers and leads from your CPL program. Or, perhaps you have two campaigns running concurrently. You want to avoid prospects included in the other campaign. Most CPL programs allow exclusion to optimize the conversion of new prospects.
Make engagement the #1 metric
When evaluating CPL, the metric that impacts cost the most is engagement. Your deployment partner’s brand awareness, trust, and perception in the industry heavily impact your engagement. Make sure you’re asking about open rates, click-through rates, and other engagement metrics when discussing CPL programs.
As we illustrated in previous examples, the lowest priced product isn’t necessarily going to yield the lowest cost per lead because of… you guessed it…engagement.
Factors that impact your campaign’s CPL
Engagement is key to getting your content in front of the right eyes. Then it’s up to your content to work its magic! Here are a few considerations to optimize your CPL:
Incentives
Depending on your campaign goals offering incentives may help increase conversions. For example, if you’re asking prospects to fill out a survey, offer a drawing for a gift card or sample product.
Quality of Content—It’s King
You’ve heard it a million times: The quality of your content (and marketing message) will have a major impact on your conversions. Spend the time to create quality lead magnets and to craft your message in a way that will resonate with your target audience. If you don’t have experts on staff, consider working with a media partner to make sure your content is solid.
Continuing Education
Offering continuing education is a great way to incentivize action—it can take longer to produce, but it’s well worth the effort.
Call to Action
Make sure your call to action (CTA) is simple, clear, and singular. If you ask them to do 3 things, they’ll probably do 0. If you ask them to do 1 thing, your chances of a conversion increase.
Align the CTA with your campaign goals. For example, if you’re trying to generate a large number of MQLs, your CTA should be simple and only require a low level of commitment from your prospect. You can nurture them into a meeting later.
Follow Up, Follow Up, Follow Up
CPL programs can help you produce a guaranteed number of leads, but they’re only as good as the follow-up to convert those leads into sales. Create solid guidelines for how and when leads will be delivered, nurtured, and eventually passed on to sales.
Set-up campaign tracking in your CRM to have visibility on your MQL to SQL conversions and SQL to sale conversions to close the loop on your CPL campaign. Check out our previous post for more tips on how to get the most out of your CRM to support your next CPL campaign!