Cost per Lead

What is Cost per Lead?

The Cost per Lead (CPL) calculates how much your company spends on ads until you obtain a new lead–that is, a potential future customer.

As Cost per Lead helps measure the financial efficacy of your customer outreach, it’s one of the many KPIs that allow you to make informed decisions about the direction of your advertising budget. Cost per Lead is an especially useful KPI to evaluate if you wish to maximize your advertising reach within your current budgetary constraints.

Cost per Lead is a relevant metric for your marketing team to monitor.

Why is Cost per Lead important for marketing teams?

Cost per Lead is important because it allows you to determine whether your ad expenditures to obtain leads is too high. In other words, this KPI compares your spending on a specific advertising platform compared with the value of leads you obtain from it. It’s ultimately your decision of what a good expense and lead benchmarks are. But if you exceed your expense benchmark while not meeting your lead benchmark, it means you’re allocating too many resources into an advertising platform with too little payoff.

For example, you may have spent $2000 on Google Ads in a given month, but won only $500 worth of leads in this timeframe. While this situation is a money sink, using Cost per Lead and related KPIs allow you to reevaluate your advertising strategy as necessary.

Calculating Cost per Lead

Best practices for Cost per Lead

The best practice for Costper Lead is to keep a close eye on the value of your orders, and where these orders are coming from. It’s up to you to determine an acceptable ratio of the amount spent on orders to the number, and value, of customers obtained from them.

If your advertising on one platform is delivering substandard results under this framework, it’s time to change strategy and advertise elsewhere. This is when knowing your ICP (ideal customer profile) comes into play – if you know this profile and where to find it, you can optimize your advertising strategy accordingly.

Other, related KPIs to Ad Spend per New Lead include:

• Ad Spend per Won Deal
• Ad Spend per New Order
• Ad Spend per New Deal