Cost Per Lead

What is the cost per lead?

Cost per lead (CPL) is a straightforward marketing metric that businesses and marketing teams can use to gauge the effectiveness of their marketing campaigns with regard to generating leads.

Teams calculate all expenses for a specific campaign (e.g., advertising costs, marketer salaries, and swag items) and divide that by the number of leads they generate. Marketers strive to minimize the CPL to make campaigns as worthwhile and cost-effective as possible. 

A lead refers to someone who indicates interest in a product or service and is likely to become a customer in the future. The number of new leads should represent how many leads the business acquired during the campaign timeframe.

Businesses use lead generation services and providers to manage campaigns to discover and qualify new potential clients. These providers help fill an organization’s sales pipeline with possible customers and assist with follow-up campaigns to increase the likelihood of conversions.  

How to calculate cost per lead

Calculating cost per lead is relatively straightforward as long as teams have accurate data points and campaign expenses to rely on as part of the calculations. The formula to calculate cost per lead is: 

To determine the total campaign cost, teams should include and add up all expenses that contributed to the marketing campaign. Some examples of campaign expenses include content creation costs and services, total ad spend, team labor, software tools and systems, and general overhead. 

Cost per lead examples

Below are two examples of how to calculate cost per lead.

Social media holiday campaign example

Company A runs an extensive social media advertising campaign during the winter holiday season. The total campaign cost, including content creation, sponsored ad spend, influencer marketing, giveaways, campaign copy, labor, and platform usage, is $50,000. The team ran the campaign for 30 days and generated 2,000 leads due to their efforts. 

CPL = $25 = $50,000 (campaign expenses) / 2,000 (leads generated) 

The cost per lead for Company A’s social media campaign is $25. 

Industry conference example 

Company Y participates in a large, multi-day, industry conference. They rent a booth, send a team of five to the conference, outsource some of the planning, produce limited edition swag, and create all new promotional materials for the event. They incur $35,000 in event-related costs. After scrubbing their list for lousy contact information, the team collects contact information from 70 potential leads. 

CPL = $500 = $35,000 (conference expenses) / 70 (quality leads generated) 

The cost per lead for Company Y’s conference participation is $500. 

Benefits of calculating cost per lead

Calculating the cost per lead offers several benefits to businesses, marketers, and sales teams. Some of the perks of calculating cost per lead include the following.

• Better budget decisions due to better data. Understanding the CPL helps businesses and marketing teams allocate their marketing budget and campaign spending more usefully. With CPL data, marketers determine where to invest campaign dollars to increase the likelihood of finding new leads.

• Improved return on investment (ROI) metrics. The CPL is a critical calculation for understanding the total ROI of marketing campaigns. By comparing the cost per lead to the revenue generation from those leads, marketing teams estimate the profitability of their efforts and prioritize similar campaigns in the future.

• Ability to compare data against industry standards. Companies can gather industry-specific CPL benchmarks from industry reports and other reputable sources to compare their data. Evaluating CPL calculations with industry averages allows brands to assess and understand how their lead generation costs align with broader industry practices. 

Strategies to improve cost per lead

Improving cost per lead requires regularly reviewing and optimizing lead generation strategies for the best results. Some effective strategies for acquiring leads at a lower price include:

• Conducting A/B testing and optimizing campaigns. Marketers should consider conducting A/B testing of different assets and creatives before rolling out the campaign or during the campaign. Teams can use this information to make better choices about their campaigns while they’re live rather than wait to review the data after the campaign ends. 

• Focus on developing quality content. Creating high-quality content that provides value to the audience will attract more qualified leads and provide better results. Rather than focusing on creating a lot of content, it’s essential to ensure the content is helpful. 

• Target audience segments. Businesses should prioritize knowing and understanding their target audience to determine the best way to reach them and which channels to use. Marketing to a broad audience can increase the cost per lead as the marketing campaign may not necessarily get in front of the eyes of those who are likely to become customers. Narrowing down the audience to specific demographics can be more cost-effective.
• Diversify the marketing mix. Some marketing tactics and platforms are more costly than others, which will affect the CPL. The best approach is to diversify marketing activities across multiple activities, media, and channels to identify the most efficient and best investment for generating leads.

Use effective calls-to-action (CTAs) to get prospects to click and convert.