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April 15, 2016 By Hendrik-Jan Francke

B2B Tech CEOs: Why You Need Your Marketing Team to Calculate Cost Per Lead

There’s a lot going on in your organization. Marketing, advertising, relationship management, and more. You can’t sweat the small stuff: You need to focus on the big picture.

The key is to make sure your teams are tracking and reporting on their performance.

When it comes to your marketing team, you shouldn't be worried about social followers or site traffic. You need them to report metrics that relate to leads. That's the bottom line.

One metric you should ensure your team tracks is Cost Per Lead (CPL).

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6 B2B Marketing Metrics Your CEO Cares About

Here’s How to Find Cost Per Lead

Whether you’re the CMO justifying results or the CEO talking to shareholders, CPL goes a long way toward helping you understand what’s working in your marketing. By showing what you’re spending on each lead, it tells you how impactful your marketing is.

Calculating it is simple: CPL is Marketing Spend / Total New Leads

No matter if you’re buying leads from a list or collecting them with inbound marketing, calculating CPL is the same. Of course, experts have shown inbound marketing has a lower cost per lead than traditional sales-driven techniques.

That should tell you all you need to know about CPL – the lower the better, right?

Not necessarily.

Yes, by reporting CPL, marketing teams support strong strategic decisions: They're uncovering exactly how much each marketing channel costs. To maximize value, they need to follow through and learn where the highest quality leads are found.

Low CPL Isn’t Always the Name of the Game – Here’s Why

Low CPL can cost more in the long run. Why?

Lead quality is more important than cost.

The further along a lead is in the buyer journey, the sooner they’ll be willing to consider a solution from you.

With that in mind, a cheap lead in the Awareness stage can be less lucrative than a pricier lead at the Consideration stage. An Awareness lead could take months to seek a permanent solution to a problem ...

... a Consideration lead is ready to look at answers right now.

Even if CPL for Awareness prospects seems like a bargain, they’re going to take more nurturing – time and effort – than the lead who’s almost purchase-ready. To truly quantify the value of leads, they need to be divided further.

You need to know Customer Acquisition Cost (CAC).

CAC is a measure of the time and treasure it takes to move leads through the buyer journey and get them to the goal – a sale. It accounts for all the marketing effort and sales time the conversion requires.

Customer Acquisition Cost = Sales & Marketing Cost / New Customers

How does it all come together?

If High CPL Correlates to Low CAC, the High-CPL Lead is More Sales-Qualified

By knowing CPL and CAC, you clarify the true cost of marketing within and across campaigns. That lets you determine which channels are most effective at reaching prospects and which methods produce results.

That gives you the data to reduce costs and raise ROI even when CPL is higher.

That, in turn, gives you the insights you need for excellent strategic decision-making.

Five Questions to Ask Your Marketing Team About Cost Per Lead

  • Which mediums have the highest/lowest CPL?
  • Does that medium produce sales qualified leads?
  • What percentage of your marketing budget is targeted to that medium?
  • What percentage of leads from that medium become prospects/customers?
  • What is the Customer Acquisition Cost from leads that come to us through that medium?

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