What is CPL?
Formula to Calculate Cost Per Lead
Knowing How Much a Lead Costs Makes Your Marketing More Strategic
Cost Per Lead is the first formula in a string of marketing metrics that will help you gauge the effectiveness of your marketing.
Whether you are purchasing a list, collecting names at tradeshows, or driving leads through inbound marketing efforts, identifying cost per lead will help you keep an eye on your marketing budget.
Cost Per Lead Formula
The cost per lead formula is simple:
Marketing Spend / Total New Leads = Cost Per Lead (CPL)
For Marketing Spend, it’s important to add up the sum of your time, ad spend, and any third party expenses.
Example of Calculating Cost Per Lead in a Marketing Campaign
Imagine Mr. Monopoly, the VP of Marketing at Monopoly Inc., is building an inbound marketing campaign around “5 Reasons the Hospitality Industry Needs to Move Accounting to the Cloud”.
Hotels are popping up all over Park Place and Boardwalk!
Cloud accounting makes sense for these growing businesses.
Let's calculate cost per lead:
One Month Marketing Spend
2,000 Monopoly Dollars
New Leads in One Month
2,000 Monopoly Dollars ÷ 60 new leads = 33 Monopoly Dollars Per Lead
Pro Tip: Set up goals in Google Analytics to make it easier to track the source of your leads. Goals can help you segment leads from advertising, email, and social media - you know exactly which measures are effective.
Make Strategic Marketing Decisions When You Know Cost Per Lead
When you know how much leads cost, you can make strategic decisions on where to target your marketing efforts. Print ads vs. Google ads. Tradeshows vs. Webinars.
Inbound marketing can deliver a much lower cost per lead than outbound marketing. Once you calculate cost per lead for different campaigns, you can focus on improving marketing efficiencies in those areas.
Is a $33 Cost Per Lead Good or Bad for Mr. Monopoly? *
Full disclosure: We used Mr. Monopoly as an example because the definition of “good” or “bad” CPL depends. Cost per lead differs for different industries, different campaigns, and leads at different stages of the buyer’s journey.
As a marketer, you will have to figure out what cost per lead works for your company. If you want quality, a higher cost per lead might mean a higher quality lead, and a lower overall customer acquisition cost. If you want quantity, you might want to lower cost per lead, even if the leads aren’t as qualified.