What Is Cost Per Lead (CPL)? Why Is It Important?

Publift
August 2, 2022
August 4, 2022
What Is Cost Per Lead (CPL)? Why Is It Important?

Cost per lead (CPL) is one of a number of marketing metrics used by businesses to determine the effectiveness of their marketing campaigns. Others include CPC, vCPM, and CPM

But exactly what is CPL? CPL provides businesses with essential data to determine whether they are acquiring new customers in a cost-efficient manner.

This article looks at the finer points of CPL, one of the most useful performance indicators when it comes to digital marketing.

Table of contents:

What Is CPL (Cost Per Lead)?

CPL Formula: How to Calculate CPL

CPL Example

What Is a CPL Model?

Why Is CPL Important?

3 Tips to Reduce CPL

CPL Advantages for Publishers 

CPL Disadvantages for Publishers 

CPL Benchmark Averages by Industry 

Final Thoughts

What Is CPL (Cost Per Lead)?

Cost per lead (CPL) is the dollar amount required to generate a new, prospective, customer from a current marketing campaign. These customers, or leads, arise when a user sees an online ad, or engages with content on a website or page, and has decided to “opt in”.

When the user clicks, they are generally asked to fill in a form, providing their details in order to gain access to information—for example, a whitepaper or further information about the organization’s products or services. This is considered to be a lead in the context of CPL marketing. 

CPL Formula: How to Calculate CPL

The cost per lead (CPL) formula is fairly simple. It is the amount of money that a company spends on a marketing campaign divided by the number of leads that are generated. 

CPL= Total Ad Spend / Total Leads Generated by Campaign

CPL Example

If a company spends $10,000 on a digital marketing campaign and generates 100 leads, CPL would be calculated by dividing 10,000 by 100, making the cost per lead $100.

What Is a CPL Model?

Predominantly used in the affiliate marketing sector, the CPL model is a model whereby an advertiser pays for a user’s contact information. 

There are two types of CPL ads, single opt-in (SOI) ads and double opt-in (DOI) ads.

SOI Ads:

  • Leads are considered to be any user who provides their contact information.
  • These ads are well suited to A/B testing, even with a low budget.
  • They usually have high conversion rates, but users often provide false information about themselves, rendering the leads redundant.

DOI Ads:

  • Leads are considered to be users that take two actions, firstly to provide their contact information—through a form, for example—and secondly to confirm that information via their email or SMS.
  • Such leads are considered to be of higher quality as they are more likely to convert.
  • Higher quality leads mean higher quality payouts.

Why Is CPL Important?

Cost per lead (CPL) is important as it is easy to calculate, can be applied to any online advertising campaign on any channel, and is a good indicator of campaign success, particularly when evaluated within the context of other marketing metrics. 

CPL has grown in importance over time. In the early days of digital marketing, leads were generated through online directories and search engines. These leads were often sold to businesses at a high cost, making it difficult for businesses to justify the expense. 

As online advertising has become more sophisticated, businesses have been able to use this knowledge to target their ads more effectively, resulting in a lower CPL. 

Additionally, the use of social media and other digital channels has made it easier for businesses to connect with potential customers, further reducing the CPL.

3 Tips to Reduce CPL

With ​​37% of marketers stating that generating high-quality leads is one of their biggest challenges, organizations are increasingly looking at ways they can streamline the lead generation process and reduce their CPL. 

There are several ways businesses can work to reduce their CPLs in order to maximize their return on investment (ROI) on ad campaigns. 

Conduct an Ad Review

Google Ads Account Conversions

One of the most straightforward ways for a business to reduce their CPL is to conduct an ad review. If an ad is receiving a large number of clicks but is not converting, an advertiser can tweak the landing page to better match the ad, generate more conversions, and consequently lower their CPL. 

Check Performance Via Network 

By segmenting campaigns via networks, a business can check each individual campaign’s success. If a network partner is not performing, advertisers can choose to opt out and stick with network partners who will provide a lower CPL.

Check Performance Via Device

When it comes to CPL, not all devices are equal. Advertisers can evaluate their campaigns via device and choose to publish ads on the devices that are working for their particular ad campaign. 

CPL Advantages for Publishers 

There are several advantages of cost per lead (CPL) for publishers, which include:

1. Easier Sales Pitch

Since publishers are only paid when a lead is generated, it’s more attractive than other revenue models, making it easier to pitch to advertisers.

2. More Targeted Targeting

CPL campaigns need to be more targeted than ad models to be effective, meaning advertisers are more inclined to build relationships with niche publishers.

3. Higher Rates

CPL campaigns often have higher rates than other forms of advertising, because the leads generated are much more valuable than the number of accrued clicks.

CPL Disadvantages for Publishers 

Disadvantages of cost per lead (CPL) for publishers include

1. Revenue Unpredictability

The CPL model can be very unpredictable, making it difficult for publishers to accurately forecast revenue.

2. Campaign Length Uncertainty

It can be difficult to predict when a campaign has run its course.

3. Missed Conversions

Missed conversions—owing to tracking software errors—in a CPL transaction can result in a loss for publishers.

CPL Benchmark Averages by Industry 

As with most marketing metrics, CPL varies across industry, channel, and whether it is a paid or organic ad campaign. Regardless of this, there are industry average benchmarks that can be used to determine if an organization’s campaigns are cost-effective in today’s marketplace. 

Average CPL by Industry

Average CPL by Industry

Sources: Marketing Charts, Hubspot, Survey Anyplace, Integrated Marketing Association

Final Thoughts

CPL has the potential to deliver meaningful growth in audience and customer acquisition as long as both advertisers and publishers understand both its strengths and weaknesses.

Publift helps digital publishers get the most out of the ads on their websites. Publift has helped its clients realize an average 55% uplift in ad revenue since 2015, through the use of cutting-edge programmatic advertising technology paired with impartial and ethical guidance.

Contact us today to learn more about how Publift can help boost your ad revenue and grow your business!

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