Cost per lead (CPL) is a vital marketing metric that businesses use to assess the efficiency of their marketing campaigns.
Alongside other crucial metrics like CPC, vCPM, and CPM, CPL plays a pivotal role in how effectively a marketing team is able to evaluate the success of their campaigns. The metric helps a business understand whether it’s efficiently acquiring prospective customers for its sales team to engage with.
Let’s take a close look at CPL’s finer points so we can understand why digital marketers consider it one of the most useful performance indicators.
Table of contents:
• CPL FAQ
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 prospective customers, or new 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 and provide 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. Here’s the cost per lead formula:
CPL= Total Ad Spend / Total Leads Generated by Campaign
If a company spends $10,000 on a digital marketing campaign and generates 100 leads, it would divide 10,000 by 100 to arrive at a CPL of $100.
What Is a CPL Model?
Predominantly used in the affiliate marketing sector, the CPL model is where 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.
- 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.
- 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’s 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 them 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.
6 Tips to Reduce CPL
With one survey finding that 37% of marketers consider generating high-quality leads to be 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.
1. Conduct an Ad Review
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 isn’t converting, an advertiser can tweak the landing page to better match the ad, generate more conversions, and consequently lower their CPL.
2. Optimize Landing Pages
As we mentioned above, tweaking landing pages can have a major impact on your conversions. Your landing page is where visitors convert into leads, so it's important to optimize it for maximum conversions. For instance, simplifying the design, adding social proof, and making sure that the call-to-action (CTA) is clear and visible can all contribute to higher conversion rates.
3. 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.
4. 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.
5. Use Targeted Ad Campaigns
Focus on targeting the right audience with your ads. For example, if you're a B2B SaaS company targeting small businesses, running LinkedIn ads targeting small business owners can be more effective than running Facebook ads.
This will help reduce wasted ad spend and improve your conversion rates, ultimately leading to a lower CPL.
6. Leverage Marketing Automation
Marketing automation can help you streamline your lead generation processes and reduce your CPL. For example, you can use email marketing automation to nurture leads over time and keep them engaged until they're ready to make a purchase.
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
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.
If you’re making more than $2,000 in monthly ad revenue, contact us today to learn more about how Publift can help increase your ad revenue and best optimize the ad space available on your website or app.
What Is Good CPL in Marketing?
A lower than average cost per lead (CPL) is generally considered ideal, as it’s a good indication of a successful marketing strategy. Measures to achieve a good CPL typically include optimizing ad placements, targeting specific audiences, and creating compelling ad content.
However, It's important to note that while a low CPL is desirable, it's not always the only metric to consider when measuring a campaign’s overall success. Other metrics—such as conversion rates, website traffic, and engagement rates—should also be taken into account.
Should CPL Be High or Low?
A lower CPL is generally preferred, though the ideal CPL will depend on the specific goals and needs of a business.
A lower CPL can mean that a business is acquiring qualified leads at a lower cost, which will result in a higher ROI. It's important to note that a lower CPL doesn’t necessarily guarantee success, as the quality of leads acquired also matters.
It's crucial to strike a balance between the cost of acquiring leads and the quality of those leads. Testing and refining a CPL strategy can help businesses find the best approach for their specific needs.
Is CPL a KPI?
CPL can be considered a key performance indicator (KPI) in certain marketing contexts. The CPL metric measures the cost it takes to acquire a potential customer's contact information. For businesses that rely on marketing campaigns to generate leads, the CPL is an important metric to track and optimize.
By comparing the CPL to the average lifetime value (LTV) of a customer, marketers can determine if their lead generation strategies are effective at a reasonable cost. However, it’s important to note that CPL shouldn’t be used in isolation and should be considered alongside other metrics such as conversion rate and ROI to fully measure your marketing efforts.