Cost per lead (CPL) is a vital marketing metric that businesses use to assess the efficiency of their marketing campaigns, alongside other crucial metrics such as CPC, vCPM.
The metric helps the marketing team 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.
What Is Cost Per Lead?
Cost per lead (CPL) is the amount spent to attract a new potential customer, or lead, via a marketing campaign.
A lead is created when a user engages with an ad or some other content element and provides some information useful to a marketer, indicating interest in a product or service.
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
Cost Per Lead Example
For example, 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?
The CPL model is where an advertiser pays a publisher for a user's contact information. It is very popular in the affiliate marketing space.
Ads that publishers display on their websites or apps to collect leads are called CPL ads.
There are two types of CPL ads—single opt-in (SOI) ads and double opt-in (DOI) ads. Here are the key differences between the two.
SOI Ads
- Leads are considered to be any user who provides their contact information.
- They usually have high conversion rates, but provide lower-quality leads as users may often provide incorrect information about themselves, rendering the leads redundant.
- These ads are well suited to A/B testing, even with a low budget.
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 a lead, also called a sales qualified lead, is considered to be of higher quality as it is more likely to convert.
- Higher quality leads mean higher quality payouts.
Why Is CPL Important?
Cost per lead (CPL) is important as it gives marketers a quick estimate of their marketing costs. This in turn allows them to efficiently allocate their marketing budget to the best performing marketing channels.
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 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.
Tips to Reduce CPL
Most marketers consider generating high-quality leads to be one of their biggest challenges. As a result, organizations are increasingly looking at ways to 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. Here are a few:
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 try replacing the ad with one that converts better. The quality of ads certainly has an impact on the number of leads generated.
For instance, publishers who struggle to see results with basic ad networks such as Google Ads often tend to see more leads when they switch to working with premium partners such as Publift. More leads will automatically drive down the CPL.
2. Optimize Landing Pages
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. 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, such as:
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 other 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.
Cost Per Lead 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.
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 has been helping its clients realize an average 55% uplift in ad revenue since 2015, through the use of cutting-edge technology and world-class customer support.
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.
Cost Per Lead (CPL)—FAQs
What Is a Good Cost Per Lead?
The ideal cost per lead depends on several factors such as the publisher’s niche, geolocation, target audience, etc. Different industries may have different average CPLs. For most publishers, aiming for a CPL that is lower than or equal to the average CPL for their niche or industry should be good. 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 Cost Per Lead 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 Cost Per Lead a KPI?
CPL is an online advertising pricing model which 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.