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- Cost per lead is a marketing metric or a pricing model, depending on whether you\u2019re using inbound or outbound methods.<\/em><\/li>\n
- Use CPL with other metrics and models, such as cost per mille, cost per click, and cost per action.<\/em><\/li>\n
- The BANT process can help you find higher-quality leads.<\/em><\/li>\n
- Inbound marketing tactics remain the best strategy for lowering your cost per lead.<\/em><\/li>\n<\/ul>\n
The Modern Definition of Cost Per Lead<\/h2>\n
Cost per lead either refers to a marketing metric for evaluating the success of inbound campaigns or a pricing model for paid outbound campaigns. As an evaluation metric, cost per lead calculates what you spent on average to generate a new prospective customer.<\/p>\n
When CPL is a pricing model, a marketing firm runs a campaign (such as email, online ads, or outbound calls) and charges you for how many leads they deliver. B2B companies and high-ticket sellers needing to coax buyers through a sales funnel can benefit most from these campaigns.<\/p>\n
Where some teams trip themselves up is not understanding what a quality lead really is. The old days have passed of randomly calling people or knocking on doors and viewing everyone you meet as a lead.<\/p>\n
The hyper-personalization of digital experiences<\/a> means you need to distinguish between mere contacts and qualified leads who truly need your service. For that reason, your cost for different leads has differing returns on investment.<\/p>\n
How To Determine Cost Per Lead as a Metric<\/h2>\n
Even if you hate math, you don\u2019t need to be afraid of figuring out your cost per lead. Simply divide your advertising and marketing expenses by the number of leads and you have your figure.<\/p>\n
The thing to remember is not to miss any related expenses, such as tools for creating and distributing your content. More advanced cost-per-lead metrics also factor in the cost of your time.<\/p>\n
Finally, remember to restrict your calculation to a specific timeframe to get good results. You\u2019ll want to compare your cost per lead for all of your marketing against that of particular campaigns to determine ROI.<\/p>\n
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An Example of Calculating Cost Per Lead<\/h3>\n
Here\u2019s a quick example of calculating your cost per lead for a campaign:<\/p>\n
Suppose you spend $5,000 on a pay-per-click campaign that runs for two months and generates 100 leads. Divide $5,000 by 100 and you get that your leads cost you $50 each for that campaign.<\/p>\n
Why You Need To Keep Calculating Cost Per Lead<\/h2>\n
Your cost per lead provides an excellent way to compare the value each marketing campaign delivers. From there, you can determine where to focus your marketing spend.<\/p>\n
This metric can be handy if you\u2019re a marketing team lead looking to secure capital for a budget. Executives will be looking for clear evidence that you\u2019re supplying the sales team with quality leads to contact because premium leads usually cost more<\/a>.<\/p>\n
However, you typically need more than the numbers on cost per lead to accurately measure your campaigns. Use cost per mille, cost per click, and cost per action to dig deeper into lead quality and cost.<\/p>\n
A Refresher on BANT for Qualifying Your Leads<\/h2>\n
One downfall with these metrics is that you can focus too much on quantity and not on quality. One hot lead ready to buy today is worth more than 100 who \u201cneed to think about it\u201d or \u201cwill be back.\u201d<\/p>\n
The BANT system helps you score your leads<\/a> to add actionable data to your cost per lead calculations. BANT stands for:<\/p>\n
- \n
- Budget: What the prospect is willing to spend on the solution<\/li>\n
- Authority: Whether your contact makes the final decision<\/li>\n
- Need: Whether the prospect truly needs your product<\/li>\n
- Timeframe: The amount of time the prospect has to make a decision<\/li>\n<\/ul>\n
You can also add another qualifier to the equation: an S for the next Step. A lead with a real project and a defined course of action is a top prospect.<\/p>\n
Sales teams have had difficulty finding out this information early enough in the sales process. When marketing lends a hand by finding ways to segment and qualify leads, the lead becomes more valuable: The cost per lead is essentially less because more convert.<\/p>\n
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Tips for Reducing Your Cost Per Lead<\/h2>\n
No matter how low your cost per lead is, you certainly want to get it lower if you can. Use the following ideas to make your campaigns more effective:<\/p>\n
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- Personalize and segment: If the ad or content you\u2019re sharing doesn\u2019t match the audience, you\u2019ll get little engagement. Customers expect to have experiences that fit their needs and personality.<\/li>\n
- Test campaigns: You shouldn\u2019t just do what looks and feels good to you. A\/B test content<\/a> and ads to discover what performs best.<\/li>\n
- Refine your keywords: You should regularly check whether your keywords are working well and drop poor performers. Targeting more long-tail keywords can lead you to a more motivated audience.<\/li>\n
- Focus your site according to visitor behavior: Your current customers and visitors are telling you what kind of leads you can most easily attract. Study who converts and when and create campaigns around those behaviors.<\/li>\n<\/ul>\n
All successful marketing comes down to tracking, testing, and executing. Watching your cost per lead in connection with your campaigns helps you make the right decisions.<\/p>\n
Why Inbound Marketing Generates the Lowest Cost Per Lead<\/h2>\n
Lead demand generation may be a necessary part of your marketing. Still, inbound marketing with excellent content delivers the lowest cost per lead with long-term ROI<\/a>.<\/p>\n
Blogging, email, social media, and search have consistently driven the lowest cost per lead over a decade. Outbound tactics can cost you almost double the investment.<\/p>\n
- Use CPL with other metrics and models, such as cost per mille, cost per click, and cost per action.<\/em><\/li>\n