Ask any marketer running a lead generation campaign and they will probably agree that lowering Cost Per Lead, or CPL, is always on their mind. For some it’s the ultimate goal, while others may consider it secondary to quality leads and recognize that some leads simply cost more. Still, no one wants to pay more when they can get the same leads for less. How low your CPL can be is based on a variety of factors, including industry, size of desired audience, and targeting methodology. But many look at CPL as strictly a measurement of the cost to acquire leads, and nothing else. This can provide an incomplete picture of your lead generation efforts and prevent you from fully optimizing your campaign. To truly measure actual cost per lead, you need to develop a lead nurturing CPL that measures past acquisition and tracks performance.
How To Calculate CPL
The traditional equation for calculating Cost Per Lead is to divide your marketing spend by the number of
leads generated. So if you spent $100 on a lead generation campaign that netted 100 new leads, your CPL would be $1. But this is only the cost to acquire the lead. It doesn’t take into account any of the lead nurturing efforts once that lead is part of your email database. This also means the traditional CPL calculation isn’t taking into account lead quality, which has a major impact on the conversion path from lead to customer. When lead nurturing CPL is calculated, you get a complete picture of how your campaigns work together.
How Lead Nurturing Works
Lead nurturing is the process by which you move newly acquired leads through the sales funnel and convert them into customers. There can be costs associated with this, such as creative executions for email messages and ads, email service provider and ad serving fees, or the lost revenue from discounts used in the lead nurturing campaign. But depending on your average order value and frequency of repeat purchases, these costs can quickly be made up once that lead becomes a customer. You may even already have a number you’re comfortable spending that was derived from your average sales and will be offset by the percentage of leads you convert.
That’s why it’s so important to include lead nurturing costs in your CPL calculation. If you knew you were willing to spend up to $3 to acquire a new customer, but you weren’t looking at your lead nurturing CPL and campaign costs alongside the initial marketing spend for the lead generation campaign, you could easily go over budget.
How To Factor Lead Nurturing Into CPL
Factoring lead nurturing into your CPL equation offers a valuable metric to benchmark quality of your lead generation campaigns. Without it, your CPL can be manipulated by the volume of leads without offering any indication of quality. This can lead to inflated, low-quality lists that can be costly to convert to customers. When you extend your CPL calculation to include marketing and lead nurturing spend together, you now learn your true cost to conversion with a lead nurturing CPL. And isn’t that what lead generation is all about?
Think about it: if you generated 100 low quality leads and it took another $400 of lead nurturing to get to conversion, your total cost is actually $500, making your CPL $5. However, if you spent $100 to net only 50 high quality leads that required just an additional $50 of lead nurturing costs, your lead nurturing CPL would be only $3.
Factoring your lead nurturing CPL is clearly an important indicator of lead quality. But if initial math indicates your leads could use some improvement, don’t worry. We can help. Get a free evaluation today and start using opt-in advertising to generate quality leads at scale.