On average, small businesses in the US spend about 1% of their revenue on advertising. It might not sound like much, so you probably don’t pay too much attention to how much you’re spending on marketing.
However, this 1% can either be money very well spent or a huge drain on your company. But how can you tell by just looking at the dollar amount spent? You can’t; not unless you figure out your cost per lead.
What is cost per lead anyway? And how can you figure it out for your company? Read on to find out more so you can make the most of your marketing dollars.
What Is Cost Per Lead?
Cost per lead is also often shortened to “CPL.” This is the amount of number it takes for you to take a prospect through the entire marketing funnel and make them into an actual customer.
CPL might look like a synonymous term with other ones, like CPA, CPC, and CPM. Here’s what each means:
- Cost per action (CPA): cost for a person to buy a product
- Cost per click (CPC): cost for a person to click on your ad
- Cost per thousand or cost per thousand impressions (CPM): cost of 1,000 people viewing your ad
As you can see, these terms all have their unique meanings, so don’t make the mistake of swapping CPL out for one of them.
How Can You Figure Out Your CPL?
So you now know what “cost per lead” means and you want to calculate it for your digital marketing campaign. How can you do so?
Well, there’s a very simple formula you can use. It’s this: total ad spend divided by total attributed leads. For example, if you spent $1,000 on an ad campaign and got 10 new customers from that, then the CPL for this ad campaign is $100.
That might seem like a lot, but it really depends on your industry benchmarks. You’ll want to check out aggregated data from various sources to see how your campaigns are stacking up to other similar ones.
In general, expect to have higher CPLs for marketing agencies and financial services. On the other side of things, expect to have much lower CPLs for media and publishing.
How to Reap the Benefits of Cost Per Lead
Let’s say you’ve calculated your CPL for a campaign and you think you can do better. How can you lower your CPL so that you make the most of your marketing spend? Keep reading for some tips!
Personalize Your Campaigns
You might not realize it, but users might be on disjointed customer journeys that cause them to click off your page and turn to your competitors.
What you want to do is put yourself in their shoes and think about the ads you’re running and where these take users. For example, you want to make sure the landing pages for specific ads are 100% related to what you’ve enticed users with in the ad. Otherwise, they might end up confused and won’t go on further with their customer journey with you.
You need to make sure that you’re personalizing journeys every step of the way and providing users with the information they’re looking for.
Take Another Look at the Keywords You’re Using
For your campaign, you might’ve done some keyword research to pick the best ones possible. However, that doesn’t guarantee that they’ll do well.
If you don’t go back to see how well these chosen keywords are performing, you’ll end up wasting lots of marketing spend. So make sure you run analyses every once in a while to determine if your keywords are performing well.
For those that don’t seem to be grabbing users’ attention, get rid of them. Then, focus on the ones that are performing well.
Lower Your Keyword Bids
Just because keywords are doing well doesn’t necessarily mean you should keep them either. For instance, you might have a keyword that’s converting quite a few people. But in the end, the excessively high bids are causing you to have a high CPL for that keyword.
Think about lowering your keyword bids to decrease your CPL. You can either do this manually or through automated bidding sites like Google.
Consider Retargeting Your Site Visitors
Sometimes, people will visit your site before they’re ready to convert. Or maybe they need a slight push to do so.
In any case, you don’t want them to forget about your brand. Keep your company top of mind by retargeting site visitors who don’t convert.
A great tool that can help with this is a lead generation tool, which tracks all activity users have with your brand. With that information, you can form personalized retargeting campaigns that are sure to convert.
Perform A/B Testing
Sure, an ad might be performing fantastically. But what if it could do better? What if you feel like you can tweak the current one for more success, but don’t want to sabotage your current success?
An excellent way to get a feel for things is to run A/B testing. These can be done simultaneously and don’t take long to generate results.
Once you’ve seen which ad performs better, you can then switch off the other and keep the better one on.
Figure Out Your Company’s Cost Per Lead for Better Marketing Spend
After reading this article, you should now have a good idea of what cost per lead (CPL) is. In addition, we’ve also given you a rough idea of how to calculate your business’s CPL and the benefits of doing so.
So whatever your digital marketing strategies are (and offline too!), it’s always a good idea to take a step back and look at your CPL. With this information, you can learn whether or not your campaign’s worth it. From there, you can test and tweak, plus note important info for future campaigns so they run more smoothly.
For more articles like this one on CPL, please browse the rest of our blog page.