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Cost Per Lead (CPL)

What is cost-per-lead (CPL)?

Cost per lead, also known as CPL, is an online advertising pricing model, where advertisers pay a predetermined price for each lead they generate from marketing campaigns. Sometimes, it is called “online lead generation.”

In ecommerce, CPL is often leveraged by businesses that sell subscription services or high-value products. In contrast to cost per click (CPC) and cost per mille (CPM) pricing models, — where marketers are charged for clicks and impressions, respectively — CPL advertisers only pay for qualified leads (regardless of how many clicks or impressions their ad receives). With a cost-per-lead approach, marketing agencies can better guarantee a return on their online advertising investments to companies that work with them.

Frequently Asked Questions

  • Why do businesses use CPL campaigns?

    Businesses use CPL campaigns to measure how cost-effective their marketing strategy is, especially in relation to new lead generation for their sales team. That’s because the CPL metric is closely tied to other important KPIs, like the cost for new customer acquisition. 

    The purpose of CPL is to provide marketing teams with a tangible dollar amount so they know how much to put toward customer acquisition costs. In addition, cost per lead can be used to monitor individual ad campaigns like Google Ads (formerly AdWords), banner ads, social media ads, or the total cost of your marketing efforts.

  • How do you calculate the CPL?

    Digital marketers who know their cost per lead can make more strategic marketing decisions, since CPL determines the effectiveness of your marketing channels. Whether you’re collecting a number of leads at trade shows or driving them through your inbound marketing campaigns, identifying your CPL will help you keep an eye on your total marketing budget.

    Cost per lead is calculated by: cost per lead = [cost of generating leads ÷ total leads acquired]. Another way of saying this is: cost per lead = [total marketing spend ÷ total new leads]. To complete this formula, start by adding up the total costs of your marketing spend, and then adding up your new leads. From there, divide your marketing spend by new leads, and the result is your CPL. Keep in mind for your online marketing costs, it’s necessary to calculate the sum of your time, ad spend, and any third party expenses you’ve incurred.

  • What is an example of cost per lead?

    Let’s say your company spent $2,000 on its pay-per-click (PPC) campaign, and 20 users have converted to leads. Using the formula: cost per lead = [cost of generating leads ÷ total leads acquired], you’d divide $2,000 (cost of generating leads) by 20 (total leads acquired). In this scenario, your cost per lead equals $100. If this CPL is too high in comparison to the cost of your products or services, then you'll need to lower costs for your PPC campaign accordingly.

More terms and formulas

formulas Retail Price See definition and examples
Fulfillment & Logistics Manufacturer's Suggested Retail Price (MSRP) See definition and examples
formulas Average Selling Price (ASP) Definition & Example See definition and examples

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