what is the CPL, how is it calculated and in which cases should it be applied?
If a company or brand aims to generate leads then it must calculate the CPL or cost per lead, in order to know if its strategies are being effective or if it needs to make changes.
It is very important in digital marketing to analyse the actions that are carried out, because everything that is not measured cannot be improved.
Today we explain in this post what the CPL is, how to calculate it and how to apply it. Keep reading to solve all your doubts!
what is the CPL?
CPL or cost per lead, you can also see it with the following acronym PPL (pay per lead), is a metric that indicates the amount invested for the acquisition of leads, that is, it serves to know the profitability of the investments made to attract potential customers.
how to calculate the CPL?
The formula is very simple:
Investment / leads obtained
The cost per lead is calculated by adding all the costs related to the investment made to get those leads, i.e. all the actions and campaigns carried out, by the total number of leads obtained.
Let's give you an example so you can see it in a more visual way. Imagine that you invest 1500€ in a campaign to generate leads, you obtain the data of 625 users, that is, you have generated that number of leads, then your CPL is 2,4€. Because 1500 / 625 = 2,4
What this figure means is that each lead you have obtained has cost you that price, in this case, €2.4.
There is no price per lead that is an exact reference, as it depends on each company. If your company is very large, perhaps paying a little more for each lead will be profitable, while another may only be able to pay a few cents to make this investment worthwhile.
But it is clear that the lower your CPL the better, because it means that you are generating many leads for less cost. It is important to keep in mind that not all of these leads will go through the conversion stage and become customers. That is why your strategy should not only be based on this calculation, you will also have to calculate the final conversion rate, another fundamental metric.
why is CPL important?
You have already seen how the cost per lead is used to calculate how much it costs to get each lead. This KPI is important for your marketing campaigns for reasons such as the following:
- identify the origin of the lead. To get a lead you can use different means and channels, either with a form, through a CTA (call to action), a subscription, etc.
By calculating the CPL you can see which is your main way to get the user to leave their data. Once you know this data you can put more effort into reinforcing this technique to bet on it.
- evaluate the profitability of your business. The cost per lead, obviously, measures what it costs to get a user to leave their contact information, and therefore it is important to calculate this data. But it will also help you to detect whether your company is viable in more general terms.
For example, if your CTL is €3 on your website, and you have another campaign to generate leads through social media that costs you €1.5, the most appropriate decision is to encourage social media strategies, because it costs you less and produces more leads.
- measuring the conversion rate: The cost per lead helps you to measure the overall conversion rate and we will explain why. A user comes to your website, if they leave you their contact details, that is when they become a lead, but it does not mean that they will go all the way to the sale. Many of those leads will fall by the wayside and only a few will become customers. So the more leads you get, the more likely they are to become customers and therefore convert. You need to know how many of them end up being customers, so if your CPL is high and very few go on to make a purchase, your strategy is not working.
You should apply this metric in all the actions you carry out to capture leads, because measuring your actions is a fundamental step to improve them and make better decisions in the future. In addition, as you have seen, the formula and calculation of this KPI is simple and will not take you much time.
Remember that thanks to it you can evaluate if the investment you have made is being profitable, measure the conversion rate and know where those leads come from.
we hope we have been able to solve all your doubts and that you have enjoyed reading this article!