What Is A Good Cost Per Lead?
In this article we examine what a good cost per lead looks like for your business, and how you can calculate this.
Cost Per Lead (CPL for short) is a metric that’s tracked the world over by savvy companies looking to keep a tab on their marketing spend and ensure the ROI equation is measuring up. But, what does a good cost per lead look like?
In this article we’ll take you through what to consider, and how to calculate a good CPL for your business.
Cost Per Lead Is Unique To Your Business
In reality, your own business’s cost per lead is all that matters. Don’t waste time worrying about how the business down the road is boasting that their cost per lead is less than yours. Each situation is different.
The value of a lead to you depends on three main factors:
What your conversion rate from a lead to a sale is
What your average order value from a sale is
What the average lifetime value of that customer will be
These three factors are different for every business based on what you sell, the likelihood of repeat business, your price points, and how good your sales people are at converting.
Two businesses that look identical from the outside may need completely different cost per lead levels to thrive, as one may have a much lower conversion rate, or may not focus on repeat business from the customer in the future.
How To Calculate It
There are a few formulas to calculate your target cost per lead, and which you use will depend on your target profit margins on your business, and your growth targets.
From deciding your ideal cost per lead, you can figure out your overall marketing budget for a campaign.
The simplest way is to take your sales target, calculate your average conversion rate and your average order value, and apply the following formulas:
Target / Average Order Value = Sales Needed To Hit Target
Sales Needed To Hit Target / Conversion Rate = Leads Needed To Make Required Sales
Ideal Cost Per Lead * Leads Needed To Make Required Sales = Budget
When you’re calculating it historically, the easiest way to calculate your cost per lead is as below:
Total Campaign Spend / New Leads = Cost Per Lead
Cost Per Lead With Meet Hugo
With Meet Hugo, your cost per lead is very easy to calculate. Take your subscription cost, and divide it by the number of leads you receive across that period, and you’ve got your cost per lead – simple!
For example, if you’re on a quarterly package at $399, and you receive 72 leads across that period, your cost per lead would be $5.54. Compared to the likes of AdWords, Facebook ads, cold calling, and other methods, we’ll always be one of the best value lead generation methods out there in terms of cost per lead.
So, What Is A Good Cost Per Lead?
A good cost per lead is a number you can hit regularly through your sales/marketing efforts, that ensures you can hit your sales targets, achieve your aims, and hit your growth and profit margins.
That number can be wildly different, even in similar looking businesses. Calculate your number, and track it religiously in order to hit your goals.