Cost per lead (CPL) is an online pricing model where a company pays a predetermined amount for each lead generated through advertising. It refers to the sum needed to acquire a new customer from an ongoing ad campaign.
Detailed Explanation
When a user, called a lead, views an online ad and interacts with the content, they take action and decide to “opt-in” to the product or service. The lead becomes a prospective customer, and the company encourages them to move further down the buyer’s journey to make a purchase.
In the early digital marketing days, companies generated leads through search engines and directory listings. They found it challenging to justify the investment of purchasing expensive leads.
Digital marketing branched out with technological advancements and the rise of social media. Now, companies use CPL at lower costs across multiple platforms, acquiring more customers and reducing marketing costs.
CPL is essential for marketing as companies can use it to gauge an online marketing campaign’s efficacy. It reliably represents a campaign’s success and provides a solid foundation for budgetary comparisons. It’s also easy to calculate.
CPL = Amount spent on campaign / Number of leads generated
Let’s take a look at an example. Suppose you spend $1,000 monthly on marketing and generate 12,500 leads from the campaign.
CPL = Amount spent on campaign / Number of leads generated = $1,00012,500 = $0.08
Your CPL is $0.08.