Before You Run That Ad Campaign, Determine Your Cost-Per-Lead

 

Time and time again, I speak to businesses who want to generate leads. It’s easy to fantasize about the amount of leads that could turn into paying customers and get carried away with volume. But before you start spending (what could turn into a lot of) money, first figure out your cost per lead. 

What is a Cost-Per-Lead

A cost per lead indicates a tangible, hard cost number that is appropriate to spend to acquire these leads. How do you determine your cost per lead, you ask? Well this is completely and entirely up to you. As a business owner, you know what each lead is worth to your business — and more importantly, what not to exceed to generate that lead. Knowing your cost per lead (CPL) will help you build out a cost-effective campaign that’ll ensure profitability. How you measure your cost per lead will help you make data driven decisions on how you can build on your campaign and to scale for volume, resulting in a profitable and positive ROI (return of investment). 

Here is an example of a cost per lead program. 

If you’re spending $5000.00 on a pay-per-click (PPC) campaign. How many clicks does it take to get a lead?

On average, a Facebook cost per click (CPC) could be $0.30/click (on average) and on google it’s $1-2 per click, and much higher ($50+ per click) for selected keywords. This isn’t to be confused with cost per impressions (CPM). 

Let’s say out of this campaign, the advertiser receives 100 leads. Here is the math breakdown:

Your cost per lead acquisition would look like: $5000.00/100 leads. 

= $50.00/lead

Based on metrics, is $50.00 a fair lead acquisition? Depending on what you’re selling, this could be a fantastic cost-per-lead. For example, a high valued item or service, paying $50.00 per lead could yield a big margin/profit for the advertiser. If you’re a dental clinic who sells whitening session for $100.00/session, $50.00 per session may be a good start, especially if those leads turn into repeat customers. However, the next question you should ask is how can we scale for more volume and lower the cost-per-lead costs. 

Success Indicators & KPI's

What success indicators do you need to put in place to ensure that your cost-per-lead is effective and sustainable for your business? Ultimately, the goal for performance advertising and nailing down your cost-per-lead is to sustain your campaign. If your cost-per-lead is too high or unrealistic, you will end up pausing and you won’t have room to scale for volume. The goal is to always acquire the lead and convert them to a sale at the minimum cost-per-lead. 

 

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