What counts as a lead?
A lead is a person who gives you their contact details and so shows interest. You decide which actions count as a lead; typical ones are:
- a contact or quote request via a form
- a callback request or a call from the website
- downloading a white paper or checklist in exchange for an email address
- signing up for a webinar, a demo or a newsletter
These leads differ greatly in value. A quote request is closer to an order than a newsletter subscription. Calculate CPL separately for each type of lead, otherwise the average mixes expensive and cheap contacts.
How is CPL calculated?
The formula is:
CPL = advertising costs ÷ number of leads
Worked example: a campaign for quote requests costs €1,500 a month and brings in 30 requests. €1,500 ÷ 30 = €50 CPL.
Only count valid leads. Duplicate requests, spam and test entries push the value down. If 5 of the 30 requests drop out, CPL rises to €1,500 ÷ 25 = €60. Whether you include only media costs or also the agency fee and content production is up to you. What matters is that you do it the same way across all channels.
What is a good cost per lead?
There is no generally good CPL, because a lead is only worth something once it turns into an order. You derive the affordable CPL from two figures: how many leads become orders and what an order brings in.
Affordable CPL = contribution margin per order × lead close rate
Worked example: an order brings in a contribution margin of €3,000, and 10% of leads become orders. You can then spend up to €300 per lead. In this case a CPL of €50 is cheap; with a close rate of 2% and a contribution margin of €1,000, the limit would be €20.
Industry figures from the web are of little help, because order values and close rates vary widely between companies. If customers come back, calculate with the customer lifetime value (CLV), the value of all orders from one customer.
CPL, CPA and CAC: how they differ
CPL is a special case of CPA (cost per acquisition) in which the conversion is a lead. For orders in an online shop, the metric is called cost per order (CPO). Customer acquisition cost (CAC) goes one step further: it covers all marketing and sales costs up to the deal and refers to one new customer.
| Metric | Refers to | Typical costs |
|---|---|---|
| CPL | one lead (enquiry, registration) | advertising costs |
| CPA | any agreed action | advertising costs |
| CAC | one new customer | marketing and sales costs |
CPL as a payment model
In affiliate marketing and in lead generation through service providers, CPL is also a billing model: the partner receives a fixed amount per lead. For this to pay off, you need clear rules on which leads are paid for, such as complete contact details, a confirmed email address or no duplicates. Without these rules, you also pay for contacts who never become customers.
How to lower your CPL without losing quality
- Improve the landing page: a landing page that delivers on the promise of the ad increases the conversion rate and so lowers CPL.
- Keep the form short: only ask for what you need for the next step.
- Track leads through to the deal: only when you know which campaign brings orders can you steer by lead quality as well as volume. To do this, deals from the CRM are fed back into conversion tracking. This end-to-end tracking measures everything from the first click to the deal.
- Check cheap leads: if CPL drops sharply, check whether the close rate drops with it. A cheap lead that never becomes an order costs more than an expensive lead that does.
CPL calculator
Enter your advertising costs and the number of valid leads for the same period. The calculator shows your average CPL.
