Generating high-quality leads and low cost per lead is one of the most important tasks in digital marketing. Except for eCommerce businesses, everyone needs leads on a regular basis to find new customers or to sell their products or services.
Google ads, Facebook Ads, SEO, Social Media, Youtube, LinkedIn and lots of other platforms are used to generate leads with different methods. In this post, we will discuss the Cost per lead with PPC Ads (eg. Google Ads, Facebook Ads).
CPL or Cost per lead is one of the most important metrics to understand in Paid advertising to keep your business profitable. A high CPL can reduce your profit and also poor quality leads can badly affect your business.
So, it is important to generate quality leads at a low cost. May time we get inquiries like
- What is the average cost of a lead?
- What is the average cost per lead on Google?
- Cost per lead in India?
- What is the cost per lead in India?
- What is a reasonable cost per lead?
- How much should I pay for a lead?
- How do you calculate cost per lead?
- Average cost per lead in India?
- How much does an average lead cost?
There are no direct answers for most of these CPL queries.
What is CPL in digital marketing & how to calculate cost per lead?
CPL stands for cost per lead and there is a simple formula to calculate it. In digital marketing, generally, we used the word conversion for any actions like leads, sales, downloads etc. Keeping the CPL low is important for the success of any digital marketing campaign. With Low CPL, you can get more leads in the same budget, businesses can get more customers and so more profit for everyone.
Suppose you are spending 1000 to advertise your business on Google ads and you can get 50 conversions ( leads or inquiries) then you can calculate your cost per lead (CPL) by dividing the total spent on ads by the total no of leads. In this case, CPL = 1000/50 = 20 . So your cost per lead is 20.
CPC Vs CPL
Many new marketers are confused between CPC and CPL. Many times we get queries about CPL but the customer always asks what will be CPC, in fact, they wanted to know Cost per lead (CPL), not Cost per click (CPC).
In Pay per click advertising (PPC Ads), an advertiser has to pay for each click ( in most cases) and the amount which he charged for each click on his ads is called Cost per click (CPC). While CPL (cost per lead) is the cost of the action taken by a user on the website. Here is how it can be calculated. [ see PPC pricing in India]
If CPC is 10, then the cost of 10 visitors (clicks) on your website will be 10X10= 100, and suppose 5 users contact you after visiting your website, in that case, you are paying 100 for 5 leads and so the cost of 1 lead = 20. This is your CPL (not CPC).
What is the Average Cost Per Lead?
Every lead comes at a different cost unless you buying them at a fixed price from someone. Each CPC is different, every time conversion rate is different and so the cost of acquiring a lead will be different. Some leads can come at 100, other at 300 and so the average will be (100+300)/2 = 200. This is the average cost per lead.
The different industry has different average CPL and that depend upon competition in that industries. Lead cost of Low budget property will cheaper than that of a luxury property.
What is a reasonable cost per lead or How much should I pay for a lead?
This is also a common question that has no fixed answer and there is a valid reason behind it. Cost per conversion (CPA, CPL) depends upon many factors like
- Your market competition – Neither you or we can control the competitors. they can increase the competition & so cost of advertisement)
- Keywords Competition (in Google ads) – We can have control on keywords inside the campaign, but not in the market.
- Your Ad Copies performance – We can also control and improve our ad copies.
- Your Website Conversion rate – Again here, you need to test different versions of your landing page or website. You have to get the best website in the market that has a maximum conversion rate.
With a better landing page, ad copies, campaign optimization, one can get low CPL. but without knowing the landing page or with a poor landing page, it is difficult to predict CPL (cost for a lead). However, An agency manages many other accounts and it can give some idea, but that should not be considered as your CPL because different businesses have different website conversion rates.
How much should I pay for a lead?
You can easily calculate how much you should pay for a lead. If lead to sales conversion rate is high then you can pay a higher amount for each conversion, but if your Lead to sales rate is low then you should keep your CPL low to stay profitable. High-quality leads have better conversion rates and so their cost is usually high. A real-life example is leads from Facebook ads vs Lead from Google ads. Facebook leads are cheap but Google search campaigns leads are costly because their quality is higher.