KPI crash course: Cost Per Lead

Why should you care about Cost Per Lead? Among other things, its an effective metric for quantifying cost vs effectiveness of marketing. Your CPL needs to be lower than your Cost Per Sale, and obviously much lower than your average ticket total.

There are a few key insights we can get from tracking CPL, and from comparing it to other metrics. For one, you can set a target for marketing costs. But what’s better than that is being able to track your CPL for each channel of your marketing, so you can compare the cost effectiveness of your different channels.

To do this, you need a way to track exactly how each lead got connected to your brand. The obvious way is to ask them. The importance of asking this simple question cannot be stressed enough. Just as important as that, though, is tracking how each of the leads that end up actually spending money with you found you. Finally, to get the truest sense of what your best strategies are, you can track where your most valuable sales heard about you.

Here’s are some ways you can track which channels are getting the most leads, and what the cost of those leads is:

1. Visits per page on your website

2. Total visits on your websites

3. Break it down to how they found your site: PPC, Display ads, Google Search and Social media posts all allow you to do this

4. For phone calls and in-store visits from new leads, you just have to ask them

To calculate CPL, you can just take the total cost of a marketing channel over a given time frame, and divide it by total number of leads over the given time frame.

We suggest tracking categories for each channel. Ask, and tally. Over a large enough sample of time, this will become very telling. Just add a tally to each for each of the categories below for every lead who tells you that is how they heard about you:


Branded apparel





Email marketing


Display ads

Over the course of say, a year, you’ll be able to see which marketing mediums are bringing in the most leads. You’ll then be able to take the total investment you made into each medium and divide it by the number of leads.

You may find out that the medium bringing in the most leads is also the one with a highest cost per lead. So is it worth the money? To answer that question, we need a bit more information. One way to approach it is to look at how much each lead is worth. You might find, for example, that leads that come in via Word-of-Mouth tend to spend more money with you — presumably because they already have a high level of trust in your brand. That accelerates them past the self-protecting stage of “let’s see how it goes before I really invest into this product”. Conversely, you might find that you pay a lot for TV ads, and that you don’t get a lot of leads from it. But wait…you might also find that those who show interest in you because of TV ads tend to spend more than those who hear about you through PPC.

We’re not saying that that’s what you should expect. The data usually reveals things you don’t expect, and then you have to draw conclusions. Let’s compare TV to PPC for another example. The kind of person who responds to TV might be an “easy sell”, as in when they see somebody who advertises on TV, they see an impressive and authoritative business that is obviously doing well enough to spend big money on advertising. This same character might also be somebody who doesn’t shop around much. But a lead who finds your website via Google Search probably is shopping around.

These are the kind of insights you can gain from a large body of data. Cost Per Lead is useful in its own right, but in conjunction with other data it can help you do something that every business has an itch todo — nail down the cost effectiveness of each of their marketing strategies.


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