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How To Calculate Cost Per Lead & Why Do It

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Last editedDec 20212 min read

Cost per lead (CPL) is a calculation of how much it costs your business to bring in prospective customers via a marketing campaign. If you run a business it is a vital figure to be able to come up with, as it demonstrates exactly how much impact your marketing campaign or campaigns are having in relation to the amount of money you invest in them. As prospective customers, these people will have clicked on an ad for your product or service and then provided contact details in return for something else. This could be more information about the products or services you provide, or material in the form of a brochure or white paper. Once a prospective customer has responded to an ad in this manner, their details become part of the sales pipeline of your company.

How to work out cost per lead

The key to the importance of the cost per lead figure is that it enables the marketing department of your business to pinpoint whether they are spending the right amount of money on the different methods available for bringing in potential sales leads. These different options might include Facebook Ads or Google Ads. If the cost per lead for a particular marketing approach is higher than the cost per lead industry standard across the sector in which you operate then the marketing campaign in question is, by definition, performing less effectively.

Alternatives to the cost per lead

The cost per lead calculation is just one of the metrics which you could use to measure the effectiveness of your marketing effort. Some of the others are as follows:

  • Cost per click (CPC) – the cost which results in one person clicking on a particular ad

  • Cost per thousand (CPT) – the cost which results in 1000 people viewing a particular ad

  • Cost per action (CPA) – the cost which results in one person buying a product or service

In simple terms, the lower the cost per lead is, the more effective the marketing campaign in question is, which represents a better return on your marketing budget.

Working out cost per lead

The good news is that calculating a figure as important as cost per lead is actually fairly simple. The first stage involves selecting a period of time (a particular month, for example) over which the calculation will be made. All that you then need to do is divide the amount of money which was spent on a particular campaign over this period of time by the number of leads which that campaign was responsible for pulling in to your business.   

A cost per lead example

A simple example of a cost per lead calculation is as follows:

  • Your marketing department spent £1500 on a Google Ads campaign

  • That marketing campaign managed to bring in 100 leads

  • The cost per lead for that particular campaign would be £15.

Simply calculating the cost per lead across a marketing campaign which operates via several different platforms will only have limited usefulness. To gain the fullest possible insight, you need to calculate the cost per lead for each individual platform, such as search engine marketing, email and social media.

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We can help

If you’re interested in finding out more about how to calculate cost per lead and why you should use it, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help

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