Reporting

Calculating "Cost Per Lead" for better business decision making

Luke Doyle Updated on Oct 9, 2024

How often are you really looking into the data your marketing is producing? Understanding the metrics that drive your success is essential. And one such crucial metric for business owners and B2B marketing managers is Cost Per Lead (CPL).

In this guide, we first dive deep into the concept of CPL, how to measure it effectively, its benefits and the challenges it presents. We'll also look at other key metrics to consider in your marketing efforts.

What is a Cost Per Lead?

A Cost Per Lead, commonly referred to as CPL is simply a metric that tells you how much it costs to acquire a lead for your business.

The definition of a lead

The definition of a lead can vary depending on who you're speaking to. There is no specific definition that everyone agrees on, but here is what we use to define types of leads in B2B and these are the most common definitions in the B2B marketplace.

Lead	Any business who has registered their interest.
Marketing Qualified Lead (MQL)	These leads fall within the customer profiles you deem the right "fit" for your company.
Sales Qualified Lead (SQL)	These are companies who are the the right "fit" AND have shown intent to buy your services within 3 - 6 months.

It's clear the value of each lead will be different. Sales Qualified Leads are the highest value leads and generally, the purpose of Lead Generation is to identify these customers to build your pipeline and set sales meetings.

Bravura offer solutions for all types of leads, so if you would like to learn more about how we do this, please send Luke and email on hello@bravura.digital and we will arrange a call with you.

How do we measure CPL?

Measuring CPL involves a straightforward calculation:

CPL = Total Campaign Marketing Costs / Total Number of Leads Generated

Let's break it down with an example. If you spend £1,000 on marketing efforts and, as a result, generate 50 leads, your CPL would be:

CPL = £1,000 / 50 = £20 per lead

Calculating your CPL regularly can provide valuable insights into the effectiveness of your marketing campaigns. It's important to measure both CPL for your individual campaigns as well as your holistic marketing efforts. In turn, this will help you identify what campaigns have performed.

There is a difference between Cost Per Lead and Cost Per Acquisition, however you should measure both to get a full picture of your marketing performance. Ultimately, these insights can help you reduce costs, improve performance and educate your team on what works and what doesn't. Use the following calculation to measure your Cost Per Acquisition (CPA):

CPA = Total Campaign Marketing Costs / Total Number of Paying Clients Generated

4 Benefits of measuring average CPL in marketing reporting

Now that we've got the basics down, let's explore why measuring CPL is essential and the benefits it brings to the table.

1. Cost Efficiency: Knowing your CPL allows you to allocate your marketing budget more effectively. You can identify which channels or campaigns provide the most cost-efficient leads and optimise your resources accordingly.

2. ROI Assessment: CPL is a critical component in determining the "return on investment" (ROI) for your marketing efforts. By tracking CPL, you can measure the revenue generated from your leads and assess the profitability of your campaigns.

3. Targeted Marketing: Understanding CPL helps you identify your most valuable customer segments. By focusing on the channels that yield the lowest CPL, you can tailor your marketing strategies to reach your ideal audience more effectively.

4. Data-Driven Decisions: You've probably heard the saying, "Marketing without data is like driving with your eyes closed"? Well, CPL data empowers you to make data-driven decisions. You can fine-tune your marketing strategies based on actual numbers, leading to better outcomes and higher conversion rates.

3 Challenges when measuring CPL

While CPL is a valuable metric, it's not without its challenges. Let's explore some of the hurdles you might encounter when measuring CPL.

1. Attribution Complexity: Determining which marketing touch-points contributed to a lead can be challenging. The customer journey is often nonlinear, making it difficult to attribute a lead solely to one channel.

2. Quality vs. Quantity: A low CPL doesn't always equate to high-quality leads. You may attract many leads, but if they don't convert into paying customers, your CPL may not reflect the true value of your marketing efforts.

3. Data Accuracy: Accurate data collection and reporting are vital for CPL calculations. Inaccurate data can lead to misleading CPL figures and misguided marketing decisions.

What is a good CPL for a small business?

A good CPL varies by industry and marketing channel, however a good benchmark to consider is whether the CPL is below £200. If so, then that tends to suggest a good cost per lead for your campaign. You can of course continue to work on reducing the CPL as you improve performance.

Below are some estimated CPLs by industry as of October 2023.

Industry	Average CPL
Media & Publishing	£209
Marketing Agency	£200
IT	£306
Industrial & Manufacturing	£209
Financial Services	£224
Business Services	£200

Can a CPL over £200 still be beneficial?

Absolutely, whilst a low CPL is generally preferred, a high CPL can be beneficial if the leads generated are of high quality and are more likely to convert into high-paying customers. In this case, use the power of market segmentation and assign appropriate CPL to your campaigns.

How do I improve my CPL?

Focus on optimising your marketing campaigns and targeting the right audience. Continuously analyse and adjust your strategies for better efficiency. We focus on optimising "Product Market Fit" and "Message Market Fit" to improve results at Bravura Digital.

Conclusion

Understanding and effectively measuring the key metrics we've looked at here is fundamental to the success of your B2B marketing campaign. It empowers you to make informed decisions, optimise your marketing budget, and ultimately drive more conversions.

The next time you evaluate your marketing campaign efforts, remember the significance of CPL and use it as a compass to guide your journey towards more successful marketing.

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