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Why Calculate Cost Per Lead & How To Improve It

Why Calculate Cost Per Lead & How To Improve It

In this article, you’ll learn how to calculate cost per lead, why it’s important to calculate it, and how you can lower it to maximize profits. 

How to Calculate CPL?

Calculating the cost per lead is easy.  Just divide the total amount you spent on a campaign by the amount of leads that came in. 

Cost-Per-Lead-Formula

Why Calculate CPL?

Your cost per lead directly affects your CPA (cost per acquisition).  When you know how much you spent to get a new client you can:

  • Determine the effectiveness of a particular campaign 
  • Identify the most profitable lead generation channel
  • Make strategic marketing decisions based on effectiveness
  • A/B compare ads based on many different factors such as keyword grouping, landing pages, ad text, and much more. 
  • Maximize your ROI
  • Grow your business intelligently 

This is, of course, only useful when you know the average value of a case (or new sale).  

Let’s be very clear – getting the leads and closing them are two different parts of the sales funnel, so let’s treat them as such. 

Now that you know how to calculate CPL and why it’s important, what action do you need to take next?

  1. Track every lead, including phone calls
  2. Make a plan for how you can lower CPL

How To Lower CPL?

1. Lower Cost Per Click

Lower your CPC by improving your Quality Score.  

Learn how to improve your Quality Score here.  

2. Review, Analyze and Tweak Keywords

  1.  Add or remove keywords
  2.  Use negative keywords
  3.  Add longtail keywords

Read all about keywords here.

3.  Improve Ad Copy (the text in your ad)

  1. Do you have a strong call to action?
  2. Is there too much information in the ad?
  3. What’s your hook?  Why should the user use your service or product?

Learn more about how to write compelling ad copy here.

4.  Analyze Delayed Conversions

Delayed conversions are conversions that don’t happen right away.  

Sometimes there is a lag between when a user clicks an ad and then takes an action considered to be a conversion.  

Imagine a potential client clicks on your Google ad on a Monday, but doesn’t call you or take an action on your website.  But then they click on your Facebook Ad on Wednesday and decide to call you to set up an appointment.   

Trackdelayed conversions so you know where your leads come from, how people find information about you, and what path they followed to get to you.  

This is when attribution models can be very useful.  Learn more about them here.  

5.  Improve Your Landing Pages (convert more visitors to leads)

  1.  What’s your conversion rate compared to your industry’s average?  That is, how many landing page visitors are you converting into leads?  Your rate should be at least 50% higher than the industry average.
  2. Are you A/B testing your landing pages to see what is converting best?

Learn more about landing pages and how to improve them here.  

Conclusion

Knowing your cost per lead is crucial in determining the effectiveness of any given marketing campaign.  Your marketing budget is far too precious to spend blindly.  Remember, the data is king, so use it wisely.  

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