"You have to spend money to make money."
You've probably heard this phrase before, and for marketing and lead generation, it couldn't be more true. Many businesses use custom marketing tactics to engage leads and move people through the sales funnel — but those efforts aren't free. Every lead comes at a cost.
Read on to learn what cost per lead is, how to calculate it, and how you can reduce your organization's cost per lead metric so you can invest that money in other areas of your business.
Let's start with a basic definition. Cost per lead (CPL) is a marketing metric that measures the average expenditure required by a business to attract and acquire a single lead.
To calculate CPL, divide your organization's total marketing expenditure during a certain time period by the number of new leads generated during that same time period.
Cost per lead varies drastically depending on the industry. This is in large part due to unique:
Businesses that market a few high-ticket products or services — like a car dealership — will often spend more to attract a single lead than those selling lower-cost items — like shampoo — because the money spent to win their favor is negligible compared to the revenue that'll come from a closed-won deal.
One search engine optimization marketing research team compared data over a three-year period to calculate the average CPL across various industries as of April 2024. Here's what they found:
Other researchers have studied the impact of company size on CPL. Their data is from a 2017 report from Hubspot, so there's no doubt that prices have gone up substantially since then, but you can still see a trend based on the total number of employees in a company. Smaller companies (2-50 employees) had a lower CPL, while enterprise organizations, with over 1,000 employees, had a CPL more than double that of small businesses.
Interestingly, annual revenue also had a similar impact; companies with higher annual revenue had a much higher CPL than companies with a lower revenue rate.
Tracking lead cost involves monitoring all expenses associated with generating leads. As you can imagine, this is no small feat without a good process in place.
Here are seven steps to effectively track CPL:
Decide what a qualified lead looks like for your business. Is it someone who fills out a contact form on your landing page, downloads a whitepaper, signs up for a free trial, or takes another specified action? Clarifying this definition is critical to track your CPL accurately.
Compile all the costs associated with your marketing and lead generation efforts. This could include expenses related to an advertising or marketing campaign, content creation, social media efforts, email marketing, lead generation tools, and personnel costs.
Select the appropriate tools and platforms to track your marketing expenses and lead generation activities. Some companies use analytics platforms like Google Analytics, or you can choose from advertising platforms like Google Ads or Meta's Ads Manager. There are also CRM systems and lead tracking software like Streak that can monitor spend.
Set up tracking parameters to monitor the source of each lead and associated costs. You can use UTM parameters for digital campaigns to track leads from specific ads, emails, or social media posts.
Divide the total expenses by the number of leads generated within a specific time frame to calculate your lead generation costs.
Once you've calculated the average cost of your leads, use that marketing metric to your advantage. Identify trends, assess the effectiveness of different marketing efforts, and pinpoint areas for improvement. Based on these insights, you can adjust your marketing strategies and allocate your marketing budget to the most effective strategies.
Once you have a handle on your CPL, save time and integrate your tracking tools to automate future data collection and the ongoing reporting process. This streamlines CPL tracking and provides you with real-time insights.
Reducing cost per lead involves optimizing your marketing processes in a way where prospects become customers without you having to spend as much money as you once did.
Here are a few strategies you could try:
Breathe new life into your ad campaigns by revamping your copy, targeting parameters, and landing pages to increase relevance and engagement. We also recommend using A/B testing to identify which versions resonate best with your audience. You can shake up ad copy, website headlines, images, and CTAs and measure which tests yield the highest conversion rates.
Conduct keyword research to identify high-performing keywords relevant to your target audience and industry. Optimize your website content, ad copy, and landing pages with these keywords to improve organic and paid search visibility so you can attract more qualified leads.
An ad that attracts 10 qualified leads is much more effective than an ad that attracts 1,000 uninterested viewers. Work with your marketing team to align your ad messaging with the needs, interests, and pain points of your target audience.
Create and publish valuable content to incentivize form fills and lead generation. Popular lead magnets include:
Optimize your landing pages for conversion by making them user-friendly, visually appealing, and all about one, clear call-to-action. Streamline the conversion process by minimizing form fields and providing compelling reasons for a potential customer to quickly take action and share their information with you.
Like most other areas of life, lead quality matters far more than lead quantity. Higher lead quality often results in a higher conversion rate and improved ROI for your marketing campaigns. Let's dive into the importance of lead quality and why you should focus your lead generation efforts on high-quality leads.
Plain and simple, high-quality leads are more likely to turn into paying customers. These leads typically have a genuine interest in your product or service, so they're easier to nurture through the sales funnel. Quality leads also have the potential to become loyal customers who make repeat purchases, thus offering you a higher customer lifetime value (LTV). A prospective customer base that's filled with high-quality leads will result in business profitability and sustainable revenue growth.
Your sales team will also appreciate a stream of quality leads. Sales reps can prioritize working leads that have a higher likelihood of closing, and as a result, experience a more efficient sales process and increased revenue generation.
Attracting high-quality leads is a critical part of growing any business, and Streak is here to make it easier for you to simplify and streamline those efforts for yourself.
Streak pipelines are a foundational element of our tool. They show business owners and sales reps alike all of their in-progress leads in a spreadsheet view — directly in their Gmail inbox — to make it easier to understand and see exactly what's happening across your book of business.
Plus, Streak integrates with tools like Calendly, Typeform, and more so new leads (along with any information they provide or that's publicly available) are automatically added to your pipeline. Once leads are in there, you can easily collaborate with your teammates and figure out how to best turn those people into paying customers.
Streak is completely free to try for 14 days. Get started in minutes to learn how it can help you qualify and track leads.
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