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Cost per Lead is a measure of the costs for generating new customers. Cost per lead,...

Cost per Lead is a measure of the costs for generating new customers. Cost per lead, or CPL, is a marketing metric based on the average cost for generating a sales lead. It is commonly used to measure the effectiveness of promotions. In some cases, firms purchase leads at a cost per lead or run digital advertising campaigns based on cost per lead pricing.

Formula:

Average cost per lead = total money spent on marketing campaign/ total leads generated

There are several variations of cost per lead that are used for different types of promotional spend. For example, cost per click advertising might calculate cost per lead as:

cost per lead = cost per click / conversation rate

Exercise 1:

You have a service company that did 31 jobs for a total of $389,529 in sales over the last 12 months. You had 124 calls in for estimates, or leads. You spent $13,750 on advertising. Calculate the cost incurred per lead.

Exercise 2:

A solar panel installer launches a digital advertising campaign to generate leads. They spend $4 per click and have a conversion rate of 56%. What is the CPL for this company?

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Answer #1

Exercise 1 -

Money spent of advertising = 13750

Total Leads = 124

Cost per lead = Money spent on advertising / total leads generated

CPL = 13750/124

CPL = 110.89

Exercise 2 -

CPL = Cost per click / Conversion rate

CPL = 4/0.56

CPL = 7.14

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