"How much does a lead cost?" "How much are you willing to spend to generate a lead" These are two questions that we too seldom answers when we explore the opportunities with our prospects or when we start consulting assignments.
However, this simple calculation is rich in information for marketing professionals looking to make informed decisions about the use of their marketing budget.
What is the cost per lead?
As the name suggests, the cost per lead (CPL) is the amount paid by a company to generate a lead, a prospect that could turn into potential customer. This indicator can be used for many for marketers who take the trouble to properly calculate, using it for the right reasons and also to follow its evolution over time.
Why calculate its cost per lead?
It is important to know how costs you a lead for the simple reason that it will allow you to make better strategic decisions in marketing property. Indeed, the calculation of cost per lead allows us to determine how much can you afford to pay for a lead. This avoids making decisions based on emotion or unsubstantiated impressions.
However, this simple calculation is rich in information for marketing professionals looking to make informed decisions about the use of their marketing budget.
What is the cost per lead?
As the name suggests, the cost per lead (CPL) is the amount paid by a company to generate a lead, a prospect that could turn into potential customer. This indicator can be used for many for marketers who take the trouble to properly calculate, using it for the right reasons and also to follow its evolution over time.
Why calculate its cost per lead?
It is important to know how costs you a lead for the simple reason that it will allow you to make better strategic decisions in marketing property. Indeed, the calculation of cost per lead allows us to determine how much can you afford to pay for a lead. This avoids making decisions based on emotion or unsubstantiated impressions.
This way, when you have to decide if you should opt for a strategy, a tactic, a tool, a campaign, agency, etc. rather than looking at the transaction under scrutiny of your budget or your usual transactions; also look there at CPL view that you can afford.
Also, following the evolution of your CPL from one period to another, you get an idea of the performance of your marketing strategy. You must therefore seek to have a CPL which tends to decrease, but beware ... make sure you do not compare apples to oranges when you talk about lead!
Compare apples to apples
As you probably know, a prospect does not necessarily equate to another. Some leads are "Hot" and should be treated with more attention than others as they represent an opportunity for more imminent sale. Thus, they need to categorize your prospects into different sets with a tactic is called the lead scoring.
Here is a classification that I suggest you use to distinguish the quality of prospects leads that are not qualified enough to be approached by your salespeople.
Information Qualified Leads (LQI)
This is the lowest level of commitment to your brand. This type of lead may be interested in the information you can provide, but is not necessarily qualified to purchase your products and services. Indeed, to give a simple example, it is not because you are interested in luxury cars you have the budget or authority to purchase one.
Marketing Qualified Leads (MQL)
Here we find the prospects that are not only not interested information that you post, but they also need your products and services to address one of their needs. However, they are still not qualified enough to be relayed to sales since they may not have the budget or the authority to do business with you or maybe it's not the right time for them to take action. You will have entrenir these leads ...
Qualified Sales Leads (SQL)
Finally, the prospects that we nicknamed "sales ready" leads that are showing interest in your products or services and who have the necessary budget and authority to take action. That is to say that the purchase does not imply that they or they have a decision-making position with a buyer Committee. Also, they plan to purchase shortly.
The different types of marketing leads
This classification of your leads will have some impact on how to calculate your CPL since I'm sure you will not be willing to pay the same amount for a SQL LQI. In this way, I suggest you calculate your CPL for each type of leads and an overall CPL. This will allow you to track these performance indicators over time in order to make better decisions for your prospect generation strategy.
How to calculate the cost per lead?
Now that you understand better what the CPL and what it is for, how about learning how to calculate it?
CPL your business can be a fairly simple calculation. The calculation involves dividing the total amount invested in lead generation by the number of leads generated over a given period. What is more complicated is to include the numbers right there.
How to calculate the cost per lead
First, the numerator of this equation we must think of all the costs that were incurred to generate leads. Often, companies will stop at the advertising budget and the cost of participation in the events are forgotten while costs such as salaries of the marketing team and the time invested in content creation and coordination of different tactics.
Second, in the denominator, we must first agree on what a lead before you can decide on the number that was generated. Thus, one must be able to align the vision of your marketing team with that of the sales force in order to reach a consensus and to calculate a PLC that will help you make the right decisions. Also, do not forget that there are different levels of lead (LQI, MQL, SQL), and the CPL will be different to each of them leading to different reflections at the strategic level. So you can use the formula above to calculate the following four elements:
Cost per LQI
Cost per MQL
Cost per SQL
global CPL
I hope you understand better now what the CPL and how to calculate. If there are points on which you want more information or want to tell us about your experience in the calculation of the CPL, the comment space is located just below these lines.
Also, following the evolution of your CPL from one period to another, you get an idea of the performance of your marketing strategy. You must therefore seek to have a CPL which tends to decrease, but beware ... make sure you do not compare apples to oranges when you talk about lead!
Compare apples to apples
As you probably know, a prospect does not necessarily equate to another. Some leads are "Hot" and should be treated with more attention than others as they represent an opportunity for more imminent sale. Thus, they need to categorize your prospects into different sets with a tactic is called the lead scoring.
Here is a classification that I suggest you use to distinguish the quality of prospects leads that are not qualified enough to be approached by your salespeople.
Information Qualified Leads (LQI)
This is the lowest level of commitment to your brand. This type of lead may be interested in the information you can provide, but is not necessarily qualified to purchase your products and services. Indeed, to give a simple example, it is not because you are interested in luxury cars you have the budget or authority to purchase one.
Marketing Qualified Leads (MQL)
Here we find the prospects that are not only not interested information that you post, but they also need your products and services to address one of their needs. However, they are still not qualified enough to be relayed to sales since they may not have the budget or the authority to do business with you or maybe it's not the right time for them to take action. You will have entrenir these leads ...
Qualified Sales Leads (SQL)
Finally, the prospects that we nicknamed "sales ready" leads that are showing interest in your products or services and who have the necessary budget and authority to take action. That is to say that the purchase does not imply that they or they have a decision-making position with a buyer Committee. Also, they plan to purchase shortly.
The different types of marketing leads
This classification of your leads will have some impact on how to calculate your CPL since I'm sure you will not be willing to pay the same amount for a SQL LQI. In this way, I suggest you calculate your CPL for each type of leads and an overall CPL. This will allow you to track these performance indicators over time in order to make better decisions for your prospect generation strategy.
How to calculate the cost per lead?
Now that you understand better what the CPL and what it is for, how about learning how to calculate it?
CPL your business can be a fairly simple calculation. The calculation involves dividing the total amount invested in lead generation by the number of leads generated over a given period. What is more complicated is to include the numbers right there.
How to calculate the cost per lead
First, the numerator of this equation we must think of all the costs that were incurred to generate leads. Often, companies will stop at the advertising budget and the cost of participation in the events are forgotten while costs such as salaries of the marketing team and the time invested in content creation and coordination of different tactics.
Second, in the denominator, we must first agree on what a lead before you can decide on the number that was generated. Thus, one must be able to align the vision of your marketing team with that of the sales force in order to reach a consensus and to calculate a PLC that will help you make the right decisions. Also, do not forget that there are different levels of lead (LQI, MQL, SQL), and the CPL will be different to each of them leading to different reflections at the strategic level. So you can use the formula above to calculate the following four elements:
Cost per LQI
Cost per MQL
Cost per SQL
global CPL
I hope you understand better now what the CPL and how to calculate. If there are points on which you want more information or want to tell us about your experience in the calculation of the CPL, the comment space is located just below these lines.
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