What is Cost Per Lead: Formula + Calculator, Tips, Examples
What is Cost per Lead (CPL)?
Cost per lead describes a billing model in online marketing in which advertisers pay a "contact fee" for contacting a customer.
Calculation of the CPL
The formula for calculating the cost per lead is:
3000 euros ad spend / 30 leads = 100 euros per lead (CPL)
How Cost per Lead works
When setting up a CPL billing model, the advertiser's goal is defined, e.g. generating inquiries on his website in order to ultimately conduct a consultation with these users. This contact represents a value for the advertiser that he is willing to pay for. The technology, administration and billing are mapped using a partner program. Ie the advertiser provides advertising material, presents its conditions for the partner program and manages its partners. The partner (publisher) now includes advertising banners or text links on their website, which direct their traffic to the appropriate advertiser. This link has one attribute and mostly cookies. The websites of the partners can be, for example, comparison sites, blogs, guides and much more. Feature: The pages or articles should represent added value for the target group and have appropriate traffic. As soon as the user finally makes a request to the advertiser within the cookie period (usually 30-90 days), it can be assigned to the appropriate publisher, after which he receives his commission.
Examples of using CPL
CPL is often used for products or services that require explanation, e.g. taking out private health insurance, hiring a tradesman, agreeing to a test drive in a car dealership, but also when registering for a newsletter. The cost per lead model is mainly used in affiliate marketing, where publishers convert their traffic for advertisers on their websites.
Benefits of CPL
The cost per lead billing model offers the following advantages:
- When using high-quality products or services that require intensive consultation, the CPL model offers an excellent advantage
- Planning security for companies, the experience of a turnover per request and its profit can be an approach to calculate the CPL
- Scalability, depending on the industry and publisher, more or fewer leads can be "bought".
- The CPL can be compared independently of the platform
Disadvantages of the CPL model
Even if there are few or no disadvantages with this billing model from the entrepreneur's point of view, since it is clearly a performance-based model, the following disadvantages can be mentioned:
- Miscalculation and/or returns can be a problem
- The CPL must be continuously adjusted, and a comparison of the ultimate success of the requests must be checked
- A high density of competitors in the market environment calls for high commissions, which may no longer be profitable for you
- Current and setup costs of the partner programs must be taken into account
- Possibly poor lead quality can result
Conclusion on the cost per lead
Especially in performance marketing, the CPL is an effective and plannable model. However, large affiliate portals also charge a fee here, which still has to be calculated on your commission. Furthermore, not every website or shop is suitable for inclusion and setup costs should be considered! The request quality may vary. Nevertheless, the CPL model is one of the most sensible and fairest billing models for advertisers in online marketing.