how should i price? – WAU
Knowing what the cost per lead (CPL) is and how to calculate this metric is essential to monitor the performance of your Digital Marketing strategy and identify aspects that can be optimized to deliver better results.
Every successful business pays special attention to controlling the entry and exit of values, closely measuring the expenses with all its processes, step by step.
Especially when it comes to marketing expenses, it is important that the amount is enough to actually attract as many leads as possible, but not so expensive as to impact the company’s activities.
The cost per lead, for example, varies a lot from company to company and, if miscalculated, shakes any institution right in its structure: the values involved in the conversion must be managed so that there are no errors in the pricing of services and products and, consequently, losses of any kind.
More than affecting the financial health of the business, the cost per lead is able to determine whether an action or campaign is following the right path and producing the expected results, or whether it should be modified to have a greater reach.
But, after all, do you really know how to calculate a lead? In today’s post we teach you to discover how much each lead generated in your inbound strategy is worth, as well as what this knowledge can change in your institution’s reality and which metrics in this sense can contribute to good management.
Follow the reading and understand!
What is cost per lead?
When creating a plan for marketing your business, one of the first actions taken by the administrator is to set a budget, right? It represents the maximum value that investments can have to attract more customers to your business (and potentially close more sales).
Imagine that you spent 100 thousand reais of your marketing budget from planning to the end of a campaign and that, during this period, you managed to attract the attention of 20 thousand people (potential customers), who were interested in your product.
The cost per lead (CPL) is precisely the split between the amount spent on your campaign and the number of people that effectively showed interest in your product, even if you have not closed a contract with them (that is, converted your leads). In this hypothetical case, it is 5 reais.
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How can cost per lead knowledge increase business performance?
The CPL is responsible for showing whether the strategy of a business is being financially interesting or whether, on the other hand, it must be completely modified, helping to verify the process at such an early stage of the sale as attracting customers.
Having full control of the business’s finances ensures that it continues to grow – and knowing the price per lead in particular allows the administrator to understand whether marketing expenses are paying off or not.
When understanding which solution allows you to generate more leads at a lower cost, you can decide with ownership where resources company should be allocated.
Thus, if certain content offers are more effective at converting leads, it will be possible to produce content that follows the same line, while offers that end up converting less may gain less attention.
How to calculate the cost per lead?
Calculating the CPL is quite simple. In mathematical terms, just apply the formula:
CPL = Marketing Investment / Number of Leads
Since the strategies most used by technology companies for lead generation are social media posts (86.7%), sending email marketing (82.7%), blog posts (77.6%) and media purchase (64.3%), expenses with the creation and maintenance of websites, content, management software and Inbound Marketing, Google Adwords, Facebook Ads and similar costs should also be included in the account, making up the marketing investment.
To clarify things, let’s see another practical example of applying the CPL: imagine that your company created a new Inbound Marketing strategy and, to develop and apply it, invested the value of 3 thousand reais, with a return total of 2,190 clicks on the landing page made for the action.
In addition, imagine that this landing page has generated a total of 328 leads. The lead cost, in this case, can be calculated as follows:
- CPL = 3,000 (Marketing Investment) / 328 (Number of Leads)
- CPL = Approximately R $ 9.15.
It is worth mentioning that, according to Martech studies, CPL is 3 times cheaper for companies that use the inbound prospecting model, with around 82% of the participants replied that they did not know how much this value was in their business.
Of course, initially, cost per lead cannot be the only factor that dictates the success of a marketing strategy.
Initially, identifying how many leads are needed for conversions is essential, so that you can move on to profit margin pricing and cap that can be paid for each lead.
What other metrics work in conjunction with the CPL?
The manager must monitor several metrics to ensure that his business is growing in a healthy way and also so that he can manage the effectiveness of his investments.
Understand what else can be taken into account in this regard!
Cost Per Click
The cost per click (CPC) measures in particular the average cost of the click obtained from campaigns that use sponsored links on social networks (such as Facebook and Instagram), Google and other marketing actions.
It can be calculated using the following formula:
CPC = Investment Value / Number of Clicks
Lead by Sale
The lead per sale (LPV) allows you to check the number of leads needed for a conversion to occur and to generate a sale for the company.
It represents another way to monitor the effectiveness of the campaign and how good at capturing customers it is.
It can be found from the following formula:
LPV = Number of Leads / Number of Sales
Cost Per Sale
The cost per sale (CPV) of each marketing action is nothing more than the combination of the cost per lead and the lead per sale (ignoring production values, sales staff and maintenance).
It is given by the formula:
CPV = Cost Per Lead (CPL) x Lead Per Sale (LPV)
4 tips to reduce your company’s PLC
Due to the correlation between these metrics, it is possible to adopt good practices that affect the CPL and also the other indicators used to monitor the performance of marketing strategies.
Below, we highlight 4 good practices that influence the success of the brand’s digital solutions and contribute to reducing the cost per lead.
1. Know your persona
One of the main practices for improving the performance of online strategies is map your persona and develop solutions focused on your ideal customer.
This direction makes your actions reach a public more interested in what you have to offer, in addition to improving the subsequent engagement and reducing the challenges of qualification, important aspects to optimize the performance of marketing.
2. Increase organic traffic
It is already recognized among marketers that organic strategies are more economical than paid ones. This is because, after investing in a content or e-book, for example, this material can return for a long time without new investments.
Thus, developing organic strategies such as SEO (search engine optimization), link building, blog posts, videos and other solutions guarantees a reduction of cost per lead in the long run.
3. Produce content that engages engagement
As published content generates engagement, it remains “updated” for Google’s algorithm. This type of feature is beneficial in blog posts and also in YouTube videos with the comments section.
With engagement, the search engine interprets that its content remains current and relevant for research on that topic.
4. Invest in Digital Marketing
Digital Marketing, especially Inbound Marketing, is advantageous to improve the relationship and sales metrics of your business, so they are worthwhile investments and provide a high ROI (return on investment).
The definition of which practices to develop depends on a personalized mapping of your target audience, business objectives, budget etc. However, all marketing actions can be optimized and improved with the monitoring of performance metrics.
How much does each new customer cost for the business?
Following the metrics we have listed, the manager can create a controlled and high performance sales process, making the necessary adjustments during the course of the campaign so that sales are made.
This is because a large number of institutions are quite efficient when generating an audience, but very weak when actually closing sales, while so many others suffer precisely the opposite, closing deals, but not obtaining an acceptable level of leads.
With the construction of a solid Inbound Marketing measurement strategy, attracting and retaining customers becomes an increasingly scalable and repeatable process, allowing the company to know exactly how much it needs to bring new customers into its core and can continue making this calculation while fully operational.
It is worth remembering that, according to research, Inbound Marketing techniques that take into account social media, blog and SEO generally bring companies a CPL about 61% lower than leads generated by traditional methods.
Measuring and comparing this value over time can be an effective method for Digital Marketing to gain more space within companies.
So, in addition to making it possible to find the numbers at each stage of the process, calculating the cost per lead also allows you to visualize where to work to leverage sales and achieve better performance.
Do you need to have similar metrics for each step of the sales funnel?
Yes, it is essential that every manager closely follows the metrics involved in all stages of the sales funnel, and not just in lead generation.
We have already presented some important concepts (CPC, LPV, CPV), but only the reality of the business is capable of indicating what is interesting to be followed.
It is based on these metrics, although the manager will be able to monitor the return on investment (ROI) of his strategy, being able to determine if in fact the investment made in the business brought the expected return or if he is consuming company assets – since, according to HubSpot data, 72% of organizations that calculate ROI say their marketing strategy is effective.
In addition to attracting and converting the customer, you need to retain them and keep them at your side as much as possible. Thus, it is also interesting to discover the Lifetime Value (LTV) of your client and bet on the generation of content for your audience in order to never lose it again.
The financial conclusion should take into account the channels used and their characteristics, as well as occurring only after the complete campaign cycle (from lead generation to customer conversion).
Now that you understand how to calculate the cost per lead and know the importance of tracking metrics related to CPL, how about knowing if your content marketing strategy is performing well? See you in the next post!