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How Do You Determine a Good Cost-Per-Lead?

by JayKay Dowdall
2 replies
  • PPC/SEM
    • |
I can work out a good cost-per-lead (CPL) after testing my campaigns for a little while, knowing my products, etc. and obviously a good CPL is going to be determined by the Long-Term-Value (LTV) of your customers... but even so, here's something I thought about while making dinner tonight:

Suppose you had no data, and were getting into a niche you had never sold to before. You start testing an ad campaign (the traffic source doesn't matter, but let's say AdWords)...

Is there a formula or way to determine what a good CPL is that you have found works for you to determine if your testing is going in the right direction?

I have my own thoughts, but I'd like to see some thoughts from the Warriors

Hit 'em with the Hein guys.
#costperlead #determine #good
  • Profile picture of the author discosloth
    For me, a healthy return on investment means spending 1/3 to 1/2 of how much your revenue per lead is.

    So if you have an AdWords campaign, with a CPC of $1, and a conversion rate of 4%, you have a CPL of $25, then your product value should be around $50 or more.

    If a lead is not an actual sale, then divide the revenue from sales to the number of leads. Let's say you had 50 sales from 200 leads. You've earned $10,000. Your revenue per lead will be 10,000/200 = $50.

    So, with a RPL of $50, your CPL can be $25. It's less if you have any other spendings other than advertising. If you do have another spending, don't forget to extract them from RPL to be sure how much you can spend.
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  • Profile picture of the author altonroot
    For eCommerce, its easy as you can have cost=profit in initial face to acquire fresh customers and make your brand. If you have fund, you can spend even more on discounts.

    For normal business, you can do a bit of reverse engineering. You will have conversion value like for say $100. Now predict your conversion rate, it should be around 5-10%. Lets take 10%. So you need 10 leads to have one conversion so your cost-per-lead would be around $10. Hope I make sense.
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