What is the ideal cost of a lead?
Posted: Tue Jan 21, 2025 5:26 am
Those who work with Digital Marketing and lead acquisition often ask themselves: “How much are you paying for your leads?” or “What is the ideal cost of a lead?” In this article, you will learn more about the subject, and you can also watch a video in which the CEO of Agência Mestre, Fabio Ricotta, explains the topic:
What is a qualified lead?
First, it is important to understand that leads are contacts who have already shown some interest in your company's product or service. A qualified lead is one that fits the persona of your project and can become an opportunity and then generate a sale (conversion).
We can divide leads into three parts:
hot lead: someone who bought a product, put it in the cart, generated the invoice, but did not pay. In other words, they just need a “little push” to buy;
warm lead: people on an email list chile whatsapp data who want to receive promotions;
cold lead: one that you received contacts for, but approached a long time ago, i.e., they lost interest.
But how much did your company spend to have this contact? That's where Cost per Lead (CPL) or Cost per Qualified Lead comes in.
What is Cost Per Lead (CPL)?
CPL is nothing more than a calculation that allows you to know how much each lead acquired cost the company, simply by dividing what was invested in digital marketing by the number of leads generated by each traffic source.
The great advantage of doing this calculation is that you have all the numbers at hand that can help you make better decisions for the growth of your business. Being able to measure investments and the returns they are bringing to your company is empowering.
In a way, we can look at this as a very specific issue. First of all, there are other metrics that work together with CPL and help you monitor your business' investment and return metrics. They are:
CPC (Cost Per Click): average cost of how many clicks a sponsored campaign received. It is calculated as follows:
CPC = Investment Value / Number of Clicks;
LPV (Lead per Sale): you get the amount of leads needed for a conversion/sale to occur. It can be calculated as follows:
LPV = Number of Leads / Number of Sales;
CPV (Cost per Sale): is the value of CPL and LPV combined (without including the cost of sales team, production, etc.).
It is calculated as follows:
Cost Per Lead (CPL) x Lead Per Sale (LPV).
Although the results of the calculations are useful, their analysis to conclude whether they are good or bad depends on a few points. In other words, there is no right or ideal result.
There is a saying that goes: “don’t compare your backstage with other people’s stage.” In other words, the cost per lead is something that varies greatly from business to business and also depending on the strategy you adopt.
When you try to compare your results with someone else's, you may end up making the wrong analysis. For example, if someone has a cost of R$0.50 per lead in an e-book promotion campaign, it doesn't mean that their result is better than someone who has a cost of R$1.00.
It may be that the fifty cent CPL does not generate as many conversions as the one real CPL.
How do I know if my cost per lead (CPL) is good?
The truth is that we cannot base ourselves solely on value to say that the cost per lead is “too expensive”.
The important thing is to break down the math of your business. Basically, you need to identify how many leads you need to make a sale. From there, you need to know what your profit margin is, to get the ceiling, that is, the highest amount you can pay for a lead, while still making the desired profit.
It is very common in some markets for customers to think that the cost of R$100.00 per lead is cheap. This is because the product to be sold has an excellent profit margin and a higher average ticket for the company.
For example, imagine that you have a property whose price is R$600,000.00, but if you make a profit of R$500,000.00 that would be great. Assuming that you need 1,000 qualified leads to make a sale, even if your cost per lead is R$100.00, it will still be advantageous to pay that amount per lead.
Paying less for a lead isn't always the best deal. The more you segment your audience and the more competitive your market is, the greater the chance that the lead will be more expensive. Therefore, our tip is that you evaluate your ROI (return on investment) and see how much you can pay per lead to make it more profitable.
The parameter that your company needs to define is based on the closing rate and the average ticket of the product or service that you offer. And this varies a lot from company to company.
What is a qualified lead?
First, it is important to understand that leads are contacts who have already shown some interest in your company's product or service. A qualified lead is one that fits the persona of your project and can become an opportunity and then generate a sale (conversion).
We can divide leads into three parts:
hot lead: someone who bought a product, put it in the cart, generated the invoice, but did not pay. In other words, they just need a “little push” to buy;
warm lead: people on an email list chile whatsapp data who want to receive promotions;
cold lead: one that you received contacts for, but approached a long time ago, i.e., they lost interest.
But how much did your company spend to have this contact? That's where Cost per Lead (CPL) or Cost per Qualified Lead comes in.
What is Cost Per Lead (CPL)?
CPL is nothing more than a calculation that allows you to know how much each lead acquired cost the company, simply by dividing what was invested in digital marketing by the number of leads generated by each traffic source.
The great advantage of doing this calculation is that you have all the numbers at hand that can help you make better decisions for the growth of your business. Being able to measure investments and the returns they are bringing to your company is empowering.
In a way, we can look at this as a very specific issue. First of all, there are other metrics that work together with CPL and help you monitor your business' investment and return metrics. They are:
CPC (Cost Per Click): average cost of how many clicks a sponsored campaign received. It is calculated as follows:
CPC = Investment Value / Number of Clicks;
LPV (Lead per Sale): you get the amount of leads needed for a conversion/sale to occur. It can be calculated as follows:
LPV = Number of Leads / Number of Sales;
CPV (Cost per Sale): is the value of CPL and LPV combined (without including the cost of sales team, production, etc.).
It is calculated as follows:
Cost Per Lead (CPL) x Lead Per Sale (LPV).
Although the results of the calculations are useful, their analysis to conclude whether they are good or bad depends on a few points. In other words, there is no right or ideal result.
There is a saying that goes: “don’t compare your backstage with other people’s stage.” In other words, the cost per lead is something that varies greatly from business to business and also depending on the strategy you adopt.
When you try to compare your results with someone else's, you may end up making the wrong analysis. For example, if someone has a cost of R$0.50 per lead in an e-book promotion campaign, it doesn't mean that their result is better than someone who has a cost of R$1.00.
It may be that the fifty cent CPL does not generate as many conversions as the one real CPL.
How do I know if my cost per lead (CPL) is good?
The truth is that we cannot base ourselves solely on value to say that the cost per lead is “too expensive”.
The important thing is to break down the math of your business. Basically, you need to identify how many leads you need to make a sale. From there, you need to know what your profit margin is, to get the ceiling, that is, the highest amount you can pay for a lead, while still making the desired profit.
It is very common in some markets for customers to think that the cost of R$100.00 per lead is cheap. This is because the product to be sold has an excellent profit margin and a higher average ticket for the company.
For example, imagine that you have a property whose price is R$600,000.00, but if you make a profit of R$500,000.00 that would be great. Assuming that you need 1,000 qualified leads to make a sale, even if your cost per lead is R$100.00, it will still be advantageous to pay that amount per lead.
Paying less for a lead isn't always the best deal. The more you segment your audience and the more competitive your market is, the greater the chance that the lead will be more expensive. Therefore, our tip is that you evaluate your ROI (return on investment) and see how much you can pay per lead to make it more profitable.
The parameter that your company needs to define is based on the closing rate and the average ticket of the product or service that you offer. And this varies a lot from company to company.