Drumming up new business is a primary goal with any local marketing campaign, regardless of your industry. However, you can’t generate new clients without first attracting leads.
Bringing in new leads can be expensive, especially for small business owners. While exact costs can vary from one industry to the next, it’s not uncommon for companies without a dedicated marketing strategy to spend upwards of $200 per new lead. And of course, even then, a lead may or may not go on to become a paying customer.
With all this in mind, knowing how to calculate cost-per-lead (CPL) is a must for business owners looking to optimize their marketing budgets. Not sure where to begin? We’ve got you covered with a comprehensive guide to understanding CPL as a marketing metric, calculating it, and even lowering it in your own campaigns.
What is Cost-Per-Lead, Anyway?
Specifically, CPL refers to the average amount of money that you spend on each new lead you bring in. You might decide to calculate your CPL for an individual campaign or for all your campaigns throughout an entire year. Regardless, CPL is a very basic yet important marketing metric that you should be calculating and tracking as part of your growth strategy.
Why is Measuring Your CPL Important?
Simply put, knowing your CPL helps you get a better feel for whether your marketing campaigns are paying off or not. Calculating your CPL for a particular campaign may reveal that you’re spending way too much money on your marketing to bring in very few leads. Hopefully, though, it will actually reveal that you’re bringing in tons of new leads and spending very little on your marketing in the process.
You won’t know where your marketing strategy stands without knowing your CPL. While it’s not the be-all-end-all metric, it is usually a good way to gauge the success of your campaigns. This is especially true when it is calculated alongside other vital metrics, such as:
- Cost Per Click (CPC)
- Cost Per Acquisition (CPA)
If you’re not taking the time to calculate your CPL and other important marketing metrics, you could be wasting a lot of your hard-earned money. Without knowing these metrics, you’re essentially flying blind—throwing money at your brand’s marketing without really knowing whether your efforts are successful. Likewise, if you’re not calculating your CPL for every campaign, there’s a good chance your competitors are.
How Do You Calculate CPL?
Now that you have a better understanding of what CPL is and why it’s important to track, you may be wondering how to calculate this metric. The good news is that it’s pretty simple to do. Here’s the basic formula:
CPL = Total campaign spending ÷ total number of leads generated
Your total spending should include anything you spent on marketing for that particular campaign. The most obvious expense here will be paid advertisements, but other marketing costs (like third-party expenses for marketing tools you may be using) should also be factored in to ensure that your calculation is as accurate as possible.
It’s a good idea to calculate your CPL for each individual marketing campaign you carry out. This way, you’ll be able to determine which campaigns are working well (and which could use some improvement).
How Can You Lower Your CPL?
Let’s say you’ve taken the time to calculate your CPL and you’re not sure what to make of the results. Average CPLs can vary drastically from one industry to the next—so it’s a good idea to do a little research on what the “typical” costs per lead for your industry should be. From there, you’ll be able to get a better feel for whether your own CPL is normal.
If you’re not happy with your CPL, the good news is that there are steps you can take to lower it so that you can generate more leads for less money.
1. Get More Out of Your Marketing Strategy
While it might seem counterintuitive to reduce your CPL by actually spending less money on marketing, the reality is that this can be a very effective strategy (when carried out properly). The idea here is that by cutting back on your actual budget for lead generation, you also force yourself to get more creative with your marketing and bring in new leads without the extra spend.
Consider, for example, focusing less on paid ads and more on organic search strategies. Many local businesses find success reducing their CPL when they focus on search engine optimization (SEO). There are plenty of free ways to boost your local search engine rankings without spending any of your own money, as long as you’re willing to put in the time and effort. Some options to boost your local SEO include:
- Setting up (and optimizing) a Google Business Profile for your company.
- Staying active on your business social media accounts.
- Starting a blog and adding new posts regularly.
- Better aligning your messaging to your audience.
- Improving the layout and design of your website.
Of course, this doesn’t necessarily mean you should stop spending money on ads. However, lowering your CPL might mean targeting new keywords that may be less expensive while still bringing in new leads.
2. A/B Test Your Ads
If you’re not already A/B testing your ads, now is the time to start. Specifically, A/B testing refers to intentionally running two versions of the same ad or marketing strategy. From there, you carefully measure the performance of each version to determine which one is the better performer. Once you know which version is more successful, you can continue to use it indefinitely with the peace of mind in knowing that you’ve made the right choice.
You can A/B test paid advertisements, email marketing campaigns, social media campaigns, and pretty much anything else that you might spend money on in your small business marketing. Just be sure that you’re segmenting your audiences so that different people are seeing each ad. Ideally, nobody should see both versions.
In the short term, A/B testing can help you confidently determine which ads or marketing strategies to use for the best results. Likewise, regular A/B testing can provide you with valuable insights that can inform your future marketing decisions.
3. Personalize Your Marketing
Did you know that nearly 90% of customers actually prefer a personalized marketing and shopping experience? This means that if you’re using generic ads and marketing strategies, you could fall short when it comes to attracting new leads. By personalizing your campaigns, your audience will feel more as though you’re genuinely speaking to them—rather than advertising at them.
The good news? It doesn’t cost much (nor is it very complicated) to start customizing your marketing. There are plenty of email marketing platforms, for example, that allow you to personalize your email subject lines with the recipient’s name. Some other ideas for personalizing your marketing content include:
- Offering personalized product/service recommendations
- Creating unique opt-in forms
- Creating buyer personas
4. Target a More Specific Audience
Last but not least, honing in on your audience in your next round of marketing campaigns can make all the difference when it comes to lowering your CPL. After all, you can spend a lot of time and money crafting the “perfect” marketing campaign—but if it’s not reaching the right people, it’s unlikely to be successful.
This is where ramping up your audience research can make all the difference. If you haven’t already dedicated a chunk of your marketing budget to audience research, you’ll need to do this before you can move forward with this strategy. The more you know about your audience and what they’re looking for, the more successfully you can create content that really engages them and gets them thinking about your brand.
From there, you might consider segmenting your audience based on behavior, interests, or other information. You can then create targeted campaigns for each of these segments, thus increasing your chances of reaching them with things like landing pages, blog articles, and email campaigns.
Attend a Surefire Local Marketing Platform Demo
Cost-per-lead is a metric that every business owner should have a handle on. By knowing your CPL for each new campaign and taking practical measures to reduce your CPL, you can start bringing in more qualified leads without spending too much money in the process.
Of course, running a business is a lot of work—and you might prefer to leave your marketing to the professionals so that you can focus on what you do best. At Surefire Local, we specialize in online marketing for local businesses—delivering higher search engine rankings, more leads, and a greater return on investment for each marketing dollar you spend. Reach out to our team today to learn more about what Surefire Local can do for your growing business. You can also request a free demo to see first-hand how our innovative platform works to supercharge your campaigns and deliver more leads!