What is CPL (cost-per-lead) in advertising and why it matters for marketers

Cost-efficiency is the ultimate value in the modern business environment. Every effort and dollar should bring measurable results to keep the business sustainable. Therefore, Cost-Per-Lead (CPL) has emerged as one of the most critical metrics for marketers aiming to optimize their campaigns. Such a concept is crucial for assessing the effectiveness of advertising stack and marketing efforts of rapidly-growing businesses.. This article dives deep into the concept of Cost-Per-Lead, explaining its definition, how it works, and why it matters for marketers across industries. Keep reading to gain an understanding of CPL in digital marketing and ideas on how to optimize this business-critical metric.

What is CPL (cost per lead)?

To start off, let's define Cost Per Lead. CPL is a digital advertising metric used to measure the cost incurred in acquiring a single lead. Marketers calculate the total spend on a campaign and divide it by the number of leads generated. Such a calculation provides marketers with insight into the efficiency of their lead-generation efforts. Cost Per Lead is widely applied across different industries to stay on top of marketing efforts. After all, such calculations help businesses understand the efficiency of their campaigns better.

How to calculate cost per lead?

The Cost Per Lead (CPL) formula is straightforward. With a simple calculation, advertising publishers can gain invaluable insights into the efficiency of their efforts. The formula for CPL calculation looks as follows:

Let's explore the example showing how the Cost Per Lead formula works in action. There is a travel agency that runs a Facebook ad campaign offering a free vacation guide in exchange for user contact details. They spend $500 on the campaign and generate 50 leads. Using the formula CPL = Total Ad Spend ÷ Number of Leads, their CPL cost is $10. This means they paid $10 for each potential customer contact.

Why cost per lead is iportant

Cost Per Lead (CPL) serves as a crucial benchmark for assessing a campaign’s financial efficiency. It serves as a pulse check allowing the company to determine how effectively a company is turning marketing spend into potential customers. A high CPL flags the inefficiencies in the company's advertising practices. In particular, it can mean that the company employs poorly targeted ads or underperforming channels. As a result, a problem of wasted resources emerges. What is a good CPL? The lower it is - the better. A low CPL often indicates a streamlined campaign that efficiently captures leads without overspending. In other words, if a CPL is low, the company's marketers are very likely to do things the right way.

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The most important aspects of CPL are immediacy and clarity. Most KPIs in marketing and advertising require lengthy analysis to deliver meaningful insights. Meanwhile, CPL offers a real-time snapshot of campaign performance. As a result,  teams can identify issues early and adjust their marketing campaigns in real time. While not all companies focus on CPL as the primary pricing model for their campaigns, it is useful to all such businesses. The ability to make quick performance evaluations is vital regardless of the services promoted. Whether it goes about a social media campaign dedicated to hiking tours or a digital out-of-home advertising campaign promoting a fitness center, CPL allows adjusting the efforts when the campaign is already on the fly.

Besides, CPL has great value in terms of lead categorization. Not every lead is equal. A slightly higher CPL might still be worthwhile if it attracts high-quality leads that have a high conversion potential. By continuously monitoring CPL, marketers can balance cost efficiency with lead quality, optimizing their campaigns for both immediate results and long-term ROI.

What is a CPL model?

The CPL model is popular in performance-based marketing. It is important to mention that there are different CPL marketing model formats. These are Single Opt-In ads and Double Opt-in ads. Let's discuss these in more detail.

SOI Ads (Single Opt-In Ads)

Single Opt-In (SOI) ads require users to submit their information through a one-step sign-up process. A user simply fills out an online form with one's details. Such a user is immediately considered a lead without any additional verification. The main benefit of this approach is that it is quick and frictionless. In addition, it generates a higher volume of leads. The main drawback here is that those can be lower-quality leads because there is no follow-up verification step.

DOI Ads (Double Opt-In Ads)

Contrary to SOI ads, Double-Opt-In (DOI) ads involve a two-step verification process. In this case, a user provides information and confirms a submission. In most cases, it goes about clicking a verification link sent to their email. This extra step ensures that the lead is genuine. In this case, the user is genuinely interested in the product or service and can be rated as a high-quality lead. While DOI ads may produce fewer leads compared to SOI ads, the quality and engagement level of these leads are significantly higher.

Strategies to lower CPL

Generating high-quality leads remains one of the most significant challenges for marketers. Therefore, companies employ a wide range of practices to reduce their Cost Per Lead. Driven by the goal to improve overall return on investment (ROI), businesses use several effective strategies. Here is the list of the most common ones.

Conduct an ad audit

A common method for reducing CPL is reviewing ad performance. Marketers should track not only clicks but also the conversion of an ad. Cut off ads that don't provide positive outcomes and focus only on those that have significant conversion rates. Also, search for the most relevant ad channels. For example, you can try using an ad exchange solution providing you with access to premium advertising platforms. In this case, you will reach high-quality leads that, naturally, lead to a lower CPL.

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Optimize landing pages

Your landing page plays a critical role in converting visitors into leads. If you want to boost conversion rates and directly impact your revenue, you need a well-designed landing page that provides a positive first impression to your website visitors. Focus on clarity and relevance of your landing page and provide a simple design helping visitors to quickly understand your offer without distractions. 

Evaluate network performance

Segmenting campaigns by network allows businesses to analyze individual performance metrics. If a specific network underperforms, shift focus to better-performing partners to achieve a more cost-effective CPL. For example, a fitness club runs advertising campaigns across multiple networks, including social media platforms, search engines, and local fitness apps. After analyzing performance metrics, they notice that social media ads generate a lower cost-per-lead (CPL) compared to ads on local fitness apps. As a result, the company will shift most of the budget toward social media campaigns while reducing the spending on fitness app networks.

Rely on marketing automation

Marketing automation tools make it easier to stay connected with potential customers and keep them engaged throughout their journey. These tools handle repetitive tasks, like sending follow-up emails or scheduling reminders. This, in turn, allows you to free up time for businesses to focus on strategy and creativity. For example, automated email campaigns can be set up to share helpful tips, exclusive offers, or reminders about unfinished sign-ups. By keeping communication consistent and relevant, businesses can build customer trust. This is very likely to enhance customer conversion and improve your CPL ads metrics.

Advantages of cost per lead (CPL) for publishers

While CPL is a widely applied category, it has both pros and cons. First, let's take a look at the most important advantages of Cost Per Lead. The main CPL benefits for publishers are outlined below.

Simplified sales pitch

CPL simplifies the sales pitch significantly because the publishers are compensated only when the lead is generated. As a result, advertisers pay only for a tangible and measurable value, which makes Cost Per Lead a low-risk option. Such an approach simplifies the sales pitch dramatically.

Enhanced targeting

CPL campaigns rely on precise targeting to be effective. Companies often partner with niche publishers and seek opportunities to publish ads on niche platforms. Apart from campaign precision, such a targeted approach fosters stronger, long-term relationships.

High revenue potential

Leads are generally more valuable than simple clicks. This results in higher payout rates for CPL campaigns compared to other advertising models. The value of such ads proves to be even higher when it comes to Double Opt-In ads that specialize in generating high-quality leads.

Disadvantages of cost Per lead (CPL) for publishers

Now, let's discuss the main drawbacks of CPL for publishers. Despite being an efficient way of measuring the conversion of marketing campaigns, this approach has certain disadvantages. 

Unpredictable revenue

Revenue from CPL campaigns can be inconsistent, making it challenging for publishers to forecast earnings reliably. After all, it is hard to find consistency even in costs associated with particular leads. Sometimes, low-quality leads bring more material benefits than high-quality leads, which makes proper lead scoring a challenging task. 

Uncertain campaign duration

It can be difficult to determine when a campaign based on CPL in marketing will conclude, leading to uncertainty in long-term planning. In general, we recommend preparing a schedule for such a campaign to add clarity. However, if the main goal of the initiative is generating a particular number of leads, be prepared to extend the campaign duration. 

Tracking errors and missed conversions

Errors in tracking software can result in missed conversions, causing publishers to lose potential revenue. Therefore, much depends on the companies’ ability to stay on top of one’s sales funnel and run efficient analytics. Fortunately, there are various analytical tools and practices aimed at businesses that use the CPL formula.

Consider partnering with TeqBlaze

If you want to leverage the complete potential of the most efficient marketing practices and stay on top of your CPL metric, consider partnering with Teqblaze, a company with an outstanding expertise in adtech market. We provide numerous tools allowing you to organize your advertising efforts better and achieve greater CPL. An excellent option for enhancing advertising strategies is using a White Label SSP+Ad Exchange platform. For instance, it helped a prominent US-based company that specializes in targeting through Connected TV reach more efficient advertising channels, enhancing the precision of their targeting. This, in turn, transformed into their lower CPL prices. We also helped a KPI-driven supply-side platform optimize their SSP platform, ensuring higher efficiency of their publisher campaigns. Overall, we provide a great range of services helping businesses reach the right audience more efficiently and connect with high-quality leads by developing their advertising platforms and using tools, such as our Ad Server ensuring cross-platform ad delivery, granular reporting, optimized campaign performance metrics, and custom targeting. 

Final words

Cost Per Lead (CPL) is an important buzzword in the modern advertising environment. For marketers, it is a crucial metric helping them measure ROI and assess the efficiency of their marketing strategies. Businesses strive for lower CPL  using efficient CPL optimization practices involving advanced tooling, data-driven approach, and strategic thinking. Speaking of tooling, Teqblaze is ready to help you achieve technological prowess that will help you stay on top of your advertising strategies and control your CPL.  Lower Cost Per Lead with us and unlock your marketing potential—let's elevate your campaigns together!