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Many clients consult digital marketing experts with various goals. The main objective is to make more money. KPIs such as Cost-Per-Lead (CPL) and Cost-Per-Sale (CPS) are effective to show clients Return on Investment (ROI).
What is cost per lead?
Cost Per Lead is the money spent on campaigns so that a qualified lead is generated. It can either be marketing qualified lead (MQL) or sales-qualified lead (SQL), which is the amount spent to initiate a conversation with a prospect.
Measuring CPL removes the intangibles from the equation.
Instead of using “virtual metrics” like keyword rankings and organic search traffic, you focus on the value of dollars in versus dollars out. Using this information, you can make an ideal decision on an inbound marketing strategy.
What is cost per sale?
Cost-Per-Sale is the amount spend that results in income generation by the business. This KPI is very effective for search initiatives, and e-commerce buys it is not very compelling as compared to Return on Investment ROI.
There is a thin line between MQL or SQL and income-generating revenue because online sales and prospects that result to many channels. When talking about CPS, you can draw a direct line between the marketing initiative and the money that was generated.
How to calculate cost per lead and cost per sale?
To get accurate results, you need to use percentages of web-based leads, and the average size of lead deals closed online.
Use the basic arithmetic to figure out the value of your lead:
Average deal size X % of the deal closed = lead value.
Once you obtain this information, you can dive into the analytics tool to understand the nuance surrounding lead generation programs. (sources, landing page revenues, etc.) and channels that you run them through.
Take a case where you spend $5,000, creating an eBook that is used for lead generation program and wishes to figure out CPL and CPS from the assets. Use basic arithmetic:
For CPL, you divide the cost of the asset by the number of leads generated by it:
$5,000 eBook generated 100 qualified leads = $50 CPL
For CPS, you wish to divide the cost of the asset by the number of sales generated:
$5,000 eBook generated 10 sales = $500 CPS
As a marketer, you know the average deal size you are working with. Compare your CPS to evaluate whether the asset is worth the investment.
Average deal size = $1,500. Your CPS = $500 for the eBook asset – you’re $1,000 in the black on every deal closed on this program.
The ultimate goal is to get your CPL as low as possible while maintaining quality leads. Without quality leads, there are no sales, if no sales, there is no ROI.
The action plan
What do clients seek to get out of digital marketing initiatives?
Many people are obsessed with “vanity metrics.” Regardless of the additional traffic brought to your site or increased domain visibility in searches, ROI is the most efficient measure. CPL and CPS are the best measures for returns on investment, which indicates the failure or success of your business.
Imagine a situation where your CEO stops you in the hallway and asks, “how are the Q4 figures looking”? What would you say? You could say,
- Gurgle smoothing intangible if you do not have a definite answer.
- Pontificate at length on the intricacies of your inbound marketing campaigns and their expected conversions.
- Answer with a single precise number like $14K ahead of revenue goals with another month to go.
Sales and marketing strategies exist in cohesion, where data is passed between these departments. Marketing experts get a clear idea of sales to funnel and what type of leads are coming down.
What about cost per lead advertising?
Organic marketing and paid advertising are useful measures of cost per lead, which need to be paired.
These are two forms of marketing, and you must aim at capturing both. You can capture intent traffic through Pay-Per-Click campaigns or through traditional content marketing channels.
With CPL, you know the amount you are paying upfront and how much traffic will be generated. It is accomplished through Google Ads, Bing ads, Facebook Ads, LinkedIn Ads, and any other type of programmatic exchange.
With PPC advertising, you do not have to worry about unquantifiable metrics like bounce rates or shares. You bid on impressions you want to receive. CPL and CPS still apply in this case.
You need to optimize a landing page and creative ads to maximize ad placements to get higher impressions, conversions, and sales. The platform is automated, dedicated, and tracks movement in real-time, which makes CPL, CPS, and ROI to understand.
Create transparency and build a client-agency partnership
Using CPL and CPS, a marketer is able show ROI to clients, which are essential determinants of success or failure of a business. An SEO company reports surface-level metrics like they are ROI. The company has nothing to concentrate on. Most SEO agencies cannot give straight answers on tactics deployed.
Like in the CEO on the hallway example, always give a transparent ROI answer. Also, give correct information to vendors.