How Cost Per Lead is Calculated

John Spacey, updated on March 02, 2018

Cost per lead, or CPL, is a marketing metric based on the average cost for generating a sales lead. It is commonly used to measure the effectiveness of promotions. In some cases, firms purchase leads at a cost per lead or run digital advertising campaigns based on cost per lead pricing.

Formula

The basic formula for calculating cost per lead is:

cost per lead = promotional spend / number of leads

Number of leads are the total leads that are attributed to the promotional spend. These may be qualified or raw leads.

Variations

There are several variations of cost per lead that are used for different types of promotional spend. For example, cost per click advertising might calculate cost per lead as:

cost per lead = cost per click / conversation rate

In the formula above a 91% conversion rate is represented as 0.91.

Example #1

A fashion company spends $1 million dollars mailing a catalog to a target market. They are able to attribute 100,000 customer visits to the catalog.

cost per lead = 1,000,000 / 100,000 = $10 per lead

There are various ways to attribute visits to a catalog such as the use of coupons and unique offers in the catalog.

Example #2

A solar panel installer launches a digital advertising campaign to generate leads. They spend $4 per click and have a conversion rate of 56%.

cost per lead = 4 / 0.56 = $7.15 per lead

Overview: Cost Per Lead
Type	Marketing Metrics
Definition	A marketing metric based on the average cost for generating a sales lead.
Related Concepts	Marketing Metrics » Promotion » Qualified Leads » Target Market » Conversion Rate »