Before someone becomes your customer, they start as a lead, flowing in through your sales funnel. You might launch an Instagram ad campaign for your cookware brand, enticing home chefs to join your newsletter with hopes of future sales. Or maybe your Google ad campaign proves effective, prompting them to hit your website landing page and download your cookbook of healthy recipes, planting the seed for a future pan purchase.
However, these marketing campaigns and advertising activities cost real dollars and cents—every click, form submission, and email signup comes at a price. Learn about cost per lead and how to determine if your campaigns are seeing a return on investment or draining your marketing budget.
What is CPL?
Cost per lead (CPL) is an advertising metric that measures how much a business spends to acquire one potential customer through its advertising and marketing efforts. You calculate CPL by dividing the total cost of a campaign by the number of new leads it produces. A low CPL means your marketing dollars are going further, leaving more room for profit when those leads convert to customers. On the other hand, a higher CPL squeezes your margins.
Brand marketers use CPL to evaluate and improve their lead generation campaigns, testing everything from messaging to creatives to audience segments. By tracking costs against results, brands learn what’s working and how to make their marketing efforts more efficient.
You can use CPL to measure the cost of acquiring either a marketing-qualified lead or a sales-qualified lead, depending on your company’s priorities.
Difference between CPL and CPA
Cost per lead measures the advertising and marketing spend required to get someone to take a preliminary step toward becoming a customer, like joining an email list or requesting a live product demo from your team. These leads have shown interest in your business by filling out a form, downloading content, or signing up for updates, but haven’t made a purchase (yet).
Cost-per-acquisition (CPA) tracks the total cost to convert someone into a paying customer who has completed a purchase. While this might be just advertising costs for an ecommerce business, many companies need to include sales team time, demo costs, and other resources required to close the deal. For a medical uniform supplier selling to hospitals, the cost of acquiring leads might be $40 when a procurement manager requests a catalog or pricing guide, while their CPA could reach $400 once you factor in sales meetings and custom pricing negotiations.
How to calculate CPL
The formula for calculating cost per lead is straightforward: Divide your total marketing spending by the number of leads generated.
CPL = Total marketing spend / Number of leads generated
Let’s say you run a photography equipment business and are promoting a new camera lens model. You spend $6,000 on digital ads targeting photography buffs, and this campaign generates 100 leads through your website when people sign up to receive detailed product specs.
Here’s how you would use the lead formula:
CPL = Total marketing spend / Number of leads generated
CPL = $600 / 100 leads
CPL = $6 per lead
This means you’re spending $6 in advertising for each potential customer who shows interest in your camera lens.
Measuring CPL across advertising channels
Beyond calculating overall CPL, your marketing team can compare CPL across different channels running marketing campaigns. By reviewing data in your ad platform dashboards, you can see how each channel performs. For example, you might find you’re paying a CPL of $70 on Facebook Ads and a higher cost of $80 for Google Ads to generate qualified leads.
Does that mean you should stop running Google Ads and reallocate that budget to Facebook Ads? Not necessarily.
Different channels often attract different types of leads with varying potential value to your business. If your Facebook leads that convert have an average lifetime value of $400 while Google leads that convert spend $600 over time, then both channels are worthwhile—and Google is actually delivering better long-term value despite its higher cost upfront.
How to improve your CPL
When you talk about improving CPL, you’re essentially talking about lowering the marketing cost to acquire each lead. However, there’s no universal “good” CPL that every marketing team should target.
Your ideal CPL depends entirely on your business model and the value of your products. For example, a custom bicycle manufacturer selling $3,000 bikes can likely spend $10 per lead comfortably, while a company selling $30 water tumblers would quickly go out of business with that same CPL.
Whatever your ideal CPL, here’s how to improve it:
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Segment your ad audience. Laser-focus your messaging on the people most likely to care. If you’re a fitness clothing brand, segment your audience and refine your messaging for distinct segments like hardcore athletes, casual gym-goers, and athleisure enthusiasts.
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A/B test your ad campaigns. A/B test multiple variations of your ads simultaneously, tracking clicks and conversions. Based on your numbers, you can reallocate your budget to the highest-performing ads, letting the data direct your marketing spend.
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Improve the quality of your lead magnets. Lead magnets are incentives that encourage leads to engage with your brand. You might offer a free ebook that helps them personally or professionally. Or host an in-depth webinar featuring industry influencers that provide actionable information.
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Try out different creative assets. Experiment with video ads that show your product in action, ephemeral stories that provide behind-the-scenes glimpses, and carousel posts that walk potential customers through a narrative.
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Explore different advertising platforms. Don’t get locked in the Meta and Google ad ecosystem—there’s a whole world of alternative advertising platforms waiting to be explored. If you’re selling mechanical keyboards, a marketing campaign on Reddit can connect you directly with passionate communities, for instance.
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Simplify your forms. Avoid embedding website forms that look like a bureaucratic nightmare. Stick to the absolute essentials: name, email, phone number, and maybe company—anything more and you’re more likely to watch potential leads bounce. Shopify Forms is a simple tool for creating user-friendly forms.
What is CPL FAQ
What’s a good CPL?
Should all my campaigns be CPL campaigns?
A CPL marketing campaign is an online advertising pricing model where an advertiser pays every time their ad generates a lead. Not all campaigns need to be CPL campaigns, and you can choose between different pricing models including cost per click, cost per mille (a fee for every 1,000 impressions), or a flat fee.
What do I do if my CPL is too high?
If your CPL is sky high, it’s time to assess your marketing campaigns. Evaluate your targeting, A/B-test your advertisements, refresh your creative assets, experiment with different ad platforms, and trim your ad spend on underperforming channels. If your CPL remains high, you might need to evaluate pricing and potentially increase prices to offset acquisition costs.
