What is cost-per-lead?
Cost per lead (pay-per-lead, contact remuneration, abbreviated CPL) is the name given to a billing model in the field of online marketing. In this model, the advertising partners pay the advertisers for leads generated, i.e. not for a direct sale, but for the pure contact made by users.
- Payment is made for each lead
- If no direct purchase is expected yet
- CPL is easy to calculate
How Cost-per-Lead works
Cost-per-lead is used in online marketing predominantly in cases where direct purchases by users on the Internet are not yet to be expected, as the corresponding product or service requires further explanation (e.g. life insurance). In marketing, lead means as much as contact and translated means that a potential buyer is led to the offer. For example, a completed contact form or a subscription to a newsletter can be a lead. Leads provide meaningful data on potential customers. The cost per lead is quite easy to calculate. The cost per lead is quite easy to calculate, as the advertising expenditure is divided by the number of all leads. So if you win 100 leads with a stake of 3,000 Euros, the CPL is 300 Euros. Cost per lead is therefore a very important key figure in advertising success control. It can evaluate the success of marketing campaigns, not on the basis of the sales achieved, but on the number of prospects. These can be consumers who have made contact for a consultation on financial services or, for example, a test drive of a car. The CPL model can therefore be used if the advertising customer wants to generate high-quality contacts. A fixed price is set for each corresponding generated lead, which the company then pays for a contact. The advertising partner provides the necessary traffic on landing pages. Finally, if the lead is successfully placed, then there is also a remuneration for “qualified leads”. In principle, the focus of the CPL billing method is on customer data acquisition. Whenever no direct sales are expected from the interaction, the cost-per-lead method is a good choice – especially for products requiring intensive consultation.
The advantages of the cost-per-lead method
The cost-per-lead indicator is very well suited for advertising high-quality products, as it already contains a quality component. CPL is also very counterfeit-proof. In contrast to payments based on clicks (e.g. pay-per-click), click fraud is not encouraged because the names and e-mails of interested parties have to be added. Thus, the CPL key figure is really unambiguous as far as real contacts are concerned. The CPL method also enables good comparability. As an absolute value, it provides a long-term comparison of campaigns from different years. In this way, the statistics on advertising success can be updated and evaluated in comparison with other forms of advertising. CPL is also a platform-independent key figure. Costs-per-lead figures for marketing campaigns on the Web are usually many times lower than those of a normal stationary retail store. This key figure can therefore be used as an important comparative key figure regardless of the platform. The CPL can also be used in affiliate marketing with the appropriate tracking methods. In the course of their own evaluations, the marketing teams of companies can use cost per lead to determine how expensive the advertising expenditure is. The use of Cost per Lead has the advantage that the advertising measures become more scalable. How much advertising is required to generate individual leads is not left to the client, but to the advertisers or publishers who have agreed to the amount of cost per lead. There are of course also disadvantages here. Quite often the question arises whether the quality of the prospective customers gained also justifies the expenditure. Thats why you should always look at the cost per lead to see how many interested parties actually sign a contract.