Increase the Scalability of Your Business by Assessing Your Cost Per Lead (CPL)

Since every customer starts as a lead, the number of leads you can generate in a given period and how much you pay on average for these leads are crucial metrics that demonstrate the scalability of your business. Observing the cost per lead (CPL) for each sales and marketing channel provides valuable insights into how you can optimally scale your business. Let’s explore how you can retrieve and utilize this information.

Understanding Cost Per Lead (CPL)

Cost Per Lead (CPL) is a marketing metric that measures the cost-effectiveness of your marketing campaigns in generating new leads. It is calculated by dividing the total marketing spend by the number of leads generated.

CPL=Total Marketing Spend/Number of Leads Generated​

Steps to Assess Your Cost Per Lead

1. Classify Your Leads

Start by classifying your leads based on their source or type. Common lead classifications include:

• Raw Leads: Initial contacts with no qualification.
• Referral Leads: Leads referred by existing customers.
• Marketing Leads: Leads generated from marketing campaigns.
• Sales Leads: Leads generated by the sales team.
• Marketing Qualified Leads (MQLs): Leads deemed more likely to become customers based on marketing criteria.
• Sales Qualified Leads (SQLs): Leads vetted by sales and deemed ready for a direct sales follow-up.

Example: An outbound direct mailing campaign may generate a specific set of leads. By classifying these leads, you can allocate the resources spent on generating them accurately.

2. Allocate Resources

Allocate both human and financial resources spent on generating each set or single specific lead. This includes:

• Human Resources: Time and effort of marketing and sales teams.
• Financial Resources: Money spent on campaigns, tools, and advertising.

3. Track Leads Through the Sales Funnel

Track your classified leads throughout the entire sales funnel. This tracking should reflect the quality of the leads by monitoring:

• Lead Conversion Rates: Percentage of leads that convert to customers.
• Lead Engagement: Level of interaction and interest shown by the lead.
• Lead Source Effectiveness: Performance of different lead sources in generating quality leads.

Benefits of Tracking CPL

Tracking and retrieving the above information demonstrates the scalability of your business to yourself, your team, and investors. The benefits include:

1. Optimized Resource Allocation:
   • Efficient allocation of marketing and sales resources based on lead performance.
   • Focus on high-performing channels that generate the most cost-effective leads.
2. Improved Marketing Strategies:
   • Identify which marketing channels provide the best return on investment.
   • Adjust marketing strategies based on lead quality and conversion rates.
3. Enhanced Sales Efficiency:
   • Streamline sales processes by focusing on high-quality leads.
   • Reduce the time and cost associated with converting leads to customers.
4. Better Decision Making:
   • Make data-driven decisions to scale your business.
   • Quickly see the impact of any changes in your marketing and sales efforts.

Example: Implementing CPL Assessment

Consider a SaaS company that runs multiple marketing campaigns, including Google Ads, content marketing, and email marketing. By classifying leads from each campaign and tracking their journey through the sales funnel, the company can:

• Calculate the CPL for each campaign.
• Identify which campaigns generate the highest quality leads at the lowest cost.
• Allocate more budget to the most cost-effective campaigns.
• Improve overall marketing efficiency and scalability.

Conclusion

By accurately assessing and optimizing your Cost Per Lead (CPL), you can significantly enhance the scalability of your business. This metric helps you understand the cost-effectiveness of your lead generation efforts and enables you to allocate resources more efficiently. Tracking CPL provides insights that guide strategic decisions, leading to improved marketing performance and business growth.