If you care about cost per lead, you’re already losing.
I sat in a client meeting last Monday and watched an entire room argue about cost per lead for 45 minutes. The agency director had a slide. The VP of Sales had a counter-slide. The business owner was doing math on a napkin. Everyone had an opinion about whether $38 was a good CPL or a bad CPL.
I’ve been in this meeting a hundred times. And after 8 years and $11 million in managed ad spend, I’ve come to believe this entire conversation is a waste of time.
Here’s my problem with cost per lead
It’s not a real metric. It’s an artifact of the awkward position media buyers sit in. I’m supposed to own the outcome of your advertising, but I don’t actually control most of the things that determine whether it works. I need your sign-off on keywords. Your creative director has to approve the copy. Your web team built a landing page I would never have approved. And then when the leads don’t close, everyone looks at me.
So what do I put on the slide? The one number I can partially influence. Cost per lead. And the whole room treats it like gospel.
Meanwhile, the thing that actually determines whether this business makes money — how much it costs to get a paying customer, all in — nobody can calculate because marketing doesn’t talk to sales and sales doesn’t share close rates with the agency.
What I look at instead
I’ve stopped caring about CPL in my own practice. What I look at is lifetime value. I want to know what a customer is worth after costs, and then I work backwards. A third of that number is the most I’m comfortable spending to acquire them. Factor in the close rate and now I have a cost per lead target that’s tied to something real — not some industry benchmark I pulled off a blog.
Most of the time when someone tells me their CPL is too high, the math actually says their prices are too low. They don’t have an advertising problem. They have a business model that can’t support advertising.
The bottom line
Stop arguing about cost per lead. Figure out your lifetime value. If the math doesn’t work, stop firing your agency and start charging more for more.