Knowing Your Cost Per Lead (CPL) When Running PPC

Many businesses both large and small will run pay per click advertising, these are of course the paid ad’s you see down the right hand bar, and often times at the very top of the search results. One of the biggest mistakes a business of any size can make with paid search is not tracking. Since we deal with mostly small businesses, we see this situation a lot. The reason for it is when you don’t actually sell something on your site it is very difficult to track conversions. A conversion can be anything from a phone call to an email, basically it is when the website visitor does what you want them to do. Even though the sale often times isn’t made on the site specifically it is important to know how many phone calls and emails you are getting.

What is CPL?

Basically, CPL is what it costs you to get a lead or more simply how many clicks you have to buy before someone calls or emails. This is a very important number to keep in mind for the simple reason of profitability. Say for example it costs you $25.00 a lead, something pretty common, and lets then say it takes you 10 leads to close a sale. Then let’s say you make $500 per sale. You would have a gross of $500.00 with a cost per acquisition of just $250.00. At that point you would want to buy as many leads as possible.

There is a saying in PPC where once you are $1.00 profitable you can open the flood gates. Once you are profitable you will want to have your company or yourself tweak your campaign as much as possible to lower your CPA. On the other side of things if it takes 50 leads to close a deal you know you will need to acquire your leads for under $10.00 a piece to be profitable. Basically your cost per lead should guide all your marketing efforts when it comes to PPC.

What To Do With CPL

Once you know your cost per lead you can change all sorts of things to help lower it. For example if only 1 in 100 people to your website fill out a form, try changing things around to make that 1 in 75, that will give you a 25% decrease in cost per lead. You could also take a look at the words you are bidding on and remove high cost low return keywords, which will also help lower your cost per lead. A third was is lower your bid price and positioning, move from the second spot in paid results to the 5th something like this will greatly reduce the number of leads you get but typically more clicks turn into leads. We could pretty much go on all day with ways to lower your cost per lead and that is the important thing to remember. In the beginning it will most likely be as expensive as it will ever be, it takes time to figure things out and with PPC advertising that takes money.

Bottom Line

Online advertising for small businesses is a tough game, dealing with typically much smaller margins, stiff competition, and smaller marketing budgets makes competition pretty tough, that said if you do it right, you can dominate even the biggest competitors. You just need to stay committed to constant improvement, lower costs per lead higher conversion ratio, and closing more calls and emails. It can be done.