We built a spreadsheet based cost per lead (CPL) calculator that we feel is:
- Easier to understand
- More flexible to customize
- Easier for saving multiple scenarios
…than other CPL calculators we’ve seen to date. Below are the details but let’s first start with the cost per lead formula and the difference between cost per lead and cost per acquisition.
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What is cost per lead (CPL) vs cost per acquisition (CPA)?
Cost per lead (or CPL) is the total cost of generating one lead. This is in contrast to cost per acquisition (CPA) which is the total cost of generating one paying customer or closed deal.
So what “costs” does a business usually have to generate one lead? Generally they are:
- Advertising costs
- Inbound marketing costs
- Other marketing costs
But most CPL calculators and formulas only think about advertising costs. Doing that underestimates your true CPL because in reality, for most businesses, there are additional costs required to generate a lead (for example, building and optimizing landing pages to capture the lead).
Limiting CPL analysis to only one channel (advertising) also stops you from properly understanding your business and marketing. For example is your SEO agency providing a good return? You’ll have no idea if you only calculate paid ad CPL.
We explain this more below.
- Easily add different costs to your CPL (advertising costs, inbound marketing costs, landing page costs)
- Easily create and save multiple versions and scenarios
The CPL calculator is hosted as a view-only Google Sheet. Once you open it, be sure to add it to your own Google Drive. Then you can make changes to it, make copies of it, or export it as an Excel file.
Below is an explanation of the CPL formula and detailed guide on using our CPL calculator.
The Cost Per Lead (CPL) Formula
It’s easiest to think of the cost per lead formula in layers of detail. In its simplest form, it’s just:
(Costs per month)/(Leads per month)
Note that “per month” can be any time period - year, week, day. Throughout this guide and the spreadsheet CPL calculator, we use per month since most businesses report on metrics on a monthly basis.
The detail (2nd layer of complexity) is in how you calculate costs and leads.
As we discussed above, most cost per lead calculators and formulas only focus on costs from one channel, usually, paid advertising. But this doesn’t accurately reflect most businesses, who generate leads both from paid sources and organically through their site.
If we call the latter category “Inbound” leads, then we can break out costs per month as:
(Costs per month) = (Advertising Costs) + (Inbound Costs)
When calculating advertising costs, most businesses (and articles) only consider advertising spend and completely ignore an important, and often very large, part of advertising cost: the cost of people required to manage the ad campaigns!
If we call this people cost “ad management” then the formula for advertising costs is then:
(Advertising Costs) = (Ad Spend) + (Ad Management)
Ad management itself usually has two components: external agency consists and internal employee costs. Of course, this varies company to company.
We’ll consider inbound costs everything from organic traffic to the main marketing site as well as content marketing via the company blog.
In practice what this consists of can vary a lot from company to company:
- Some companies spend a lot on SEO agencies and consultants
- Some companies spend a lot of their marketing team’s time on inbound
- Some companies spend a lot on blogging (content marketing)
But for calculation purposes, these are all people costs, which you can easily think of as internal resources and external resources:
(Inbound Costs) = (External resources) + (Internal resources)
As you’ll see in our discussion below, our calculator lets you easily add or remove external and internal resources and adds up the total to calculate your inbound costs.
Cost Per Lead (CPL) Calculator
In this section we’ll be going over how our spreadsheet calculator works. So if you haven’t already downloaded it, you can do so here – it’s free, no optin required, and it will make this section significantly more interesting.
The spreadsheet is divided into two parts as per our high level cost per lead formula discussed above.
Then, a section on calculating leads:
Note the actual sections are longer and include more information than what is shown in the screenshots above.
All costs are per month and column C has some helpful notes about certain rows.
Ad costs are divided into ad spend and ad management. Adding up ad spend is simple, just insert your average monthly spend by channel.
One big advantage of a spreadsheet calculator (vs. a rigid on-page calculator) is that you can easily customize the rows, so you in this case you can add and remove rows as needed depending on where your company spends ad budget.
In the base example, we’ve set a hypothetical $3,000/month spend on Facebook and $4,000/month on Google.
The ad management section gets more interesting. In addition to any monthly spend on a marketing agency that manages your ads, you’ll have to estimate what portion of internal team members time gets spent managing the agency or the ads themselves.
You can copy and past the Employee salary and Employee % of FTE rows if you need to add more employees.
Some companies want to understand cost per lead excluding internal marketing team salary costs. That’s okay. If that’s the case, simply set those values to zero or delete those rows.
But in our estimation the true cost per lead should include that spend because the internal team is required to run the ad process and thus without them no ad based leads would be generated. You can also run the calculator with and without internal team member costs and report on the difference.
The inbound costs section has rows for spend on software and assets (landing page software, email software, etc.), plus sections for people costs as discussed above:
The flexibility of the spreadsheet calculator becomes really useful for computing inbound marketing costs because of what we said above:
“Inbound marketing” encompases a suite of different activities.
This means, from a cost perspective, it includes a variety of different costs you’ll need to add up.
In the inbound costs section of our CPL calculator (screenshot above) there are line items for:
- Agency costs - You add as many of these as you like if you have different agencies for SEO, content marketing, etc.
- In house employee time - Again, just copy and paste these rows to include percentages of salary spent on employees working on inbound marketing
- Tech and asset costs - Add as many of these as you need for landing page software, blogging platforms, marketing automation software, graphics and other assets, etc.
As you customize the cost per lead costs section, adding and removing sections as it applies to your company, double check that the formula in the Total Costs row, highlighted in light red still properly adds up all of your costs – adjust the formula until it does.
Just like costs, the leads calculation is divided into paid ad leads and inbound leads. This will let us compute both the paid ad CPL and inbound CPL (and of course, a blended CPL).
To keep the units consistent, make sure your values for leads are per month just like your costs (or whatever time period, as long as it’s consistent).
Paid Ad Leads
This is simply separated by paid ad channel. We put placeholders in for Facebook, Google and Linkedin – add and remove channels as you need.
Following our theme of making this calculator customizable (so it’s more useful to you), we designed this section so you can compute your monthly leads by paid ad channel in a few different ways – just choose which method is most useful:
(1) You can just input your average monthly leads directly – this is easiest if you know roughly how many leads you get per month from Facebook, Google, etc. and just want to enter it directly.
If you do this, the clicks per month, costs per click (CPC), and landing page conversion rate cells are not used – you can ignore them.
If you prefer to use this method, use the tab titled “Simpler Leads”, it does this already.
(2) You can input your clicks per month and conversion rate – This gives you a little more granularity. You can input the clicks per month and the average landing page conversion rate and the calculator will compute the leads per month (clicks * conversion rate). It will also calculate the CPC just for your reference.
(Note: Alternatively, you could change the formulas yourself to input a cost per click and have the calculator tell you the clicks per month you’ll get with the monthly ad spend you set in the costs section above.)
Inbound leads are hard to generalize. They come from a variety of sources and forms on your site: Organic traffic to your marketing site, to blog articles (organic, referral), through social channels, form submissions on your homepage, form submissions on your “work with us” or “request a demo”, or any other lead generation page – the list goes on.
Thus we decided it was most useful to keep this section simple:
You can compute your inbound leads in 2 ways:
(1) You can just enter the total inbound leads you get per month – If you aren’t tracking conversion rates on your marketing site or your blog than this is best.
(2) You can enter your average monthly traffic and conversion rate – This gives you one added level of granularity.
We’ve found that the 2nd route (how the calculator is built by default) is best for teams looking to see how improving traffic or conversion rates would help CPL.
For example, if you invested in SEO and grew traffic another 10,000 visitors, but kept conversion rate the same, how would that affect your CPL?
Results: Computing Costs Per Lead by Channel
Once you’ve customized the costs and leads sections scroll to the top to see your costs per lead.
The calculator shows 3 costs per lead: paid, inbound, and blended. Showing costs per lead by channel is extremely useful to let you and your team see what channel is performing better.
Also, having the calculator in spreadsheet form lets you go back and play with values to see how this would affect the relative CPLs between the two channels. Finally, you can easily save different scenarios by either copying COLUMN B or copying the entire sheet into new tabs and giving each tab a unique name.
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