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Why Should You Care About CPL (Cost Per Lead)?

Are you overwhelmed with all the analytics that come with your Advertising campaigns,and everyone telling you how important it is? Between television, digital, website, and email marketing and advertising, how do you find the time to look at all the data? Or even understand it? Not many of us have the luxury of personnel dedicated to this task.

A recent conversation that Focus had with a client, brought this issue to our attention. The conversation started about something totally unrelated, and then they suddenly started talking about advertising they had purchased from another agency they were working with. They were receiving a fair amount of leads, and so they wanted to double their spend to get twice as many. But that is not what happened. Their leads did not double. There was an increase, but not what was expected. They asked why do you think that is? Well, in so many words, we told them it was their CPL. It had changed with the increase in budget, and was obviously higher, thus less leads.

CPL or cost per lead is one Number you should know well, it is easy to calculate, and it can be applied to any campaign you are running.
The fact is knowing your CPL well can help you evaluate effectiveness of your campaigns. In other words, are my advertising dollars being spent wisely?


Secondly, once you know this number you can compare to the industry as a whole to see where you stand.

Ok, now you know your number, what next?

Cost Per lead is one number. You also need to know your conversion numbers – Percentage of appointments to leads, percentage of shows to appointments, and the percentage of sales to shows.

You then can use these numbers to determine your profitability, budget and feasibility. The trigger of Cost Per Lead will tell you everything you need to know to predict your future – CPL is your version of the Magic 8 Ball.

Start with the end in mind. How much money do you need to gross? What is your average gross? Subtract the need from the average and you have your required cost per car sold – ADVERTISING BUDGET/# CARS SOLD = COST PER CAR SOLD.

What does my CPL have to be to deliver the required Cost Per Car Sold? That depends on your conversion of leads to sales.

The number of leads and cost of those leads is very important, but CPL means nothing if your leads are not converting to sales. Let’s look at an example.
Cost Per Car Sold Goal – $500
% of appointments to leads – 70%
% of shows to appointments – 40%
% of sales to shows – 25%

Advertising Budget $10,000
Cost Per Lead $50

Total Leads 200

In this example, the cost per car sold is $714.28

If you know how many leads you need to generate to sell X number of cars, you can set your advertising budget that will cause you to hit your sales goal.

And, don’t forget to give your agency your CPL goal along with your advertising budget. You can set a CPL threshold that will force your agency to evaluate and adjust campaigns to get the most leads possible. Lastly, do not forget to look at conversion.

If your advertising campaign CPL is too high, it is not working. You can then determine if you want to continue. But, as you can see, that is not the only factor you need to review. And, typically, the solution is a combination of factors but it all starts with knowing your numbers.

If you know how many leads you need to generate to sell X number of cars, you can set your advertising budget that will cause you to hit your sales goal.

Hopefully you found this useful as a tool for increasing your car sales. If you need more tips, do not hesitate to reach out!

This post first appeared on Focus Inc's Company, please read the originial post: here

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Why Should You Care About CPL (Cost Per Lead)?


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