Cost per lead (CPL) marketing is payment setup in which the advertiser pays a fixed price for receiving sales leads. The cost can range greatly depending on how targeted the leads are. For example, loosely targeted leads may be $1.00 each whereas highly targeted “buyer” leads may be as much as $100.00. While this may sound expensive, it is important to realize that the latter group has a high likelihood of converting in a sale. Buyer leads are individuals who have previously purchased products or services in a related niche, making them very likely to be interested in the advertiser.
An important concept in CPL marketing – and all other lead generation structures – is customer lifetime value. CLV is the average revenues that you generate per customer. This extends beyond any singular sale to the lifetime of your relationship with each customer. If you have generated $1000 from one customer, that would be the CLV, even if that was spread between several different sales. Often customer lifetime value is examined as an average for all customers. For example, if you have generated $50,000 in sales and had 40 customers, your average CLV would be $1250. This number can be extremely useful for determining how much money you can spend on acquiring each new customer.
There are a variety of other ways to generate leads for your business. Different methods will work better for some companies than others. Furthermore, in general, it is advantageous to employ more than one.
Pay per click (PPC) is a system in which the advertiser pays a certain amount each time their ad is clicked. The prices for this are generally much lower than CPL; however, those clicking on the ad are not vetted and thus may be significantly less targeted than leads generated in a CPL arrangement. Typically, with PPC the advertiser has control over the content of the ad; however, they may not be able to fully control where it is displayed.
Ultimately both methods of marketing are effective and should typically be used in tandem. PPC campaigns are more passive, driving viewers to visit your landing pages and websites; whereas CPL is more active, providing you with leads to reach out to.
Cost per impression (CPM) is a form of marketing in which the advertiser pays for every 1,000 impressions of an advertisement. This is one of the least targeted methods of promotions; however, it is also extremely cost-effective. The pricing for 1,000 impressions is typically comparable to that of a single lead in the CPL scheme. However, the conversion rate is naturally significantly lower as there is no guarantee that each viewer is even engaged by the advertisement.
CPM tends to be most effective for brand marketing. However, in terms of directly driving sales it is generally a poor option.
Cost per acquisition is a setup in which the advertisers pays an affiliate for every new customer gained. This is the most expensive per capita for of marketing; however, due to the structure there is no inefficiency. Since CPA is a very high engagement for the affiliate, pricing is fairly competitive, driving up costs for the advertisers. Furthermore, this puts the control out of the hands of the advertisers; therefore making is a potentially unreliable system.
As with the other forms of marketing CPA is typically best used as part of a more complete strategy. Every business that can afford to offer reasonable affiliate payments should incorporate CPA because it puts the onus for customer acquisition entirely on another party.