Every affiliate asks one and the same question at the beginning of their journey, and this question is how to calculate the cost of a lead. Luckily, there's a specifically designed advertising metric called CPL—one important aspect we are dedicating our article to. Let's find out the details.
What CPL Means
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CPL is a parameter in marketing that stands for cost per lead. Lead is a potential client who has ordered a product, leaving a phone number, e-mail, and a link to his account on a social network.
The advertising term CPL has 2 meanings:
Payment model. A form of partnership in affiliate marketing where the advertiser is paid a specified price per request.
Lead cost. Based on the advertising results, you can calculate the cost of each application using the CPL calculation formula; to do this, you need to divide the advertising costs by the number of applications (leads).
In affiliate programs where the advertising term CPL is used as a payment model, there are product offers that work according to the CPL model. The client makes an order, the media buyer receives a reward, and the affiliate only has to approve the request (confirm the order).
How It Works
To understand the principle behind CPL, let’s refresh the process of launching an advertising campaign and receiving the first leads:
The media buyer selects an offer in the affiliate program that works according to the CPL advertising model.
They create an advertising campaign, for example, on Facebook.
They launch an advertising campaign and receive their first requests.
For each lead, they receive a payment according to the CPL advertising model (for example, Italy, weight loss offer, $11 per request).
Having received 100 applications at an average price of $2.5 per lead and a payment of $5 according to the CPL payment model, the buyer has 100% ROI, that is, they spent $250 on advertising and earned $250 because the affiliate will pay $500.
The advertising term CPL in affiliate marketing is divided into two types: SOI and DOI.
SOI is a model where the lead is a user who left contact information on the landing page; usually, an email or phone number is required.
DOI is a model where, in addition to providing contact information, it must be confirmed, for example, by clicking on a link in the mail.
The difference between SOI and DOI is small, but each country has its own mentality: in the CIS people use mail and look through most of the emails, but in Asian countries, only 20% open them and click the link. The following differences can be distinguished between these payment models:
The SOI conversion is higher.
SOI allows you to conduct broad tests (audiences, texts, creatives, titles) with a small budget.
The quality of leads and payment in the DOI model are higher. If the buyer brings high-quality traffic using this model, the affiliate will happily increase the payout.
The advantage of the CPL advertising model lies in its low cost. You can start earning money using this model with only $200-300 in your pocket. After getting your very first leads, you need to calculate whether the advertising campaign is bringing profit or whether you should stop. It is beneficial for the advertiser to collect a database of numbers and emails that can be used for mailing in the future.
Who Chooses It
The CPL marketing metric is quite widespread and is used in Real Estate, Education, Mobile Apps, self-care products, and car maintenance. In general, this model is in demand in areas where contact information is highly valued and absolutely necessary for further development. Online stores that sell cheap goods do not need to focus on the cost of the request; the conversion process is their top priority. In business, this metric helps calculate the average cost per lead and predict whether your advertising campaign is going to be profitable if you continue to receive customer requests at the same price.
In affiliate marketing, CPL can be found in the following niches:
Dating (apps or dating landing pages).
Gambling (affiliates attract users, they register on a casino site, and advertisers pay a fee to the media buyer).
Adult and Nutra (in product offers, the CPL advertising model is also in demand. The model is more suitable for beginners because tests require less funding).
Sweepstakes (online product giveaways, most often iPhones and gift cards. To participate you must provide an e-mail/phone number).
Finance (forex, crypto-vertical, loans, PAMM investments, etc., where you need to leave data or sign up).
Calculating Results
To calculate CPL, use the marketing formula for calculating CPL, where advertising expenses are divided by the number of leads.
To do that, you need to see how much money the advertising campaign spent. If you launched your campaign on Facebook, then opposite the advertising campaign you will see the budget you spent and the number of leads next to it. The picture below shows an example of statistics from the Facebook advertising account; after launch, 1 lead was received with a value of $7.63, which means CPL = 7.63: 1 = $7.63.
Affiliates can go to the affiliate program whose offers they are working with and check out the number of requests there. In the case of entrepreneurial activity, statistics on leads should be collected in Google Analytics or Google Data Studio.
To calculate statistics in Google Analytics, you will need to specify goals and their value, then upload your expense information and use the Calculated Metrics function using a formula to calculate CPL.
Keep in mind that each vertical and business area has a different definition of a profitable CPL. The optimal cost per lead that will bring profit is determined by the advertiser. Logically, however, it is clear that it should not exceed the maximum payout for the offer, otherwise, the ROI will be negative and the advertising itself will become negative. If a lead costs $10, but you receive $5 in profit from the application, advertising has a ROI indicator of 100% and is unprofitable.
Enhancing Efficiency
CPL is affected by all the obvious things: low-quality content on the landing page, the application form not working correctly or slowly uploading, or landing pages on mobile and desktop looking completely different. Such aspects should be taken into account, so you should explore the client's path to the final goal before you introduce your campaign to customers. Check the little things that make up an advertising campaign: website, headline, text, creo, and buttons.
Again, focus on the advertising campaign. Having already received the first results, track the parameters and calculate how promising the campaign looks. The source is also important, for example, Facebook optimizes after 50 leads, but in fact, after 20 conversions, it can find the right audience and give leads at the same price. Having received the first 25-50 leads, analyze the advertising campaign (Facebook itself has quite detailed analytics, you can find everything you need, but if this is not enough, connect to Google Analytics). When looking at the results, pay attention to age, placement, conversions from desktop and mobile, and what time of day there are more customers.
Try not to stick to one traffic source. Facebook is suitable for those who want to automate campaigns. However, it requires a solid budget for tests. Google can immediately bring a warm and ardent audience that will be interested in the product from the beginning but will require large financial investments and skills in setting up and undergoing moderation.
Use retargeting. For example, show ads to users who visited the site but did not complete the targeted action. This is how you target a warm audience that has already seen the offer but, for some reason, did not place an order. This audience is more loyal and more likely to make a purchase.
Wrapping Up
Each advertiser determines the CPL value independently, but keep in mind that this indicator should be considered in conjunction with other parameters: cost per click (CPC), advertising click-through rate (CTR), and conversion percentage. When launching a campaign, be sure to check the landing page, creative, and text, constantly monitor the company’s results, and test new approaches, because tests help you understand what works better.
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