Marketers spend billions of dollars on digital advertising every year.
So, how do those marketers ensure that the money spent on those ads is put to good use? Here’s a hint: Pumping more and more money into your ads won’t directly correlate to better results.
Cost Per Lead (CPL): The Critical Metric to Ensure the Most Bang for Your Buck
Cost per lead represents the amount of money a marketer spends acquiring a new lead to nurture through their contact database. In essence, CPL is an efficiency metric and represents your marketing team’s ability (or lack thereof) to deliver targeted, high-quality ads that drive tangible results for your business.
Typically, people think about CPL in the context of paid advertising, but it can apply to other marketing activities as well. For the purposes of this blog post, let’s focus on CPL in the context of paid Google Ads. Search, display and social channels will require slight, strategic variations to reduce CPL, but for the most part, the same principles apply.
By keeping your CPL as low as possible, you can boost the ROI of your marketing activities while continuing to acquire new, high-quality leads for your sales team.
5 Proven Ways to Decrease Your Cost Per Lead
1. Increase the probability of conversions by taking an inbound approach to paid.
When a person clicks on an ad and converts on a form, most marketers want that action to occur as close to the bottom of the funnel as possible, i.e., for a demo or consultation. That way, you’re not spending extra calories moving them through the funnel.
But inbound would argue you should spend those calories. Offer other types of content at different stages of the funnel.
At New Breed, we find that we get the most value out of paid advertising by promoting top-of-the-funnel offers and nurturing those contacts through to the sale. Top-of-the-funnel offers like e-books and guides introduce much less friction than a bottom-of-the-funnel offer like a demo, so visitors are more likely to actually convert. And as long as your inbound nurture engine is set up properly, it doesn’t matter where you pull them into the funnel.
2. Reduce your cost per click by improving the quality and relevance of your ads.
Obviously, if you’re serving ads to people who don’t care about the content of those ads — or if the ad is promoting content that it later fails to deliver — your CPL will end up decreasing.
If you’re spending money on this traffic, you want to get as much value out of it as possible. The first step to getting that value is ensuring that the landing page is optimized for conversions. It needs to have a clear offer above the fold that can be understood in five seconds or less.
Test the effectivity of your landing pages by showing them to someone for five seconds and ask them what’s being offered. If they can’t tell you, you need to change it.
The more relevant, the better. Choose highly targeted, long-tail keywords that are more reflective of what your prospects are actually searching for. Single keyword ad groups can help you achieve higher performing ads by targeting one specific keyword per ad group.
This strategy will help increase your quality score, Google’s rating of the quality and relevance of your ads, and in turn, reduce your cost per click as well. The less money you’re paying for traffic and the more interested that traffic is in the content you’re sending them to, the lower your overall CPL will be.
3. Eliminate wasteful spend by targeting people based on their behavior.
Google allows you to build and target audiences with similar interests. For example, if you’re an automotive company, you could build a list of people who search for cars often and serve them ads for your company. They’ll be more likely to click and convert on your offer than an audience who rarely searches for cars.
Additionally, you can retarget people who’ve already visited your site and attract them back to convert. Here’s your chance to tighten up your strategy.
Rather than targeting everyone who visits your site, group them into different audiences based on their behavior:
Audiences of people who visited high-intent pages like pricing pages or bottom-of-the-funnel landing pages.
Audiences of people who visited high-traffic (but perhaps neutral or currently undefinable intent) pages like the homepage and blog articles.
Audiences of people who visited high negative intent pages like an email unsubscription page.
Basing your ad strategy on the way that people interacted with your website will allow you to bring back high-intent visitors with a higher likelihood of converting. Plus, this strategy will help you learn more about low-intent or negative-intent visitors so you can optimize your ads and target audiences even further.
Another key audience to pay attention to is the group of visitors who have already converted on your website. Since they’re already in your nurture track, you wouldn’t want to serve them paid ads again, but Google provides the option to target similar audiences. Because these audiences look and behave the same, they’re more likely to convert as well, even if they haven’t found your brand yet. This strategy prevents you from wasting money on people who wouldn’t have ended up converting in the first place.
4. Stop spending time and money on low-performing keywords.
Periodically, sift through the different keywords you’re spending money on and analyze their performance. Tag and optimize the ones proven to drive conversions and eliminate the ones that aren’t working.
Remember, every keyword has the ability to convert someone at some point — but that doesn’t mean that you should keep that keyword indefinitely. Sometimes it can be nerve-wracking to get rid of a highly-searched keyword that’s been getting a lot of clicks, but if it doesn’t convert frequently enough, it’s a waste of time.
Try switching to a more targeted long-tail keyword instead. Though you might get fewer clicks, the people who do click on that ad will probably convert at a higher rate.
5. Perform A/B tests to optimize your ad performance over time.
It’s OK if you don’t get it right the first time. The best approach to paid ads is to always have at least two ads running at once so you can perform A/B tests. If you’re only running one ad at a time, you’ll never be able to compare, analyze and learn from the results.
In keeping with the scientific method, use one ad as the control and one as the variable. If there are too many variables, it can be difficult to draw a clear conclusion. Make sure each ad is served an equal amount of times and rotate them indefinitely. Change only one element at a time to understand what resonates the most with your audience.
Remember: The ad that converts more leads more efficiently — and therefore reduces your CPL — is the winner. If people are clicking on an ad and not converting, that’s not your winner.
Of course, CPL is just one metric in the scope of cost per acquisition, but if you can keep your CPL low, your cost per acquisition should stay fairly low as well. Regardless, you should always be working to reduce the amount of money and time you’re spending on converting leads without sacrificing the quality of those leads.
Maintaining a low CPL can be difficult as you ramp up your marketing efforts — being more targeted and expanding the reach of your campaigns at the same time — but as you continue to optimize and iterate on your strategy, you can likely get to a place where your ads are performing reasonably without the need for much management on your part.