How To Calculate Your Target Cost Per Lead
Calculating how much your business should spend on lead generation is a critical aspect of digital marketing. Without determining a target cost per lead, you cannot truly know the effectiveness of your marketing efforts. This calculator helps you determine a target cost per lead based on important business metrics. Because different lead sources convert at different rates, our cost per lead calculator outputs target cost per lead based on conversion rates. This will help you determine how much should spend on leads for each channel. Determining your target cost per lead is necessary to apply Google’s machine learning or smart bidding for your ads.
Example Cost Per Lead Calculation
Example Data: Accounting & Bookkeeping Firm. Their average customer pays them $500 / mo. Their average customers stays with them for 3 years. They spend 9% of gross revenue on marketing & lead generation.
Cost Per Lead Calculator Breakdown
Average Value of a Single Customer Transaction – This the average revenue your receive from a single transaction.
Average Number of Transactions Over The Life of Your Average Customer – This is the average number of transactions you receive over the entire length a customer works with you. This calculation can reach for years. If you are a startup or new business this can be a projection based on assumptions of how long you will retain customers.
Average Lifetime Value of a Customer – This is the average value of a single customer transaction multiplied by the average number of transactions over the life of your average customer.
Percentage of Gross Revenue Spent on Marketing – This is the average lifetime value of a customer multiplied by the average conversion rate of a lead.
Cost Per Lead Target – This is the average value of a lead multiplied by the percentage of gross revenue spent on marketing.
