Cost per lead: what it is and why it works

Cost per lead, or CPL, is the name given to what it costs to obtain a potential customer: someone interested in a product or service who fills in a form with their details, requests information or registers on a page. In short, it is what a company pays for each user who takes that kind of action and can therefore be counted as a lead.

Not all leads are equal

There are many types of lead depending on how much interest the person requesting information actually shows. The most valuable are qualified leads, sometimes called hot leads: people showing a very high level of interest in buying, where the chances of the transaction eventually happening are high.

At the other end sit co-registrations: users who belong to your target audience but do not necessarily have much intention of buying. These are people who, after registering and filling in a form, expressly accept receiving information from the company and give their consent to be contacted.

Why the model works

• You pay for outcomes, not traffic. A click that leaves immediately costs you nothing under CPL.
• The cost is predictable. If you know what a lead is worth to you, you can decide what you are willing to pay for one and scale from there.
• It forces you to define the funnel. You cannot buy leads without first agreeing what counts as one.

The catch

Quality varies enormously between sources, and a cheap lead that never converts is more expensive than a costly one that does. Judge suppliers on cost per sale, not cost per lead, and check where the leads actually came from.