How is cost per lead (CPL) calculated?

Cost per lead (CPL) is a key metric used in marketing that indicates how much it costs to acquire a new lead. The correct method to calculate CPL involves dividing the total campaign costs by the number of leads acquired.

When a marketing campaign is conducted, businesses seek to understand the efficiency of their spending in relation to the number of leads generated. By using this calculation, organizations can measure the effectiveness of their campaigns and make informed decisions about future marketing strategies. This metric is especially important in performance-based marketing where resources are allocated based on the cost-effectiveness of obtaining new leads.

For instance, if a company spends $500 on a campaign and generates 100 leads, the CPL would be $5 per lead. This insight helps in budgeting and evaluating the return on investment for different marketing activities.

The other options do not accurately portray the calculation for CPL. Dividing total revenue by the number of leads pertains more to understanding profitability rather than acquisition costs. Summing total expenses across marketing efforts does not differentiate between leads generated and expenses incurred, making it an inaccurate measure for CPL. Averaging the lead conversion time relates to the timeframe of lead acquisition and engagement rather than the cost associated with obtaining those leads.