Guest post by Richard Bufkin.
Marketing a product or service costs money, and it is not always clear how beneficial a marketing campaign will be. Companies rely on a variety of metrics to help them see how sales and marketing produce financial benefits for the organization, whether the goal is to increase leads (which marketing controls) or sales (which relies on sales-marketing alignment).
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Analyzing cost per lead and cost per sale are both important, but are obviously functionally different metrics with unique use cases. Understanding how to use each one can provide you with valuable information in your next marketing or sales campaign.
The Importance of Metrics in Marketing Campaigns
When you launch a marketing campaign, you should have some idea of how to assess its efficacy. Ideally, you spend a minimal amount of money to earn a large number of leads and eventual sales—but achieving this requires an effective strategy. To determine how to adjust your marketing campaigns for greater success, you’ll likely use various metrics, such as:
- Views or clicks
- Cost per click
- Positive engagement, such as likes, shares or requests for more information
- Cost per sale
- Cost per lead
Analyzing several metrics is key to developing the ideal marketing strategy for products or services. The best metrics to use depend on the type of campaign, marketing goals, and existing marketing challenges you are trying to solve.
Cost Per Lead
To determine the cost per lead (CPL), you simply divide the money you pay for a particular marketing and sales campaign by the number of consumer lead lists your business earned from the campaign. Remember to include the salary of sales (if applicable) and marketing staff in your figures, as well as ad spending and outsourcing content creation.
Using CPL for assessing the efficacy of a campaign is important for analyzing lead generation. If your company wants to generate more leads, or test different marketing avenues to see which one produces more leads, CPL provides the most effective evaluation of your return on investment.
Cost Per Sale
Similar to CPL, cost per sale (CPS) involves dividing the money spent by the number of sales. Businesses should consider targeting CPS to specific aspects of the campaign to avoid confounding due to higher spending on high-end sales.
CPS can be an effective tool for determining the success of each marketing campaign as well as the ROI of the marketing campaign in general. You can compare the average revenue and profit of the sale to the CPS to determine if you need to improve your success or decrease the overall costs.
When to Use CPL or CPS
Ultimately, you may focus on one or both metrics, depending on your goals. Only a portion of engagements will generate a lead, and not every lead will convert into a sale. If your company has been developing its lead generation and you need to assess how your investment is paying off, CPL can tell you how much you spend to get each lead. You can compare the CPL for different campaigns to gauge their individual efficacy.
Besides providing data about the profitability of any campaign, CPS may be an important addition for comparing your lead generation efforts to actual sales. Using both metrics can help you determine if you need to focus more on lead generation or sales conversions, if the cost of the lead is disproportionately high compared to the cost of a sale.
Assessing the success of a marketing campaign calls for data collection using different metrics. Cost per lead and cost per sale are two unique metrics that help companies determine how much they are spending in relation to what they earn in the form of leads or sales. By implementing these metrics when appropriate, you can evaluate the productivity of each marketing campaign.
Author bio: Richard Bufkin is President of TargetLeads a division of Senior Direct Inc., a direct mail marketing company. With over 20 years of experience, he focuses on lead generation and growing the business.
SOURCES
https://www.appsflyer.com/glossary/cost-per-lead/
https://www.appsflyer.com/glossary/cost-per-sale/
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