Forget About Industry CPL Metrics

Scientific looking charts and graphs can mask fundamental misunderstanding.

Those industry averages tell you nothing

It’s tempting to want to compare your metrics to industry benchmarks, particularly when trying to justify your services to a paying client. To most of those clients, the metric they care about is the cost per lead, and there is plenty of research available online showing average CPL segmented by industry and channel.

These industry averages can be a useful way to start a discussion and see if your marketing efforts are in the right ballpark, but with so many variables that affect CPL the question is whether these benchmarks are more likely to help or hinder your ability to show value to your clients.

Some leads are better than others

Not all leads are created equal, and you don’t want the dollar value of your highly qualified leads to be compared to those generated from other marketing channels using completely different methods.

Consider a pay-per-lead service like Bark, or directory listings like Angie’s List. They may be able sell leads at a price below what you can hope to achieve through search engine marketing, but because you didn’t acquire those leads with your own messaging, the right expectations have not been set for those leads. They are far less qualified.

Furthermore, industry-averages don’t capture geographic and seasonal variation. The categories may be over-broad – conflating very different verticals like cosmetic surgery and pediatrics within the same medical industry, for instance.

How you measure it matters

They also don’t capture the huge differences in how CPL is measured across agencies. Are they diligently scrubbing their leads before calculating their metrics? What percentage of their leads are generated from branded search terms, which will generally have a much lower CPL? What methods are they using to capture leads, and just how qualified are they? Are they careful not to double-count any leads? Do they have any campaigns that count page visits as leads, blowing out the metrics? (I’ve seen it happen!)

If your industry averages are based on your own agency’s portfolio, and if lead tracking practices have been consistent across the data sample, then you are on firmer ground. But by focusing on these industry benchmarks you inevitably invite comparisons to the metrics your competitors will cite when they try to poach your clients.

Good campaigns should get worse

Lastly, leads should get more expensive the more successful you are. A good marketing specialist will always pick the low-hanging fruit first and move up the tree until the Customer Acquisition Cost (CAC) is equal at the margin to the Customer Lifetime Value (LTV). The last thing you want is to get punished for your success.

Maximize lead value

This doesn’t mean that CPL is not important. But rather than compete with industry benchmarks, you should focus on the one benchmark that matters: the lead value. Your job is to get as many leads as possible while keeping CPL below that benchmark.

The lead value is a function of the client’s close rate and the LTV of the customer, but you can increase the lead value by qualifying your leads (and thus helping the client’s close rate).

Ultimately you will show value to the client by providing high quality leads at a price that allows them to turn a profit. It also doesn’t hurt to educate the client on the measures you are taking to secure those leads at the best price possible, such as bid rules and optimizations.

Of course, any discussion of leads assumes that you have control of the landing page where your ads are sent. If you do not have that control, you can’t be held accountable for generating leads, and you will have to explore other deliverables like the Search Terms Report and the Quality Score Report.

Tell your story by focusing on what matters

Digital marketers always live with the threat that competitors will try to lure away their clients with grandiose promises, and if you define your value by how your CPL stacks up against dubious averages, you play right into their hands. Rather than compare yourself to others, tell your own story, and focus on getting your client a positive return on their investment.

Oh, one last thing. If you are a digital marketing professional with agency experience who believes in putting the client first, there’s a place for you at Ethical Digital.

By Kevin Frei at April 10, 2019