March 7, 2018
What’s the CPL goal? Tends to be a question asked frequently in the lead generation world of online advertising. Sometimes this number seems to be floated around the historical account average, and profit levels aren’t looked into as they should be when looking into what your CPL goal should look like.
Initial Steps to Using Profit Goals for Lead Gen Clients
Some easy initial steps would be to take a look at the following three things:
- Sales Rate per Lead – how many sales do you receive per lead
- Revenue per Sale
- Cost per Sale
Once you have this information it is easy to develop CPL goals or profit goals. You’d take the following formula in order to find the profit amounts per lead:
=(Revenue-Cost)*Sales Rates
Once you have this formula in place, it’s easy to find the profit margins you’re looking for when advertising costs are included to come up with a CPL goal. From here, let’s say you want double the profit as your cost. Therefore you’d want your cost per lead to be half of the formula above. To use numbers in this scenario, let’s say each sale generates $500 of revenue on average, but costs $75. The sales rate per lead is around 15%. That would show that each lead is worth $63.75 in profit before advertising cost. If we want a 200% ROI – our CPL goal would then be $31.88. And we’d earn $31.88 per lead.
CPL Goal =((Revenue-Cost)*Sales Rates) / ROI Goal
Considering Different Sales Rates & Costs Across Account
As most know – each product or service that a company offers is not typically created equal. For example, let’s say for an account the goal is to get registrations to a few different PPC conferences. Each conference may have different revenue, costs and sales rates.
NOTE: all numbers in examples are completely made up to use as a mock example. In this example let’s say:
- London Conference
- Revenue per Person: $2,000
- Cost per Person: $1,250
- Sales Rates: 10%
- Indianapolis Conference
- Revenue per Person: $1,500
- Cost per Person: $500
- Sales Rates: 20%
- Austin Conference
- Revenue per Person: $1,500
- Cost per Person: $700
- Sales Rates: 35%
With this information, if we’re still trying to hit a 200% ROI – the conferences will each have different CPL goals when it comes to advertising around the conference.
- London Conference
- (($2,000-$1,250)*10%)/2 = $37.50 CPL Goal
- Indianapolis Conference
- (($1,500-$500)*20%)/2 = $100.00 CPL Goal
- Austin Conference
- (($1,500-$700)*35%)/2 = $140 CPL Goal
Obviously, for specific businesses, the way profit numbers are established can be different – but these show examples as to how to develop CPL goals, and how those CPL goals can be different based on the different revenue amounts or sales rates of a product or service.
Considering Different Platforms When Developing CPL Goals
Once everything is figured out above, the differentiating sales rates by platform can be considered to develop different CPL goals per each platform.
Above shows how to consider sales rates by platform when developing CPL goals. As can be seen above, LinkedIn typically has higher rates than Facebook targeting – so the goal on Facebook has to be lower than the goal on LinkedIn in order to hit the overall ROI goal in each platform. This layout really shows the dramatic differences on why common CPL goals across an account might not make sense. Here for example, the Austin conference on LinkedIn can afford $148 CPLs – which would allow us to get more aggressive in trying to get registrations, while the London Facebook efforts need a $30 CPL to hit goals, which is telling us maybe don’t advertise on Facebook for this conference because goals would be too hard to hit.
Looking at goals this way will allow you to:
- Easily visualize profit levels of Lead Gen clients
- Easily keep everyone on the same page in terms of profitability and ROI goals
- Easily prove the value or lack there of on each avenue you’re advertising on
Final Thoughts
Looking at revenue, profit numbers, ROI goals, historical sales rates are all conversations that need to be had to develop proper CPL goals. At Hanapin Marketing we always preach: create budgets and set goals based on profit and revenue numbers, then make optimizations off of the CPL goals for our Lead Gen clients. The steps above help you do exactly that.
Continue driving home the profit discussions – and it’ll help form better connections between the teams across the company to grow profit of the company together.