Clients ask me that question (What is a good cost per lead?) all the time and it is often impossible to answer. That’s mostly because it’s the wrong question.
It’s not about whether the leads are expensive or cheap.
It’s about whether they are the right leads for your business.
Yesterday I was investigating a client’s ads because I thought one client’s lead costs were maybe too high. She was creeping up on $4.00 and our leads are usually $2.50. Today, I was trying to discern if another client’s leads were too cheap! They’d dropped to $0.30 when they’d been $0.70 for months. Did the change mean something was going wrong? I had to find out. I’ve got another client who is thrilled with $10 leads. The question really isn’t, “What is a good cost per lead?” But rather, “What is a good cost per lead FOR MY BUSINESS.”
Whether or not the lead cost is “right” depends on unique variables that are specific to YOUR business. Some of the things we consider when we are trying to determine a “good” lead cost for a business are:
What is the cost of your product?
If one buyer/client earns you thousands of dollars, you might be willing to pay, hundreds, even thousands for a single lead. If you only get a few dollars from every lead, even $3.00 might be too much.
What has the cost per lead been in the past?
If you know that you’ve recently gotten leads that became buyers at a certain price point, you can use that price point as a benchmark and set your goals in relation to that number.
Do you have other expenses associated with your product?
If it’s a digital product, usually not. If it’s a physical product, you may have production or warehouse fees you have to consider which impact how much you are willing to pay for a new lead.
How likely is each lead to become a buyer?
If you know that more expensive leads are more likely to become buyers, whereas cheaper leads never buy, then it’s worth paying extra for the leads who turn into buyers.
What is your niche?
If you are selling to other businesses, your ads are usually going to be more expensive than if you are selling to a typical consumer. Ads in education, pets, & cooking are all “inexpensive” compared to ads for beauty and fitness or home and garden.
So, with all those variables, how do you figure out the right lead cost for you? When it comes to Facebook ads, it’s always the numbers that tell us what to do:
When you’ve been running ads for a long time, and have a lot of data, there are complex calculations we can run to determine how much we are willing to pay for a lead to get the revenue we want.
When you are brand new to ads, and light on data, we sometimes just have to jump into the deep in and get some key numbers before we know what a “good” lead cost is for your business.