Computing Target Cost Per Lead

It’s important to have a clear benchmark to work with

Computing Target Cost Per Lead

I got the chance to answer this question in a group and I thought of sharing it here in case it helps anyone and don’t worry, you can use it as a guideline for your own ad campaigns too. So the question was, what was a good benchmark for a cost per lead for Facebook ads. My own answer was that it depends on the advertiser’s goals.

Since the work I do for my clients are mainly customer acquisition, my aim is to acquire customers at breakeven or better. Based on that goal, here’s how I compute for my target cost per lead:

  • I determine my conversion rate based on historical data.
  • I determine the average revenue I get for every initial purchase of a new customer.
  • I multiply the 2 numbers and get my target cost per lead.

For example, if my sales page converts at 15% and I get an average of P500 per new customer, then my target cost per lead is P75. If you’re selling just one product and you’re looking to profit off it, just include your target profit margin in the equation. Use it to remove the profit from the revenue.

And then there’s another example. I’m selling a P10,000 product on a sales page which converts at 20% and I want to earn at least 40% profit. The equation would then be 60% x P10,000 x 20% = P1,200 per lead.

So, yes, it’s important to have a clear benchmark to work with. Hope it helps you big time.