Paid acquisition
Cost Per Lead Is The Wrong Number
Companies that optimise for cost per lead get cheap leads that never close. The number that matters is cost per closed deal, and after that ROAS. Optimise for quality and the whole marketing job gets easier.
A company that cares about cost per lead will optimise for cost per lead. That is the whole problem. You get what you optimise for, and cheap leads are easy to get.
What happens when you optimise for cost per lead?
You bring in bullshit leads. Broad targeting gets the number down, so the targeting goes broad. The dashboard looks better every week while the sales team works a pipeline full of people with no money and no intent.
The lead is not the product. A lead nobody can close is worth nothing, and it costs more than nothing, because a rep spent an hour finding that out.
What should you optimise for instead?
Cost per closed deal, and after that ROAS. Both of those numbers count revenue, which means neither can be improved by buying cheaper traffic.
| Cost per lead | Cost per closed deal | |
|---|---|---|
| What it counts | Contacts | Customers |
| Improves when | Traffic gets cheaper | Traffic gets better |
| Rewards | Broad targeting | Tight targeting |
| Hides | Close rate, deal size, sales cycle | Nothing that matters |
| Gameable by | Lowering intent | Nothing |
How does this change the ads you run?
It flips the target. Instead of asking who is cheapest to reach, you ask who is most likely to close, and you accept paying more per lead to reach them.
Take two campaigns. One brings leads in at $40 and closes 2 percent. The other brings them in at $120 and closes 12 percent. The first campaign has the better cost per lead by a factor of three. It also costs $2,000 per closed deal against $1,000, so it is twice as expensive at the only thing you actually buy.
Those figures are arithmetic, not a benchmark. Run the same sum on your own numbers and the comparison usually goes the same direction.
Why does this make you a better marketer?
Because it makes your life much easier. Optimising for the cheapest lead puts you in a fight you cannot win, competing on price for attention against everyone else doing the same thing.
Optimising for the best quality lead puts you in a different job. You spend your time on targeting, offer, and proof, and those compound. Cheap traffic never does.
Questions about cost per lead and cost per closed deal
What is wrong with optimising for cost per lead?
You get what you optimise for. Target cost per lead and the cheapest leads win, which means broad targeting and people with no money and no intent. The number on the dashboard improves while the revenue stays flat or falls.
What should B2B companies measure instead?
Cost per closed deal first, then ROAS. Both of them count revenue, so neither can be gamed by buying cheaper traffic. A campaign with a higher cost per lead and a better cost per closed deal is the better campaign every time.
Does a low cost per lead ever matter?
Only as a component of cost per closed deal. On its own it tells you what traffic costs, not what customers cost. Two campaigns can have the same cost per lead and a completely different cost per closed deal, and only one of them is worth funding.