Q: I'm running search advertising to generate leads. Is it better to optimize my campaigns based on the volume of leads received or cost-per-lead? I want to be careful about paying too much for a lead.
A: We often see clients wrestle with this question, especially when starting a new lead generation effort. The boss wants as many leads as possible at the lowest cost per acquisition (CPA) as possible. The problem is, you can't have it all. There is often a connection between lead quality and cost per lead (or CPA).
Here are a few questions to consider first:
Are all leads equal? Probably not. In a search campaign you will probably need to pay more for keywords that prospects are using when they are closer to being ready to close the deal and less for searches from people just "kicking the tires" or even worse, are not even able to buy from you. Wouldn't you want to pay more for those ready to buy even if it means you get less overall leads?
What is a lead worth? If you know that it often takes you 20 leads to get one sale but that sale is worth $100,000, then why would you worry about paying even $100 a lead? You may not have to pay that much but the question is would you, if you knew it was a quality lead? If you factor in the customer lifetime value of that sale, you will realize even more revenue from that $100 lead.
How long have you been running the campaign and what have been the results? If it's a brand new campaign, you will be severely limiting your reach and traffic by adhering to a strict CPA. And limiting reach and traffic early on an in a campaign means you are aren't allowing a) your retargeting lists to build and b) your advertising platform to gain enough data to make better predictive choices for ad display.
If it's a campaign that has been running awhile with a healthy click through rate, and you are still seeing a low number of conversions with a resulting high CPA, then it's time to focus on your landing experience. We can't stress this enough. We see all too often an enormous amount of effort put towards ad copy, keywords and targeting and next to nothing spent on the landing page.
Because conversions (in this case the number of leads), conversion rate and CPA all play off one another, it's difficult to set hard and fast rules about what any one advertiser should do and when. The best way to approach it is to have only one metric be your Key Performance Indicator and base that choice on the one metric that will tell you at that this point in time if your campaign is moving in the right direction or not. In a new campaign, it might be CTR or conversions. As the campaign matures, you might move on to Conversion rate or CPA. In a very mature effort you will begin to see where you might be willing to have an upward push on CPA in order to get more conversions.