Cost Per Lead (CPL) VS Cost per Acquisition (CPA) - Understanding the Difference and When to Use Them

Performance-based marketing lives by data-driven decisions, and among the most important metrics that inform the optimization of the activity are Cost Per Action (CPA) and Cost Per Lead (CPL). Each of them has its purpose in terms of maximizing the efficiency of ad spend; however, the difference may change your marketing strategy a lot. Now that you are familiar with what CPL and CPA are, you should get a grasp of the difference between the two metrics.

In this article, we provide an easy-to-use CPA vs CPL comparison so that marketers can adopt the suitable strategies at each funnel step.

What is CPA?

Cost Per Action (CPA), also called cost per acquisition, is a system of measuring performance-based marketing in terms of determining the average cost of making a sale, app install, or registration. CPA advertising allows marketers to pay only when an action is performed by the user, a fact that makes it an effective instrument in determining the actual ROI of conversion and revenue-based campaigns.

CPA Formula is defined by the relationship below:

CPA = Total Cost ÷ Number of Actions (Conversions). 

As a case example, when investing $1,000 in a campaign and making 25 purchases, your CPA will be $40.

What is CPL?

Cost Per Lead (CPL) is a marketing performance indicator that measures the average cost of obtaining a potential customer lead, an email sign-up, a demo request, etc. CPL meaning stays focused on the top and middle of the marketing funnel, where interest is created and a database of prospects is built so that they can be nurtured in the future.

CPL Formula CPL = The Total Cost / Total number of leads. 

As an example, when you spend $500 and get 50 leads in your campaign, your CPL will be $10.

Core Differences Between CPA and CPL

Although CPA and CPL are the foundations of a performance-based marketing business, they have very different uses in the marketing funnel and strategic benefits.

Focus and Marketing Funnel Stage

• CPA aims at the actions on the bottom of the funnel, i.e., buying or installing an application. It is perfect when the campaign objective is primary conversion and income.
• CPL is aimed at the creation of potential customers at the upper or middle funnel. The goal here is to gather leads that can be turned into customers in the future by additional engagement.

Cost and Budget Implications

• CPA campaigns also have the uncertainty of high budgets since the advertiser solely pays for revenue-generating activities. It costs more on a per conversion basis, but the ratio of ROI is also high.
• CPL campaigns are typically more economical to conduct when marketing is in the early stages, with a lower cost per lead. But not every lead will be turned into a customer; thus, ROI is eventually dependent on the quality of leads and lead nurturing.

Risk and Reward Profile

• CPA passes all the risk to the publisher or network since no payment is made until a valuable activity is carried out. This model makes marketers pay for results only, even though it is at a premium.
• CPL presents less risk to the publisher and more risk to the advertisers because they pay per lead, whether the leads convert or not. This may lead to increased lead volume, albeit of uneven quality.

Campaign Applications

• CPA works best where the conversion purpose of a campaign is obvious and imminent, e.g., e-commerce flash sales, app downloads, and subscription sign-ups.
• CPL effectively works on long-term growth strategy, including B2B lead generation, SaaS trials, or any case where you need to compile a qualified prospect list.

Strategic Considerations for CPL vs CPA

When deciding between CPL and CPA, you must appreciate what your campaign aims to achieve. That is because each model has its unique benefits based on your priorities in either conversion in the short term or customer relationship in the long term. Here’s what you need to consider. 

When to Prioritize CPA

Choose CPA when:

• Your business process is based on instant transactions or registrations.
• You desire maximum ROI instead of paying out on every sale or high-value activity completion.
• You have a well-tuned sales process, and you can pay more upfront to have a certain result.

CPA or CPA can be particularly effective where the direct-to-consumer brands are used, where there is affiliate marketing, and where there is a brief buying cycle.

When to Prioritize CPL

Choose CPL when:

• You are out to expand a prospect list to make future sales.
• You sell in businesses with a stickier sales cycle (e.g., B2B, SaaS, real estate).
• Without conversion, you must cultivate leads with content or demos or custom follow-up.

CPL works best when it comes to generating brand awareness, widening your pipeline, and ensuring a sustained increase in revenues.

Cost Per Lead vs Cost Per Action

Conclusion

CPA and CPL are necessary indicators of performance-based marketing and useful sets of indications, each with their benefits. CPA is the gold standard to bring the culture of conversion and to get the highest returns ROI while CPL is imperative in order to create a healthy pipeline of leads to achieve long-term growth.

The cleverest marketers take advantage of each of these models, testing, maximizing, and aligning their activities toward the business objectives to get the finest results ever. With a clear distinction between CPL versus CPA, you will be able to make well-informed decisions to increase short and long-lasting success. If you’re looking to maximize your marketing ROI with flexible CPA and CPL campaign options, Offer.one provides a powerful platform designed for performance-driven marketers.