There are two ways to get traffic: organic and paid. Paid traffic like PPC is instant, BUT the drawback is that… well it costs money. Many online marketers (including myself for a long time) shied away from it altogether because of that. But what if you could make money while building your mailing list simultaneously, how does that sound? For this reason it’s essential that you’re familiar with calculating your cost per lead formula.
I’ve said it before and I’ll say it again: email marketing should be an important cornerstone of your online marketing strategy.
Email marketing enables you to capture leads when they arrive at your site so that you can both remain in touch and build a relationship with that person but at the same time so that you can put them through your autoresponder powered sales funnel.
Calculating Cost Per Lead
Ideally every person who visits your site would both sign up for your mailing list and furthermore purchase everything which you would recommend to them. We live in the real world, however, so it’s important to be able to calculate your cost per lead as it relates to your email list so I’m going to present a cost per lead formula for figuring just that.
This number is important for a number of reasons; perhaps most importantly because by determining how much your new subscribers are worth in relation to your autoresponder, you can calculate your Adwords campaign’s budget accordingly in such a way that you know that you’ll still be turning a profit while bringing in valuable traffic.
This essentially means that you can easily build your email list on autopilot via PPC while SIMULTANEOUSLY making money.
The cost per lead formula specifically works first by using Google Analytics to set a goal for a given period of time, say over the course of one month, as relating to every time someone clicks on a “subscribe” button for your email list after giving their email address somewhere on your site.
By comparing this to the total number of visitors which you got in that month’s span, this lets you know the percentage of how many people are subscribing versus simply visiting your site without signing up.
Note that this number can always be improved with the ongoing split testing of your copy/images, what incentive that you are offering them in exchange for their email address, and how you present that sign up to your visitors whether it be through a lightbox pop up, a sign up widget, etc.
Once you know the percentage of sign ups which you are getting, calculate your average income per subscriber after they have gone through your sales funnel in full.
To do this you just take everyone who subscribed in that month’s period and look at the profits which you’ve earned from that number of people through the beginning of the month up and to when the last one has finished going through the sales funnel.
So for example if you found that you made $2000 on say the 400 new subscribers you got in that month after they’ve been put through your sales funnel in full, meaning that they have received every email from your auto responder after they’ve signed up, then with some simple division we learn that each subscriber is essentially worth $5.
Of course this doesn’t mean that we can go ahead and spend up to $5 per click in Adwords to get traffic to our site because remember that the $5 only applies to those WHO SIGNED UP for the list.
This is why we first calculated how many unique visitors were subscribing to our email list to begin with.
So let’s say we’re getting 1 in 10 people signing up for our mailing list (remember this number can be significantly improved through optimization), that effectively means that we can spend up to 1/10th of $5, or $0.50 per lead when using paid traffic and still expect to come out in the black if all things remain the same.
Something very important to note and remind you of is that this is strictly for calculating your COST PER LEAD.
It does not take into account money which you can make from visitors on your site (if you’ve monetized your site). This only looks at what you’re making on average from your sales funnel specifically.
ADDITIONALLY, this does not take into account subsequent future emails which are not part of your autoresponder/sales funnel through which you’ll undoubtedly make more money on those 400 subscribers even.
Keeping these things in mind, this $0.50 value is conservatively skewed low and can be considered safe for designing an Adwords budget around it.
In reality, your traffic is potentially worth much more than this, it all depends on how you’ve monetized your site. Calculating the value of your CPL in this way, you won’t have to see PPC as as much of a risk anymore.