9 Clouds Automotive Marketing Blog

Where automotive meets digital marketing.


How to Calculate Cost Per Digital Lead

Digital marketing can be simplified into a numbers game. 

If you know that 1% of people who visit your website ask for a quote, you can either increase the number of people who come to your site or increase the conversion of people who end up asking for more information. In a mathematical equation it would look like this:

Visitors x Conversion Rate = Leads

Knowing this formula is the foundation of knowing what is working online and what is under-performing. With the power of this one equation, you can easily calculate the cost per digital lead from each of your marketing channels and decide what works best and what could be eliminated from your budget.

Let's walk through three easy steps to calculate this formula and use it moving forward.

Step 1: Count Your Visitors

This is the number that most vendors and marketers know. How many people are visiting your site? This is a “top of the funnel” metric, meaning it shows awareness and how well-known your store is. The number, however, is not success. Having many visitors to your site doesn't pay the bills. Selling cars does.

We want to calculate this useful sales number a couple of ways.

First, we want the overall number of visitors to your website over a certain time frame. Let's start with 30 days. This will lead us down the path of calculating an average cost per lead for all digital leads.

Then, we want to follow the same process for each of our main digital marketing efforts. In other words, calculate how many visitors come to your site from:

  • Social media
  • Email
  • Autotrader and 3rd party lead providers
  • Search ads
  • Other sources

We will create a cost per digital lead formula for each of these traffic sources to find out which channel is performing best for your store.

Step 2: Calculate Leads

In step 2, we jump to the other side of the equation. We go into our DMS or CRM and look at all of our leads in the same 30-day time frame. In most systems, you will be able to filter your leads by their source, be it a third party lead provider, online search or an online ad.

If you can't do this (or don't know how to do this) in your DMS/CRM, you could set this measurement up easily using Google Analytics.

Calculating leads with Google Analytics

If you know how to find the source of your leads, skip this section. If you don't know how, here's a great work around.

1. Make sure that a lead who submits a form on your site, such as a request a quote form or an application for financing, is redirected to a thank you page.

For example, after I submit a quote request, I don't just see a line of text that says “thank you.” Rather, I'm directed to a new page, with a unique URL, that says thank you and has the text saying something to the effect of, “We appreciate your interest and we'll be in touch soon.”

2. Copy the URL of this thank you page or pages. We'll need it on Google Analytics.

3. Create a URL destination goal on Google Analytics using your thank you page URL. You can do this by clicking on Admin in analytics and then choose goals. (You can read a full explanation about goal setup on our analytics course.)

Now, whenever someone submits a form, they will be marked as a conversion and can easily be tracked back to their original source using analytics.


Step 3: Calculate Conversion Rate

With the number of leads calculated, we can easily calculate our conversion rate.

If we have 1000 visitors from Facebook and we get 10 leads from Facebook, we have a 1% lead conversion rate on Facebook.

Similarly, if we have 30 visitors from Autotrader and get 10 leads, we have a 33% lead conversion rate.

From an overall perspective, we can take the total web traffic over a 30-day period and the total number of leads. Let's say we have 100 leads and 10,000 visitors. Our overall lead conversion rate would be 1%.

Knowing these numbers allows us to compare which sources are best at converting.

*BONUS* Step 4: Add in Cost per Channel

Now we know the rate at which each channel converts. But if one channel is very expensive and another is inexpensive, we may prefer the inexpensive channel with a lower conversion rate.

For example, if Autotrader generates 10 leads with a high conversion rate of 33%, but costs $5000/mo, we may opt to spend our time (and perhaps our money) on Facebook.

Calculating the cost per channel is a new equation, but an even simpler one:

Cost / Leads = Cost per lead

In the Autotrader example, $5000 / 10 leads = $500 per lead

If Facebook costs $400 (on ads) and generates 10 leads, the cost per lead of Facebook would be $40 per lead.

Now, comparing the cost per lead of each channel gives a quick look at which channels make the most economic sense for your store. If you know that leads will continue to cost $40 on Facebook, you could spend $400 more and get 10 more leads. Not a bad deal.

How to Use Cost Per Lead Data

Knowing conversion rates and cost per lead data generates two useful insights.

1. Which digital channels could increase their conversion rate?

If we see a low conversion rate on Facebook, we might add more links to our vehicles. If we see that ads have a low conversion rate, we might edit the text or photos to increase that percentage. If we see a channel that has maxed out its potential conversion rate, we would know not to spend too much time trying to improve it.

2. Which digital channels have the lowest cost per lead?

If we can allocate our marketing budget to the lowest cost per lead (assuming they convert to sales at the same rate), our stores can save money and spend wisely.

Knowing your average cost per lead for digital leads also allows you to evaluate new software, agencies and strategies. Does the new tool or strategy create leads at a lower cost per lead? If so, it would be worth implementing. If not, it can be ignored.

Know Your Numbers

Digital marketing should be measurable and objective. When you know your conversion rates and cost per lead, you can fairly assess the best strategies and identify ways to save money without losing leads.

Here at 9 Clouds, we help dealers identify these key numbers in our free Inbound Marketing Assessment. Just let us know if you would like help measuring your current conversion rates and cost per leads. We will jump on the phone for 30 minutes and walk you through the results we find.

Happy measuring and happy marketing.

Request a Free Marketing Assessment


Photo: Anssi Koskinen