Foundations · Lesson 5 of 6
Cost per lead campaigns and lead quality
About 10 minutes · Yogender Kumar, Managing Partner
By the end of this lesson you'll be able to
- Write a valid-lead definition a partner can work to
- Calculate cost per customer from lead price, valid rate and sales rate
- Decide which lead partners deserve more budget
Why this matters
On a cost-per-lead campaign the dashboard shows a lead price, and it's tempting to buy wherever it's lowest. You don't make money from leads, but from the customers your team turns them into. This lesson shows how the gap between the two can reverse a decision.
The core idea
With CPL you pay for an enquiry. The partner carries the risk of visitors who never fill in the form. You carry the risk that the lead isn't real, can't be reached or never buys.
So a lead has three prices:
- Cost per lead: what the partner charges.
- Cost per valid lead: once leads that are fake or can't be reached are taken out.
- Cost per customer: once your sales team has done its work.
Only the third tells you whether the campaign makes money.
Worked example
Fernbrook Cover is an imaginary insurance broker, so the figures are illustrative. Each policy it sells leaves about £180 of commission in the first year. It decides it can spend up to £120 to win a customer.
In one month it buys leads from two partners:
- Partner X charges £12 a lead and sends 500, for £6,000. One in five fails Calder's checks: duplicates, made-up names, numbers that don't connect. That leaves 400 valid leads, and the team sells to 1 in 10 of them: 40 policies.
- Partner Y charges £15 a lead and sends 300, for £4,500. One in ten fails, which leaves 270 valid. The team sells to 1 in 6: 45 policies.
Fernbrook Cover: the same month, two lead partners
Partner X: £12 per lead
Partner Y: £15 per lead
What the numbers show
- Partner X: £6,000 ÷ 40 = £150 per policy. That's over the £120 limit.
- Partner Y: £4,500 ÷ 45 = £100 per policy. That's inside it.
The partner charging 25% more per lead brings in customers for a third less. And if Calder had agreed to be credited for invalid leads, Partner X would have cost 400 × £12 = £4,800. That's £120 per policy, which only just meets the limit. On the same terms Partner Y would cost 270 × £15 = £4,050, or £90 a policy, so Y still wins.
What each policy really cost
What a valid lead looks like
Write the definition down and share it before launch. A typical one says a lead must:
- be a real person aged 18 or over, with a UK postcode where the service is offered
- have a phone number that connects and an email address that doesn't bounce
- not duplicate a lead you've had in the last 90 days
- come with recorded consent that names your business, with the time and the wording shown, and a phone number you've checked against the TPS before calling
Then agree the return process: how many days you have to reject a lead, what evidence you'll send, and whether rejected leads are credited or replaced.
In practice
- Track every lead by partner and sub-ID, all the way to sale or no sale.
- Send each partner a monthly quality report: valid rate, contact rate and sales rate.
- Call new leads quickly, and measure how your sales rate changes with speed.
- Move budget by cost per customer, not cost per lead.
- Treat a sudden jump in lead volume as a reason to check, not to celebrate.
Common mistakes
- Buying on lead price alone. A £12 lead that never answers the phone costs more than a £15 lead that buys.
- No written definition. If "valid" isn't agreed before launch, every rejection becomes an argument.
- Blaming partners for slow follow-up. If leads wait two days for a call, your sales rate drops, whoever sent them. Fix your own speed first.
Try it yourself
You buy 600 leads at £10 each. 20% fail your checks, and you've agreed to be credited for invalid leads. Your team sells to 1 in 8 valid leads. What's your cost per customer, and what would it have been without the credit?
Show answer
Valid leads: 600 × 0.8 = 480. With the credit you pay 480 × £10 = £4,800. Customers: 480 ÷ 8 = 60. Cost per customer: £4,800 ÷ 60 = £80. Without the credit you'd pay £6,000 for the same 60 customers, which is £100 each.
Quick check
Not scored. Pick an answer to see the explanation.
Partner A charges £10 per lead and its customers cost you £140 each. Partner B charges £16 per lead and its customers cost £95. Which deserves more budget?
Which of these belongs in a valid-lead definition?
Key takeaways
- A lead has three prices: per lead, per valid lead and per customer.
- Judge and fund lead partners on cost per customer.
- Agree a written valid-lead definition and a return process before launch.
- Your own speed of follow-up changes the numbers as much as the partner does.
Further reading: the full guide on our blog