Building Your Cost Per Lead Benchmark

Building Your Cost Per Lead Benchmark

Feb 13, 2023 | By Jackie Lipinski

Why Is Understanding Your Cost Per Lead (CPL) Data Important For A Home Builder?
Knowledge is power. By gaining an understanding of your Cost Per Lead (CPL) data, you gain access to crucial insights into the performance of your marketing strategies, leading you to make better decisions led by data. 

Your home builder's CPL measures the cost of acquiring a lead and helps you understand how much you are spending to generate interest in your homes. By tracking and analyzing your CPL data, you can make informed decisions about your marketing budget and strategies, identify areas for improvement, and optimize your marketing efforts to maximize return on investment. Additionally, having a clear understanding of your CPL empowers marketers to make data-driven decisions and negotiate effectively with companies offering ad products.

Is There An Industry Standard Cost Per Lead (CPL) Number To Benchmark Against?
As a home builder marketer or leader, you may be curious about the elusive industry-standard Cost Per Lead number and how your company stacks up. This is a common question among new home marketers, and we'll dive into what this benchmark represents and how you can use it to evaluate your marketing efforts.

The truth is that there is no industry standard Cost Per lead number because we have an even better benchmark number, your home builder’s data. That’s right. Your homebuilding company has the power to create its own benchmark by analyzing and understanding its unique CPL data, which is much more valuable than an industry-standard number to compare against. By calculating and understanding your own CPL, you can establish a meaningful, company-wide benchmark that will be much more effective in guiding and empowering your marketing decisions.

Why Is There No Industry Standard Cost Per Lead (CPL) Number?
The lack of a standard Cost Per Lead (CPL) across the industry is due to the diverse factors affecting each home builder, though the profit margins and unique home prices of each builder play a major role in determining CPL, making it impossible to establish a one-size-fits-all benchmark. 

Understanding Your Year-Over-Year Cost Per Lead Data:
To determine your target CPL for each new year, it's helpful to look at year-over-year data and aim for a consistent or improved number of leads at a lower cost. 

It’s also valuable to build a baseline history chart, even in a simple spreadsheet, to better help understand how your company’s CPL has changed over the years. We would recommend gathering data from 2019 to 2022 and analyzing the individual CPL data for each year. This approach allows you to gain a deeper understanding of your company's performance over time. 

Note that if you can’t guarantee the accuracy of your data (the total marketing spend by year and total lead volume for the company), then go back only as far as you can with your accurate data. It would be better to have a short history of your CPL, than inaccurate data. Also, make sure you’re following the same sources to collect your marketing budget and lead data to stay as accurate as possible.

Considerations to be aware of when analyzing your builder Cost Per Lead data from past years:
Understand that many factors impact your builder’s Cost Per Lead. 

  • You can expect your CPL to increase the more expensive your homes get, due to the fact that fewer qualified leads in the market can afford your homes. 
  • Be aware that the cost of some digital Facebooks ads went up due to the ios14 update being able to target less directly in September of 2020.
  • Another item to note is that 2021 was one of the best lead volume years for builders and many were able to slash their marketing budgets because the demand for homes was so high. So you might find that your 2022 total CPL numbers are starting to trend back to "normal" numbers of 2019 vs what might be inflated 2021's numbers, though we do believe that 2022 will probably still be better than your 2019 numbers - the last good normal year to benchmark against.
Calculating your home builder’s Cost Per Lead:
To calculate your Cost Per Lead the math is pretty simple: 
(Your entire marketing budget for the year) divided by (Total amount of leads from both online and onsite sourced combined) = Cost Per Lead that year. 

Example: If in 2022 your total company-wide marketing spend was $900,000 and your online and onsite leads total was 4,000 leads then the math would be:
$900,000 / 4,000 = $225 is what your company Cost Per Lead would be for 2022*
*(Example math numbers, not real data)

Determining your Cost Per Lead can help you make informed decisions about marketing strategies and budget. By calculating and tracking your CPL, you can make data-driven decisions and optimize your marketing efforts to maximize your return on investment.

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