Cost per lead without knowing what a customer is worth over time is half an equation. The same lead price is either excellent or ruinous depending on the other half.
The simple version
Average order value multiplied by the average number of purchases one customer makes over the whole relationship. Crude, and good enough for decisions. Refine it when you have enough data to refine.
Selling a subscription makes it easier still: monthly payment times the average number of months a customer stays.
Why it changes decisions
Suppose a lead is expensive and the first sale leaves you underwater. If the customer returns three times, the channel is profitable and should be widened. If they buy once, it is loss-making and widening it multiplies the loss. The cost-per-lead figure is identical in both cases.
What raises it
- Repeat purchases. Cheaper to bring back a buyer than to find a new one.
- Retention. One extra month across all customers beats a month of work on acquisition.
- Upsells. Extending what a customer already buys costs almost nothing in acquisition.
How much data you need
Five customers is not enough: one unusually long or short case moves the average on its own. The first meaningful figures appear in the dozens, and until then use the conservative estimate rather than the flattering one.
A useful habit is to compute it per source. A customer from cold commenting behaves differently from a referral, and averaging them together destroys the very information you were after. The other half of the equation is in the lead cost piece.