Peformance Marketing

Media Planning: Arriving at the Right CPL and other Unit Metrics

Likhith Reddy
|
Mar 7, 2023
Media Planning: Arriving at the Right CPL and other Unit Metrics

Contents

Problem Statement

As a performance marketers, there is no doubt to admit that its always been challenging to control your unit metrics. Three common questions that we always have in our mind while running paid campaigns,

1. My CPL is high for this campaign, am I overspending?

2. What is the right threshold of CPL, cpMQL to operate at for my campaigns? What should be my tCPA be?

3. How do I look beyond CPL, cpMQL to understand my spending potential?

4. I am just setting up a new ads account, how do I plan my budgeting and scale effectively?

What (and Why) Exactly are Unit Metrics to Consider for Paid Media

Paid Pipeline Metrics:

1. CPL (its obvious!) : Cost for each lead generated.

2. cpMQL : Cost for each Marketing Qualified Lead

3. cpSQL : Cost for each Sales Qualified Lead

4. cpOpp : Cost for each Opp

These metrics largely depend on industry, channels, CPC etc, and hard to really define benchmarks unless you compare with similar industries.

Account Efficiency Metrics :

1. CAC : CAC refers to the amount you spend to acquire each new customer. To calculate it, divide your combined sales and marketing expenditure by the number of new customers it generated. Lower it is better.

2. LTV : Its measure of how many times of revenue you make out of your CAC. Higher it is better.

3. CAC Payback : The time it takes in months to recoup the cost of acquiring a customer. Lower it is better.

4. Pipeline to Spend % : Its measure of how much % you are spending out of your total pipeline generated. This number depends on stage of company, regions, channels based on brand strength, cost optimisation etc. Lower it is better but if its too low you are under spending and might have a high opportunity cost involved.

Ideally these four metrics are much needed for marketer to understand how the paid channel is heading and gives you direction or course correct if needed.

Understanding your current funnel in 3 Steps:

1. How is my funnel looks like : Evaluate your funnel across different channels

Metric Channel Paid_LinkedIn Paid_META Paid_GoogleAds Organic/Direct Referral/Social Others Blended
Leads 167 100 100 100 100 100 667
MQL 67 46 46 47 47 48 300
SQL 40 26 26 27 28 29 176
Opp 12 11 12 13 13 14 75
Customers 4 4 5 6 7 8 33
Pipeline $540,000 $272,277 $294,118 $315,534 $336,538 $357,143 2,115,610
ARR $162,000 $99,010 $122,549 $145,631 $168,269 $190,476 887,935
Metric in % Channel Paid_LinkedIn Paid_META Paid_GoogleAds Organic/Direct Referral/Social Others Blended
Lead_to_MQL 40% 46% 46% 47% 47% 48% 46%
MQL_to_SQL 60% 57% 57% 58% 59% 60% 58%
SQL_to_Opp 30% 42% 44% 46% 48% 50% 45%
Opp_to_Customer 30% 36% 42% 46% 50% 53% 44%
Avg Deal Size (ARR) $45,000 $25,000 $25,000 $25,000 $25,000 $25,000 $25,000
MRR $3,750 $2,083 $2,083 $2,083 $2,083 $2,083 $2,083

2. What are my current spends and other costs involved:

Costs Paid_LinkedIn Paid_META Paid_GoogleAds Organic/Direct Referral/Social Others Blended
Marketing Spends $40,000 $20,000 $40,000 $0 $0 $0 $100,000
Sales Spends $0 $0 $0 $0 $0 $0 $0
Tools Spends $5,000 $5,000 $5,000 $5,000 $5,000 $5,000 $30,000
Others $0 $0 $0 $0 $0 $0 $0
TOTAL $45,000 $25,000 $45,000 $5,000 $5,000 $5,000 $130,000

3. What are my unit metrics coming to

Unit Economics Paid_LinkedIn Paid_META Paid_GoogleAds Organic/Direct Referral/Social Others Blended
Pipeline to Spend % 8% 9% 15% 2% 1% 1% 6%
Gross Revenue to Spend % 35% 32% 46% 4% 4% 3% 18%
CAC $12,500 $6,313 $9,180 $858 $743 $656 $3,983
LTV : CAC 2.9 3.2 2.2 23.3 26.9 30.5 5.5
CAC Payback 3.3 3.0 4.4 0.4 0.4 0.3 1.9
CP-Lead $240 $100 $500 $0 $0 $0 $150
CP-MQL $600 $439 $868 $0 $0 $0 $334
CP-SQL $1,000 $777 $1,511 $0 $0 $0 $569
CP-Opp $3,333 $1,836 $3,400 $0 $0 $0 $1,333
CP-Deal $11,111 $5,050 $8,160 $0 $0 $0 $3,064

Bonus : This sheet automates your calculation, all you need to do is enter the input metrics marked in yellow.

Now, lets understand how do we derive optimal numbers based on your funnel metrics,

Approach 1 : (Cost Optimisation)

Mathematical Bottom Up Approach to Arrive at Right CPL (till cp-OPP)

Inputs to consider : Pipeline to Spend %, Pipeline Target, funnel metrics in %

Outputs : Budget Required, CPL, Leads to be generated

When to use :

1. You know what is spend to pipe ratio you would to operate at

2. You know what is your pipeline target

3. You know very well on how your funnel looks like (Lead → MQL → SQL → Opp)

Case 1 :

Now, consider you would like to operate at 20% Pipeline to Spend Ratio with pipeline target of $250k with ARR of $45k, it makes sense to spend upto $243 for a lead and close to $810 for MQL. Be cautious that LTV:CAC and CAC Payback is likely to be on higher end. In this case, you will able to generate 185 leads at $243 CPL at 20% Pipeline to Spend Ratio with pipeline of $250k with $45k budget.

Metric Channel Paid_LinkedIn
Leads 185
MQL 56
SQL 28
Opp 6
Customers 2
Pipeline $250,000
ARR $75,000
Metric in %_Channel Paid_LinkedIn
Lead_to_MQL 30%
MQL_to_SQL 50%
SQL_to_Opp 20%
Opp_to_Customer 30%
Avg Deal Size (ARR) $45,000
MRR $3,750
Costs Paid_LinkedIn
Marketing Spends $45,000
Sales Spends $0
Tools Spends $5,000
Others $0
TOTAL $50,000
Revenue Paid_LinkedIn
Gross Margin 80%
Gross Revenue $60,000
Unit Economics Paid_LinkedIn
Pipeline to Spend % 20%
Gross Revenue to Spend % 83%
CAC $30,000
LTV : CAC 1.2
CAC Payback 8.0
CP-Lead $243
CP-MQL $810
CP-SQL $1,620
CP-Opp $8,100
CP-Customer 27,000

Case 2 :

Now, consider you would like to operate at 10% Pipeline to Spend Ratio with same pipeline target of $250k with ARR of $45k and at more safer LTV:CAC and CAC Payback ratio, you are no longer supposed to spend more than $108 for a lead and close to $360 for MQL.

In this case, you will able to generate 185 leads at $108 CPL at 10% Pipeline to Spend Ratio with pipeline of $250k, and your budget comes down to $20k

Metric Channel Paid_LinkedIn
Leads 185
MQL 56
SQL 28
Opp 6
Customers 2
Pipeline $250,000
ARR $75,000
Metric in %_ Channel Paid_LinkedIn
Lead_to_MQL 30%
MQL_to_SQL 50%
SQL_to_Opp 20%
Opp_to_Customer 30%
Avg Deal Size (ARR) $45,000
MRR $3,750
Costs Paid_LinkedIn
Marketing Spends $20,000
Sales Spends $0
Tools Spends $5,000
Others $0
TOTAL $25,000
Revenue Paid_LinkedIn
Gross Margin 80%
Gross Revenue $60,000
Unit Economics Paid_LinkedIn
Pipeline to Spend % 10%
Gross Revenue to Spend % 42%
CAC $15,000
LTV : CAC 2.4
CAC Payback 4.0
CP-Lead $108
CP-MQL $360
CP-SQL $720
CP-Opp $3,600
CP-Customer 12,000

PS: Arrive to your Pipeline to Spend ratio cautiously, it might not be easy if you want to target 10% S2P if you are currently operating at 20% S2P, and can’t reduce CPL from $243 to $108 in one go. Evaluate your funnels based on different cuts like channel, region and plan for incremental optimisation.

Approach 2 : (Scale to Max Potential)

Mathematical Top Down Approach to know your Right CPL (till cp-OPP)

Inputs to consider : Marketing cost, CPL, funnel metrics in %

Outputs : Spend_to_Pipeline, Pipeline, Leads to be generated

When to use :

1. You have budget in hand.

2. You have CPL in mind and want to understand what is the best number you can achieve

3. You know very well on how your funnel looks like (Lead → MQL → SQL → Opp)

4. You are not too constrained on S2P and maximise your pipeline and be flexible with your CPL

Case 1 :

Consider you are able to operate your funnel with at Marketing cost of $40k and CPL of $100, you are likely to get 400 leads and $540k pipe with 8% S2P at optimal LTV:CAC & CAC payback.

Metric Channel Paid_LinkedIn
Leads 400
MQL 120
SQL 60
Opp 12
Customers 4
Pipeline $540,000
ARR $162,000
Metric in %_ Channel Paid_LinkedIn
Lead_to_MQL 30%
MQL_to_SQL 50%
SQL_to_Opp 20%
Opp_to_Customer 30%
Avg Deal Size (ARR) $45,000
MRR $3,750
Costs Paid_LinkedIn
Marketing Spends $40,000
Sales Spends $0
Tools Spends $5,000
Others $0
TOTAL $45,000
Revenue Paid_LinkedIn
Gross Margin 80%
Gross Revenue $129,600
Unit Economics Paid_LinkedIn
Pipeline to Spend % 8%
Gross Revenue to Spend % 35%
CAC $12,500
LTV : CAC 2.9
CAC Payback 3.3
CP-Lead $100
CP-MQL $333
CP-SQL $667
CP-Opp $3,333
CP-Customer 11,111

Case 2 :

Consider you are able to work on your funnel metrics (Lead to MQL % etc) and make it better than Case 1, for same Marketing cost of $40k it is okay to spend even $240 for a lead for same $540k pipe with 8% S2P, just that your count of leads will get reduced.

Metric Channel Paid_LinkedIn
Leads 167
MQL 67
SQL 40
Opp 12
Customers 4
Pipeline $540,000
ARR $162,000
Metric in %_ Channel Paid_LinkedIn
Lead_to_MQL 40%
MQL_to_SQL 60%
SQL_to_Opp 30%
Opp_to_Customer 30%
Avg Deal Size (ARR) $45,000
MRR $3,750
Costs Paid_LinkedIn
Marketing Spends $40,000
Sales Spends $0
Tools Spends $5,000
Others $0
TOTAL $45,000
Revenue Paid_LinkedIn
Gross Margin 80%
Gross Revenue $129,600
Unit Economics Paid_LinkedIn
Pipeline to Spend % 8%
Gross Revenue to Spend % 35%
CAC $12,500
LTV : CAC 2.9
CAC Payback 3.3
CP-Lead $240
CP-MQL $600
CP-SQL $1000
CP-Opp $3,333
CP-Customer 11,111

Bonus : This sheet automates your calculation, all you need to do is enter the input metrics marked in yellow.

Deriving your right tCPA at Campaign Level :

While planning the same at campaign level, its okay to keep the keep the calculation simpler, all you need is what is your historic S2P for each campaign.

Consider this, you are running three paid search campaigns with varied performance in terms of leads, Opp % etc.

From the current set of campaigns, campaign 1 and 2 are currently operating at close to 18% P2S but at varied CPL, lets try to understand its ideal tCPA while we continue to optimise,

Campaign - 1 (Competitor) :

  • You wanted to improve CTR from 3.6% to 4%
  • You wanted to improve CVR from 0.6% to 1%

You are likely to get 7 leads from 4 at more or less same cost of $17k. This boils down to your tCPA of $2.3k

Similarly, for campaign 2 you have scope to optimise CPL from $1.2k to $1k if CTRs and CVR can be improved.

Now comes the interesting part of campaign 3 which is currently at 22% P2S at $732 CPL. Now this campaign at its best can generate upto 14.59% P2S even if we increment CTRs and CVR, so its again important to understand what is the best case a campaign can operate at while looking for P2S. So ideal tCPA can be $500 at 15% P2S but this campaign cant generate 10% P2S at current setup unlike campaign 1.

Metric (Current) Campaign - 1 (Competitor) Campaign - 2 (Use Case - 1) Campaign - 3 (Use Case - 2)
Spend $16,528 $12,624 $8,787
Impressions 17,254 13,244 9,254
IS 90% 90% 90%
Clicks 627 423 350
CPC 26 30 25
CTR % 3.63% 3.19% 3.78%
Leads 4 10 12
CVR % 0.64% 2.36% 3.43%
Opps 4 3 2
Opp % 100% 30% 17%
$ Pipeline $92,000 $70,000 $40,000
$ Avg Deal Size $23,000 $23,333 $20,000
Pipeline to Spend % 17.97% 18.03% 21.97%
CPL $4,132 $1,262 $732
CPL Opp $4,132 $4,208 $4,394
Metric (Target based on P2S) Campaign - 1 (Competitor) Campaign - 2 (Use Case - 1) Campaign - 3 (Use Case - 2)
Target Spend $17,000 $13,000 $9,000
Clicks 739 495 450
CTR % 4.00% 3.50% 4.50%
Leads 7 12 18
CVR % 1.00% 2.50% 4.00%
Opps 7 4 3
Opp % 100% 30% 17%
$ Pipeline $170,000 $86,667 $60,000
$ Avg Deal Size $23,000 $23,333 $20,000
Pipeline to Spend % 10.00% 15.00% 15.00%
CPL $2,300 $1,050 $500
CPL Opp $2,300 $3,500 $3,000
Best Case Spend $20,214 $15,371 $11,616
Best Case Imp 19171 14716 10282
Best Case Clicks 767 515 463
Best Case Leads 8 13 9
Best Case Opps 8 4 3
Best Case Pipe $176,374 $90,133 $61,693
Best Case P2S % 9.64% 14.42% 14.59%

Closing Notes :

In conclusion, its always important to look beyond your CPL and optimise campaigns at Pipeline to Spend % to scale profitably. Backtrack the metrics and then understand what is the best CPL you can operate it. This helps you to ensure you are not burning a lot and helps to scale/optimise campaigns with clear direction in hand.

Reach out to us for any queries, TripleDart will be happy to help and you can book a call here.

Likhith Reddy
B2B SaaS | Senior Paid Strategist at TripleDart Digital.
Likhith Reddy

Likhith Reddy

B2B SaaS | Senior Paid Strategist at TripleDart Digital.

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