I have sat in meetings where four people used the word "lead" to mean four different things, agreed on a plan, and left the room thinking they understood each other. They did not. One meant anyone who visited the website. One meant anyone who filled in a form. One meant someone who had answered the phone. One meant someone ready to sign a contract.
Nobody was lying. They just never agreed what the word meant, and the plan they made was built on a number that meant something different to each of them.
This is not a vocabulary problem. It is a money problem. If your agency reports a €10 cost per lead and you were picturing someone ready to buy, you will budget wrong, forecast wrong, and eventually conclude that marketing does not work. So here is every term, in plain language, with one example running through all of them.
Meet Happy Paws, a dog grooming salon. One location, one owner, a groom costs €45, and dogs come back every couple of months. She spends €1,000 a month on ads. We will run her numbers through every metric in this post so you can see exactly how each one relates to the others.
Part one: the words for people
This is where most of the confusion lives, because these describe the same human at different stages and people grab whichever word sounds best.
Contact
That is the whole definition. There is no implication of interest, permission, or relevance. A business card in a drawer is a contact. So is a name you bought on a list, which is why "we have 50,000 contacts" is a sentence that means almost nothing on its own.
Lead
The difference is an action. They filled in a form, requested a quote, booked a call, or replied to something. Interest has to be demonstrated, not assumed. The moment someone raises their hand, a contact becomes a lead.
This is the word that gets stretched hardest. If someone tells you they generated 500 leads, ask what action defined a lead. The answer is often "visited the page."
MQL
A lead that fits the profile of a customer and has engaged enough that marketing thinks sales should call them. It is a filter, not a promotion. The point is to stop sales wasting time on people who were never going to buy.
SQL
A lead that sales has actually spoken to and confirmed is real: they have the need, the budget, and the intent. The gap between MQL and SQL is usually where businesses discover their lead quality is worse than their lead volume suggested.
Prospect and opportunity
Mostly used in B2B and longer sales cycles. An opportunity has a value, an expected close date, and a stage. It is what appears in a pipeline forecast. For most local service businesses this stage does not exist, and pretending it does just adds a step nobody uses.
Customer
The only one of these words that is unambiguous, and the only one that pays your rent. Every stage above exists to produce this one, which is why reporting that stops before it is incomplete reporting.
“If someone says they generated 500 leads, ask what action defined a lead. The answer is often that they visited the page.”
Part two: the words for cost
These four get mixed up constantly, and the mix-up is expensive because they can differ by a factor of ten on the same campaign.
CPM
What it costs to show your ad a thousand times. It measures how expensive the audience is to reach, not whether reaching them did anything. A rising CPM usually means more competition for that audience, or an ad the platform does not want to serve.
CPC
What you pay for one person to click through. Useful for judging whether your creative is doing its job, because a low CPC means the ad is interesting. It says nothing about whether those people were worth attracting.
CPL
What you pay for one person to raise their hand. This is the number most agencies report, and it is genuinely useful, but only once everyone agrees what a lead is. A €5 CPL where a lead is a page visit and a €50 CPL where a lead is a booked appointment could describe the same campaign.
CPA
Here is the trap. CPA is meaningless until someone names the action. It might be a purchase, a booking, a trial signup, or a form fill. CPL is simply one type of CPA where the action is a lead.
Always ask which action. If an agency quotes a €40 CPA and you assume that means a customer while they mean a booked appointment that may not show up, you have just built a budget on a number that is roughly half of what you thought.
CAC
The one that tells the truth. Not just ad spend, but everything it took: software, agency fees, the hours someone spent chasing leads on the phone. Divided by customers who actually paid, not appointments booked.
CAC is always higher than CPA, usually much higher. Businesses that plan against CPA while believing they are looking at CAC systematically underestimate what growth costs them.
The one sentence worth memorising: CPL counts hands raised, CPA counts whatever action you named, and CAC counts money spent to get money in. They are three different numbers about the same campaign, and the gap between the smallest and the largest is where most bad budget decisions are made.
Part three: the words for return
ROAS
How much revenue each euro of advertising produced. Useful for comparing campaigns against each other. Dangerous as a headline business metric, because it ignores your margins, your staff, your rent and everything else. A campaign can post a ROAS of 3 and still lose the business money.
ROI
Profit against everything you spent, not revenue against advertising. This is the number that tells you whether the business made money. ROAS and ROI are not interchangeable and the difference is usually your entire margin.
LTV
What a customer is worth across the whole relationship, not on the first transaction. This is the number that rescues businesses that look unprofitable on a first-purchase basis, which is most businesses with any repeat custom.
LTV to CAC ratio
Three to one is the conventional benchmark: a customer should be worth at least three times what they cost to win. Below that, the margin rarely survives your overheads. Well above it, say six to one, usually means you are underspending rather than being brilliant.
Payback period
The ratio tells you if the economics work. Payback tells you whether you can survive the wait. A business with excellent LTV to CAC can still run out of cash if it takes eighteen months to get the money back.
Part four: the words for traffic
| Term | What it means | Happy Paws |
|---|---|---|
| Impression | Your ad was displayed once. Not necessarily seen, and definitely not read | 100,000 |
| Reach | How many different people saw it. Always lower than impressions | 25,000 people |
| Frequency | Impressions ÷ reach. How many times the average person saw it | 4 times |
| CTR | Clicks ÷ impressions. Whether the ad was interesting enough to act on | 2% |
| Conversion rate | Percentage completing an action, from one stage to the next | 5% of clicks |
| Bounce rate | Percentage who arrive and leave without doing anything | Depends on the page |
Conversion rate deserves a warning. It is the most abused term in this entire list, because it requires two reference points and people only ever give one. Conversion from what, to what? Clicks to leads is a different number from leads to customers, and both get called "our conversion rate."
Happy Paws has at least four: clicks to leads is 5 percent, leads to bookings is 25 percent, bookings to attended is 80 percent, and clicks to customers is 1 percent. All four are her conversion rate. Which one you mean changes the entire conversation.
All of it, on one page
Here is the whole month for Happy Paws, every metric in sequence, so you can see how one campaign produces a dozen different numbers.
The same campaign, twelve ways
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Request audit →Six ways these get used wrong
"We have 50,000 leads"
They have 50,000 contacts. Leads did something to signal interest. The distinction is most of the value.
Quoting CPA without the action
A €40 CPA is not a number until someone says what happened for €40. Always ask.
Calling CPA your CAC
CPA usually counts ad spend only. CAC counts software, fees and labour too, and is often double.
Reporting ROAS as profitability
ROAS ignores margin and overheads. A ROAS of 3 on a 20% margin product is a loss.
"Our conversion rate is 5%"
From what, to what? There are four in the example above and they range from 1% to 80%.
Judging on first purchase only
Without LTV, every repeat-business campaign looks worse than it is. Happy Paws would have switched hers off.
The bigger point
None of this is complicated. That is rather the point. These are simple ideas that get muddled because everyone assumes everyone else means the same thing, and nobody wants to be the person in the meeting asking what a word means.
Be that person. Ask what counts as a lead. Ask which action the CPA refers to. Ask whether the CAC includes the tools and the time. The five seconds of mild awkwardness is considerably cheaper than a quarter spent optimising toward a number that never meant what you thought.
If you want to go further on which of these actually predict revenue and which just look good in a report, that is covered in the post on vanity metrics. And for a case where the reported number and reality come apart entirely, see the one on click-to-WhatsApp conversions.
Frequently asked questions
A contact is any person whose details you hold. A lead is a contact who has shown interest in what you sell. Your neighbour's email in your phone is a contact. The same neighbour filling in your quote form is a lead. The difference is an action they took toward buying, and it matters because 10,000 contacts and 10,000 leads are worth wildly different amounts.
CPL is cost per lead: spend divided by leads. CPA is cost per action, where the action is whatever you defined, which might be a booking, a trial or a purchase. CPL is one specific type of CPA. Always ask which action a CPA refers to, because a €40 cost per booked appointment and a €40 cost per form fill describe very different results.
CPA usually counts advertising spend only, divided by your chosen action. CAC is everything it costs to win one paying customer: ad spend, software, agency fees and the labour involved in following up. CAC is always higher than CPA, often by a lot. Planning against CPA while believing you are looking at CAC systematically underestimates what growth costs.
ROAS is revenue divided by ad spend. ROI is profit divided by total cost. ROAS ignores margins, staff, software and every other expense, which is why a campaign can show a ROAS of 3 and still lose money. ROAS is useful for comparing campaigns. ROI tells you whether the business is actually making money.
Three to one is the conventional benchmark. Below that the margin is usually too thin to cover overheads and still grow. Well above it, such as six to one, often means you are underspending rather than being exceptionally efficient. Pair it with payback period, which tells you how long your cash is tied up before the customer repays what you spent to win them.
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