A frequently uttered platitude: You can not be an influential ad person if you do not know your numbers. Well, it is a cliché for a reason. Over and above that, you will not be a top-grade marketer if you are sidelining the one metric that matters the most: cost per acquisition (CPA).
That being said, all other metrics such as click-through rate (CTR), cost per click, cost per conversion, are crucial too. These metrics are significant to any well-run campaign. But they certainly do not hold a candle to the holy grail of marketing metrics: CPA. In other words, how much to spend on customer acquisition?
So why is the Cost Per Acquisition (CPA) so important?
Because it is the prototypical metric for deducing true return on investment (ROI). If your campaign is grabbing eyeballs and clicks, but it is incapable of generating revenue, it will be considered unsuccessful.
For instance, if you are working for an agency responsible for managing a company’s pay per click (PPC) account. Your team’s ads are faring well above average (on paper). Through aggressive split-testing, you are able to attain a CTR more than 4% and had the cost per click down below a dollar, that’s splendid.
Yet, when you share this good news with your client, you may hear that they had received only one sale, yes only a single sale out of all your efforts. Not good. Their CPA was the entire spend on the marketing campaign to date.
So instead of focusing on CTRs and click costs, if you focus on CPA, you will begin creating campaigns that propel the number of sales and hence, delight the client. The impression counts and click rates may not always be soaring high, but they will work where they matter, driving revenue.
CPA Network India is growing expeditiously; more and more people want to earn money from affiliate marketing. There are umpteen great Indian affiliate networks and programs that can be a great source of making money online. You can promote Cost Per Action (CPA) offers that pay when a visitor does some activity like free registration, sign up, etc. and the affiliate earns a fixed amount.
What is a CPA?
Cost per acquisition is another term for cost per action and is used interchangeably with it. CPA is a measure of the advertiser’s per conversion cost from start to end, from the inclusion to the search engine results to designing engaging landing pages that grab the attention of the visitor. This means cost per acquisition computes how much it costs in advertising to convert someone from a visitor to a client for the company.
Cost per acquisition vs Cost per conversion
For the record, cost per acquisition is not the same as cost per conversion. The term ‘conversion’ is usually used to describe anything from making a purchase to liking a brand on Facebook. The acquisition is pivoted predominantly on making a customer. It is all about generating revenue.
Cost per conversion (CPC) is great for answering the question, “What does it cost to get this newsletter subscription?” At the same time, you also need to answer the question, “How many newsletter subscribers do I need, on average, to make a sale?” This is the CPA.
Is CPA the only metric that actually matters?
Advertisers plump for this type of paid inclusion, as they have to pay only when the desired outcome is accomplished. The desired outcome of a conversion is typically purchased from the advertiser, or a form being filled by a visitor so that the visitor’s name, email address, and other pertinent details can be added to the list of potential clients.
Effective CPA advertising is a pivotal part of understanding cost per acquisition rates. When an advertising campaign is effectual, it connotes that the cost per acquisition is at a low rate. There are more visitors that are converting into clients than normal, and it makes the paid inclusion advertising an excellent choice because it involves paying less for paid inclusion than the company has budgeted for.
So what should my CPA be?
One of the most frequently asked questions on CPA is what makes a good CPA. How much amount should we be disbursing to get a new client? The answer, needless to say, is that it varies; it all comes down to what your mean revenue is per customer.
There are several ways to ascertain your average revenue per customer. You can take your total revenue over a period (year/month) and divide it by the number of customers you had during the same period.
The average revenue per customer = Yearly revenue/Yearly customer count
There are other formulae that take into account the purchase frequency, lifetime value, and average order size, but the formula mentioned above is the easiest place to start. Once you learn the worth of an average customer, you can know what your average profit is.
When you know how much you earn from a customer, you can estimate how much you would be willing to spend to get a customer.
Equipped with this number, analyze your ongoing marketing initiatives. It should be moderately evident which channels are fetching financially rewarding customers and which channels are costing you far more than they are worth.
Is SEO essential for an efficacious CPA?
Cost per acquisition as a means of paid inclusion is very effective and economical as it evaluates the number of conversions from visitor to client, even when systematic, functional CPA advertising is subject to search engine optimization practices.
Search engine optimization is important when dealing with cost per acquisition numbers. The better the SEO on a web page, the more efficacious CPA advertising is. Using optimized keywords and phrases that appertain directly to the subject of the web page, that is part of the paid inclusion, can make the cost per acquisition more effective.
The number of organic results from a search engine query can be just as essential to the cost per acquisition as it is too crude ranking in a search engine. It can lead to yielding more conversions without having to pay as much via paid inclusion.
How do I track the CPA?
It is imperative for every CPA affiliate marketer to know which traffic source and keywords are converting. For this, they require affiliate tracking software.
Most CPA affiliate tracking programs are not free; some of them come with a monthly subscription fee.
If you are a novice in CPA marketing then programs like Prosper202 are for you. They are free self-hosted affiliate tracking programs that track CPA convergence and come with features such as:
- Allow you to add multiple traffic sources, sundry affiliate campaigns, landing pages, to name a few.
- Facilitate you to track conversions
- Monitor which traffic source is converting and which keywords are performing well.
- Provide an option to add any particular type of traffic source like pay per click, pay per view or CPM ads.
There is a number of paid affiliate tracking programs like CPV Lab, iMOBItrax, and Voluum, available in the market. Usually, their main feature is copying campaigns and easy split testing. They extend smooth, facile optimization. For instance, if any keyword or campaign is not performing as per your criteria, they will highlight that keyword and campaign.
Some of them even offer to track email campaigns and you will not need any other software to track email campaigns. They may also support mobile campaigns.
One must keep close tabs on the numbers to be an effective marketer. And it does boil down to what your CPA is. How well do you know it? It is certainly the key metric for your business as it dictates your bottom line and thus deciding whether you grow or fold.