Dallas Business Consultant Elijah ClarkDallas Business Consultant Elijah Clark

CPA is more than just a way to measure your search market advertising. It’s a means to assess your multichannel marketing to identify channel customer acquisition equity for marketing spend allocation. Customer acquisition equity rifles ROI and by understanding ROI, your marketing communication achieves optimization.

Cost Per Acquisition = Total Advertising Cost/Number Of Total Leads

ROI = (Revenue – (Total Adverting Cost))/Total Advertising Cost

Tracking campaign channels is key. Let’s say you’re a business with no prior marketing background wanting to gain new customers, you need to:

  • Have Web presence for your brand
  • Optimize your website
  • Outline true costs associated for your marketing campaigns
    • Production costs, labor costs, cost of delivery, competitor research, future costs
  • Establish campaign goal
  • Set a realistic cost you are will to spend for each new customer lead
  • Purpose multichannel marketing
    • Link/motivate your marketing to your website
    • Focus your marketing directly at your intended target audience

To example:

If you ran a three-month Valpak ad, which specifies an expiry date, that has total advertising costs of $2000 and you’re willing to pay $15 for each new potential customer, your ad would need to produce at least 133 potential leads. To illustrate why you need to be realistic, consider your projected revenue return. Let’s say you’re selling 10 pound bags of crushed rocks for $55 and out of your 133 potential leads you only have two leads that use your coupon to purchase a total of 10 bags each, your ROI is -45%.

Now let’s examine the same example, but instead you advertise in AdWords using an optimized landing page with a downloadable coupon as well as a mobile coupon that specifies an expiry date. Your total advertising costs are $2000 over a three-month period, and you had 500 potential new customers view your coupon. At the end of the expiry date, you capitalize off of 200 customers who purchased a total of 2000 bags of crush rock at $55/bag.

Your CPA = $4, and your ROI = 5400%

What’s even better, is that you use your Web Analytics to:

  • Drive down future CPA
  • Increase ROI
  • Optimize your marketing

Now that’s power for how to understand your marketing measure, retention cost, and future revenue transactions as well as begin to realize the importance of customer acquisition equity for how to best allocate your advertising pay out mix.

Manco, Darryl

Darryl brings forward more than 2 decades of business experience that include setting/administering budgets, ensuring material resources are profited from, and creative ad planning. Darryl’s areas of expertise cover branding, search marketing, analytics, seo, and competitive market analysis.

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Cite this article:
Manco, Darryl (February 25, 2013). Cost Per Acquisition Cost [Web log post]. Retrieved from http://elijahclark.com/cost-per-acquisition-cost/
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