Cost per acquisition is more than just a way to measure your search market advertising. It’s also a means to assess your multi-channel marketing and customer acquisition equity. Customer acquisition equity rivals return on investment (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 to creating and understanding marketing and customer acquisition. Let’s say you’re a business with no prior marketing background wanting to gain new customers, you need to:
- Have an online presence for your brand.
- Optimize your website.
- Outline true costs associated for your marketing
- Establish marketing campaign goals.
- Set a realistic cost you are willing to spend for each new customer lead.
- Align your marketingto your website.
- Focus your marketingdirectly at your intended target audience.
If you ran a three-month Valpak ad, which specifies an expiry date and has a total advertising costs of $2,000, and you’re willing to pay $15 for each new potential customer, your ad would need to produce at least 133 potential leads to break-even. To illustrate why you need to be realistic with your budget, consider your projected revenue return. Let’s say you’re selling bags of crushed rocks for $55, with a goal of selling 133 bags. However, you only have two leads that purchase a total of 10 bags each. With only 20 of 133 sold, your ROI is -84.96%.
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 deal. At the end of the expiry date, you capitalize from 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 in understanding your marketing measure, retention cost, and future revenue transactions as well as realization of the importance of customer acquisition equity for how to best allocate your advertising pay-out mix.