For me a Cost Per Acquisition (CPA) is most probably the most important digital stat. The CPA enables you to understand how much it is cost your business to acquire a new; customer; enquiry; order; download etc
You CPA is based on what is the most important conversion for your business.
Why is it important to know your CPA?
The long and the short of understanding your CPA is to understand if you are driving conversions to your business that are affordable and sustainable.
Once you have this figure you can benchmark individual marketing channels, campaigns and technical implementations.
Do you have a particular marketing channel that has a higher CPA to the rest, it would be worthwhile investigating why this might be. Taking into consideration your total business CPA can you afford to keep running this channel? How can you improve the performance of this channel?
How to calculate a CPA
- Marketing cost / conversions
If you have:-
- £500 spend
- 10 conversions
- CPA = £50 or 5%
When calculating your CPA I would present them as a percentage as well as a financial figure.
What else to take into consideration when considering your websites conversion rate
It is imperative you know your profit margin, if your profit margin is 20% but your CPA is 20% it is highly unlikely to be sustainable.
Life Time Value
When your campaigns are more developed it would be worth calculating your CPA based on the Lifetime value (LTV) of a customer. This will enable you to increase your CPA.
Customer Life Stage
When you consider your CPA you should also consider the life stage of your customer as you may be prepared to pay a higher CPA for a new customer than a repeat order.
Give it a go, how are your marketing channels performing, if you don’t know where to start and would like some advice get in touch.