Cost Per Acquisition - Explained
What is Cost Per Acquisition?
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Table of ContentsWhat is Cost per Acquisition?How does Cost Per Acquisition Work? Marketing ChannelsFactors Affecting Cost Per AcquisitionMethods of Tracking Cost Per AcquisitionAcademic Research on Cost per Acquisition (CPA)
What is Cost per Acquisition?
Cost Per Acquisition concerns the cost of acquiring a new business client or user. It is a marketing measure for the effectiveness of a customer acquisition effort (marketing campaign).
Back to: MARKETING, SALES, ADVERTISING, & PR
How does Cost Per Acquisition Work?
At its basic level, cost per acquisition refers to an advertising marketing model that serves as a metric in measuring the cost of attaining a consumer who can take action that leads to a conversion (sale or purchase). This transition can be one of the many things that will contribute to a sale, a click, as well as a form of submission. The CPA can determine coupled average order value as well as customer lifetime value, the success of most online businesses. Conversion rates also mainly indicate marketing success.This metric is detailed in a way that a company can use it to measure the steps it takes to bring a new customer and make them loyal.
CPA can be used in the following marketing channels:
- Pay Per Click- This is an advertising channel that marketers use to drive traffic to their website, with the intention to ultimately convert them into clients. Pay Per Click advertising with various social media platforms such as Facebook as well as LinkedIn enables a brand, in this case, a company, to reach their prospective target audience based on particular interests as well as more interactive ways of purchasing visits to a business site.
- Affiliate Marketing New customer acquisition is an essential marketing strategy for many brand ambassadors. The affiliate channel has presented this in proof by leveraging its ability to drive new clients at an affordable cost. With more retailers taking over the online marketing initiative, affiliate networks are now in a position to highlight the original volumes of clients as they can now deliver through their affiliate partners. This increased reach provided by affiliates paves up a new way for merchants to access a broader customer base.
- Display- Digital display advertising enables a brand owner to track and analyze progress in ways that may not apply to traditional advertising media. These displays can also be priced in various unique ways. As such, advertisers are in a position to track when their ads are being clicked and the actions that have been completed when the ads have been clicked.
- Social Media Marketing- Social media marketing feeds into the discovery of a new idea posted on the channel such as stories or development in search activity. Social media can also assist brands owners to build links that may end up supporting Search Engine Optimization efforts. Many users have performed searches on social media sites to identify media content. Social connections can also have an impact on the relevance of various search results.
- Content Marketing- Over the past few decades, companies have invested mainly in marketing analytics engines directly from predictive analytics to performance management as well as visualization tools. Such tools have enabled users to surface from substantial quantities of data. Content marketing is focused on creating, publishing, as well as leveraging content for a targeted audience on various online marketing platforms. The primary objective of content marketing is to: Attract the attention of clients while generating sales; Increase brand awareness as well as credibility; and Expand a companys client base
It's essential for businesses to invest in effective CPA advertising since it has a direct impact on the number of new customers acquired. When an advertising campaign is efficient, it implies that the cost per acquisition is at a low rate. That also means that more visitors are converting into consumers than usual. This means that the paid inclusion advertising is an excellent choice because it entails paying less for paid acquisition. Since the cost per acquisition is focused on measuring the number of conversions from a visitor to a customer, even if it's efficient, this advertising model is still subject to search engine optimization.
Factors Affecting Cost Per Acquisition
With that stated, most companies have concluded that there is no standard platform for measuring a good CPA. However, some factors can impact the efficacy of a CPA model and its impact on brand marketing.
- Business stage- It's important to understand the step of business an individual is at. For instance, an emerging business is still on the verge of growing. Therefore, it requires a lot of support from the owner and staff. This implies that revenue can't be spent in developing other marketing models. But, a growing business can sacrifice profits to invest in additional marketing methods and models.
- Budget Besides the direct advertising spends, a company pays for outbound emails, salespeople as well as any other additional advertising requirement that may go into obtaining a new client. All these factors that add to the process determine the budget of implementing the CPA model of marketing.
- Advertising Medium-There are different ad channels for CPA, and they come with different costs. They will add up to a company's total cost per acquisition. Your choice of advertising medium highly relies on the platform of advertising including what one aspires to achieve in the long run.
- How "Acquisition" is defined- All too often, companies use customer per acquisition as their marketing and advertising metrics intended to help them garner more clients. In other cases, this may change as the same method of marketing and advertising may be used in secondary advertising.
Every business has for decades, struggled with deciding which channels to focus marketing spend on as well as how much return the initial capital spent returns. This is not a simple question because a lot is at stake. Marketing channels have vastly evolved since the television and radio days. For CPA users, tracking the efficiency and contribution to the marketing model is the primary objective of making the right choice.
Methods of Tracking Cost Per Acquisition
Regardless of advanced technology as well as ad platforms, the question of how to spend money is still the main agenda even for advanced marketing operations. Thats why its vital to track the CPA model through the following methods:
- Utilize UTM parameters to generate link codes for social or affiliate marketing- Marketers strive to become data-driven individuals. They base their conclusions on various statistics while using traffic analysis software to analyze their website. This must be Google Analytics, which is a free version that provides its users with sufficient information so that they get a clear picture of where the traffic comes from and where it goes to.
- Exporting PPC campaign data from AdWords- Exporting pay per click campaign information and data from AdWords may seem complicated in the beginning. But this is one of the best ways to track the performance of the CPA model and its efficacy in attracting more clients to the site.
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