This post is a beginner’s guide to Cost per Acquisition, which is required to acquire a new customer. If you are looking for a way to increase your revenue, this may be it. The first step in understanding CPA is determining if this business model makes sense for your company and what pricing you should charge per acquisition. After that, there are three main points: Setup Your Tracking System, Find Quality Leads, Track Them Well, and Calculate Your Return On Investment (ROI).
What Is Cost Per Acquisition (CPA)
You may have heard the term “cost per acquisition” thrown around, but what does it mean? What is CPA measuring? The truth is that CPA can be used to measure many different aspects of marketing campaigns. For example, you might use cost per acquisition to determine how much money was spent on a campaign for each customer gained. In addition, this metric will help you figure out if your marketing strategy needs improvement or not.
How to Calculate Cost per Acquisition (CPA)
Cost per Acquisition, or CPA, is a metric that indicates how much it costs to acquire a customer. It can be calculated by dividing the price of an acquisition channel by the number of successful conversions from that channel.
For example, spend $1 on Facebook Ads and receive ten orders, your CPA would be $0.10.
Difference between CPA vs. CAC
CPA stands for cost per acquisition. This acronym typically refers to advertising campaigns that pay for each conversion made on your website or app. So, for example, if an ad campaign has a $5 CPA rate, it means that you would have to spend $5 for every customer acquired through the campaign.
CPA calculates your cost per conversion. This means it considers all costs incurred in getting someone to convert on your website (e.g., marketing spend).
CAC stands for cost per action. This acronym typically refers to advertising campaigns that pay based on specific actions taken by customers rather than just conversions made on your website.
CAC calculates your cost of customer acquisition. This means that this only considers marketing expenses related to acquiring customers (e.g., pay-per-click ads).
Benefits of Decreasing Cost per Acquisition (CPA)
If you have a high CPA, it will be more challenging to grow your business because of the high cost of acquiring new customers. However, if you can lower your CPA, you can assume the following benefits and opportunities.
- More Sales With Less Investment
- Less Time Needed To Get Sales
- Re-invest Money Saved
Strategies to Decrease and Optimize Cost per Acquisition (CPA)
Achieving a great CPA is one of the most important goals for any campaign. It’s not just about lowering your cost but also optimizing it. You want to increase the number of conversions per dollar spent and decrease your spending on each conversion. Let’s discuss some strategies for reducing and optimizing Cost Per Acquisition (CPA).
1. Optimize Your Campaigns
On average, only about 10% of your keywords deliver 80% of your conversions. Therefore, it would be best to split these top-performing keywords into a new campaign to optimize your campaigns. This allows you to create highly targeted ads for those top converting keywords and increase the likelihood that someone will click on them. It also allows you to use a lower bid for those keywords and increase your ROI.
2. Optimize Your Landing Pages
The best way to optimize your landing page is by A/B testing different versions of it to see which one converts better. You can test out other headlines, layouts, colors, images, call-to-action buttons, etc., until you find the version that is most appealing to your target audience.
3. Optimize Your Content For Keywords Lower In The Funnel
Keywords are the basis of both SEO and PPC campaigns. The lower in the funnel your keywords target, the more likely you are to convert users into buyers. This makes it vitally important to target long-tail and problem-based keywords within your copy.
4. Use Value-Based Bidding
This is a relatively new feature available on Google Ad words. With value-based bidding, you set your max CPC bid for each keyword, and Google determines how much you should pay for each click based on the value it has.
For example, if someone searching for “car insurance” converts better than someone searching for “cheap car insurance,” then your max CPC bid will be higher when bidding for “car insurance” compared to, say, “cheap car insurance .”You don’t have to worry about setting a max CPC bid for each keyword, as Google will do it for you based on the value of those keywords.
This can be a great way to decrease your CPA because the cost is lower when someone searches for a more valuable search term compared to a less valuable one.
5. Use Remarketing
Remarketing is a great way to decrease your CPA. It allows you to target someone who has already visited your site, making them more likely to convert if they see your ad again. You can use remarketing at the ad group or campaign level, but make sure that you remarket to someone who has already visited your site every time you create an ad group or campaign.
6. Use Google Display Network
Google’s Display Network allows you to show ads on websites related to your business or niche. You can choose which sites you want your ad to be shown on by targeting specific topics and categories, making your ads more effective. This can help increase your conversions by reaching a wider audience and increasing the likelihood that someone will click on your ad.
7. Use Broad Match Modifier Keywords
When using broad match keywords, you target a wide range of possible search terms. However, this means that many people who aren’t searching for what you offer will see your ads. You can improve this by using broad match modifier keywords to change the common words in someone’s search term into a keyword you want to target.
For example, if someone searched for “home insurance” and you use “home insurance” as one of your broad match modifier keywords, then Google will only show your ad if someone searches for “home insurance” instead of just “insurance.” This can significantly improve your conversions by making it more likely that someone who is searching for what you offer will see your ad.
The key to decreasing your cost per acquisition is testing different ad group and keyword combinations, improving ad relevance, and bidding based on the value of keywords. By following these steps, you will see a decrease in your CPA.Google Adwords can be great for your business if used properly. However, if you are not getting the results you want from your campaigns, you might need a professional.