In e-commerce, tracking user actions is key to growing a campaign. Due to pixel tracking, marketers can see when users have clicked on ads and promotions and if the clicks have resulted in sales. In pay-per-click (PPC) advertising, cost-per-click (CPC) is a revenue model that involves paying only when a user clicks your display ad. With CPC, you choose the maximum amount you’re willing to spend per ad, and you only have to pay when that ad gets clicked.
CPC is an effective strategy and an important metric. However, focusing solely on clicks doesn’t account for actions like sales and conversions, meaning it often provides an incomplete view of how a campaign is performing. Cost per acquisition (CPA) goes beyond clicks, so you can see how effective your ad really is at achieving your desired outcomes.
While CPC remains useful and necessary, CPA provides deeper insights into just how closely your campaign’s performance is boosting your business success. All major social media sites offer their own version of CPA advertising, so it’s easy to embrace, no matter your preferred platform.
As a creative marketing agency, Anchor Digital has helped many purpose-driven brands grow through techniques like PPC and search engine optimisation. Here’s our guide to the basics of cost per acquisition, including the average cost per acquisition, the cost per acquisition formula and how to optimise your approach so your acquisitions soar.
What Is the Cost Per Acquisition?
CPA is an online advertising pricing model in which brands pay for each successful “acquisition” their ad campaign generates. As a marketer, you don’t pay for clicks and impressions but for the particular actions users take. Acquisitions can include sales, form submissions, newsletter sign-ups, e-books or white paper downloads, social media shares, registering for webinars or anything else your ad has compelled users to do.
The beauty of this approach is that you define your acquisition before you even start advertising, and you only have to pay when the desired outcome occurs.
Cost-per-acquisition auctions on advertising platforms like Google don’t reward the highest bidder but the brand with the highest Ad Rank. Google calculates Ad Rank by combining your maximum CPA bid with your ad’s Quality Score.
How to Calculate Cost Per Acquisition
Your cost per acquisition is a good way to determine the average cost of acquiring new customers.
To calculate your average cost per acquisition, divide your total ad spend by the number of new customers. First, add up all the costs involved in running your ad, such as PPC platform or marketing agency fees, and divide by the total number of acquisitions generated during the campaign. This cost-per-acquisition formula gives you an insight into whether you’re seeing a significant return on investment or just losing money on your CPA campaign.
What counts as a good CPA varies across industries and professions. CPAs need to bring you new customers while still making a profit and be competitive enough to keep you in high-value auctions. You should be able to bid enough to maintain around 65% of the page impression share.
If your campaign hasn’t been the success you hoped for, there are several ways to enhance your approach to cost per acquisition.
How to Optimise Cost per Acquisition
Here are some of the most effective techniques for keeping your CPA campaign dynamic, adaptable and profitable.
Create compelling ad copy
Your best starting point is to craft the most effective ad copy you can. It plays a huge part in your Quality Score and, as a result, your overall rankings. Remember that Google now prioritises helpful, reliable, people-first content and penalises the low-grade, spammy variety. Focus on providing users with the benefits of your product and answering the questions they’re searching for, but don’t neglect the power of appealing to emotion.
Enhance your landing page
Leading someone to your homepage is one thing, but your website needs to be responsive and well-optimised to attract the conversions you want. A well-designed landing page improves your conversion rate and, by extension, your CPA performance. A good landing page should have content that matches the user query and intent, quality images and a strong call-to-action (CTA).
Focus on customer retention
It’s well known that retaining an existing customer is more affordable than acquiring a new one. By investing in your existing customers, you reduce spending and lower your CPA. Repeat customers generate a lot more revenue than one-time shoppers.
There are many ways to retarget previous customers, from running targeted ads to sending emails to unresponsive subscribers.
Offer attention-grabbing deals
The promise of a free gift or a product at an amazing price is a surefire way to stand out among the digital noise. Sometimes all you need to do to get noticed is to offer a deal that’s too good to ignore. At the very least, this approach sparks interest, and interest is the first step towards sales and other conversions.
A/B test
A/B testing is a way that you can gain a deeper insight into the tastes and preferences of your target demographics and start to turn setbacks into successes. A/B testing is a powerful, widely used marketing strategy that compares different variations of an ad to see which one more effectively drives conversions. By changing just one element at a time, a headline or CTA, you really get an in-depth look at what’s working and what isn’t. A/B testing lets you gather data to fine-tune your campaign and avoid wasting time and money, improving your CPA as a result.
Regularly conduct new research
Market research helps you gain insights into the needs and preferences of your target demographics, and it’s an ongoing process. It allows you to better target your messaging so your ads are more relevant to the people you’re trying to reach. Not to mention that your competitors can offer fresh insights into your target group and inspiration for your own campaign.
Optimised Acquisition and Retention Strategies with Anchor
While the right strategies will attract new customers to your business, it’s equally important that they return. That’s why Anchor Digital helps with both customer acquisition and retention planning. We know there’s no substitute for a helpful customer service experience that shows the user you care about and are ready to meet their needs. Our multi-faceted approach works towards providing your brand with exactly that kind of experience.
With our strategy services, Anchor helps you achieve your goals while maintaining your own unique brand voice. If you need help defining your brand identity, we can provide that, too. Every time we launch a campaign, we anchor it in a solid strategy suited to your brand and your needs. We can help with brand positioning, brand strategy, marketing strategy, and more.
For an acquisition and retention strategy that gets you more out of the money you spend, contact the Anchor team.
