What is Cost Per Acquisition?
One of the main concerns an ecommerce business has today is figuring out whether its marketing strategies are working in its favor or not. You know the drill - when time and money are invested into various channels it’s essential to know if you’re reaping all the desired results and if all the hard work is paying off.
In the world of paid acquisitions, everything revolves around ‘clicks’. But if you really give it a thought, clicks can only tell you if people have viewed your content. It does not disclose if they have stayed on and acted upon it. How can you be sure if your content is engaging enough to sustain your customer’s interest and persuade them to buy your product or service?
The best way to figure out if your content is capable of generating conversions is to calculate the Cost per Acquisition.
Cost Per Acquisition or CPA in short is a key metric that measures the costs involved in converting a lead to a customer. So for your online store, CPA is the total cost involved in getting a new customer to associate with your ecommerce business.
How to calculate Cost Per Acquisition for your online store?
The cost per acquisition is calculated by taking the total cost of a marketing campaign and dividing it by the number of conversions (or new customers acquired).
The costs should not only include the cost of production of the marketing campaigns but should also take into account the time and energy spent in developing it as well as the actual cost incurred in getting it up and running.
Here is the simple formula for CPA:
CPA = Total Cost of a Campaign ÷ number of conversions.
Let’s look at an example to better understand this metric. Assuming you run a campaign on Instagram for your online store that sells Bags & Wallets and the total budget for your campaign is $700. At the end of the campaign, you find that it has brought you 40 sales.
So what’s the CPA for this campaign? $ 700 cost of the campaign ÷ 40 conversions = $ 17.5 CPA.
Why is CPA an important metric for ecommerce?
CPA is one of the most core metrics that marketers need to be keenly tracking simply because it lets you know how much it would cost the business to acquire new customers. Moreover, marketers need to determine if their efforts are fruitful or if they need to tweak their marketing strategies.
CPA also gives a clear picture of the actual Return on Investment which is very useful in budget allocations going forward and in determining how successful your previous investments and strategies were.
It provides insight that will help streamline your current marketing strategies making them more effective, relevant, and impactful, leading to higher conversions and increased sales.
How to reduce your online store’s CPA?
Ecommerce marketers often look at boosting sales and increasing traffic rather than on cost optimization. But it’s best to think of lowering your CPA right from the start. This way you don’t need to worry about increasing conversions later on. Reducing CPA will surely impact your ROI and increase it within a short span of time. Here are a few ways in which you can reduce CPA:
- Optimize your website or campaign landing page: Your website or the specific landing page that you’re using for your Ads is the first thing that your customers see when they click on your ad.
- Evoke your audience’s curiosity: A little curiosity goes a long way. Don’t reveal much; highlight just enough of your offer in a convincing manner.
- Appeal to your customers’ emotions: Get creative and add the emotional quotient to your copy. It will work wonders.
- Optimize the check-out process. Customers abandon their carts at the last moment due to technical issues faced at the time of billing or some hidden charges that they were not sure of. Be straightforward with billing and create a pleasant shopping experience for customers on your website.
While you set out to lower your CPA, another tactic that will be a boon for your online store is improving your customer support. Engage with your customer seamlessly using DelightChat.