There are many components to successful marketing and advertising campaigns: adequate market research and targeted audience understanding, a clearly defined strategy, high-quality content and creatives, and an effective tracking and analysis system. Selecting the right, measurable goals — in digital marketing, often in the form of metrics — is a critical element of winning advertising programs. However, experts often disagree on which metrics are the most important for businesses like yours to focus on improving.
The large amount of data available from online marketing makes it all too easy to focus on the wrong values — and basing your strategies on those metrics can be disastrous for your campaign. In particular, there are many metrics where giant increases look good, but they really mean little for your business. These metrics, known as vanity metrics, include impressions and social media interactions, such as Facebook likes; they can provide insights for optimizing your content but aren’t relevant for your business goals or the financial return on your marketing efforts.
On the other side of the divide are the performance or ROI-based metrics. Rather than focusing on social cues, these analytics hone in on the actionable, financial measures that are more meaningful to your brand’s success. There are several important metrics that prove the ROI of your marketing program and campaigns, such as cost per lead and average order value — but one of the most discussed is cost per acquisition, or CPA.
Recently, some marketers have been giving this performance metric a negative connotation, turning CPA into something of a dirty word in the marketing field. The reason is that a driving focus on the expense of turning a visitor into a customer can seem rather calculated — and even scheming. A cost per acquisition approach seems to take the audience focus, which is so important in online marketing, out of the equation.
Yet there is another way to view the cost per acquisition metric; one that shows how it balances your business goals with a focus on your customers. Instead of looking at CPA as a cold-hearted number, it can represent something more — the investment that you make in each customer. With this positive look, your cost per acquisition becomes one part of the total time and resources that you invest into leads with a goal of providing value and converting them into customers.
In terms of marketing and overall business performance, the CPA metric offers concrete insights that you won’t be able to draw from other sources. Your cost per acquisition can be easily compared to how much a customer is worth to your organization — your customer lifetime value, or CLV. With these two metrics, you can evaluate if your acquisition cost allows for a profit, whether your products or services are priced appropriately and, with some research, where you might be able to make changes that will lower your CPA.
With a focus on the performance metric of cost per acquisition, you will only be paying for the acquisitions you really make. As a result, your business and marketing efforts will be focused on the actions that convert visitors to loyal, lifetime customers. This is the model that we use at SourceKnowledge, using audience behavior data to create laser-focused targeting that removes guessing from the advertising process. In our acquisition-based system, we work with you to ensure that each step taken is in the interest of gaining and retaining more customers.
Performance, The Winning Curve