What is Cost Per Acquisition (CPA) in Ecommerce?
In Ecommerce CPA stands for “Cost Per Acquisition”. It is a marketing metric that calculates the total cost of acquiring a single paying customer at the campaign or channel level. CPA is a crucial metric for determining marketing success, and it differs from Cost of Acquiring Customer (CAC) in that it is more granular.
Why is CPA such a crucial metric?
Many marketing measures, such as conversion rate and visitors, are measures of success. On the other hand, Cost Per Acquisition (CPA) is a financial indicator that is used to directly measure the revenue impact of marketing efforts.
Online firms can calculate an acceptable Ecommerce CPA for acquisition using AOV (average order value) and CLV (customer lifetime value). Conversion rates are one of the most important indicators of marketing success, but CPA gives you a financial perspective on how well your campaign is doing.
The following paid marketing mediums use cost per acquisition:
Social Media Marketing
It can also be utilised for eCommerce SEO, email marketing, and other platforms that don’t require direct advertising but still require overhead (labour, indirect expenses such as content production, etc.).
What is a good CPA?
In the world of eCommerce, there is no single standard for what constitutes a “good” CPA. Each internet firm has its own profit margins, pricing, and running costs. Understanding these aspects is the most significant factor in setting a target CPA since it allows a company to assess how much it can afford to pay for customer acquisition. Others who have an impact include:
Or are you in a stage of expansion when revenues can be sacrificed in exchange for brand recognition? To set standards that everyone in the organisation is happy with, it’s critical to clearly define eCommerce goals and risks.
Budget: If your company’s marketing budget is restricted, prudent ad spending is the way to go. Focus on low-hanging fruit — high-converting phrases and brand queries — with a decreased ad budget. As the budget grows, campaigns can be broadened to include phrases that convert at a lower rate but have a higher CPA.
Advertising Medium: The elements stated above in Business Stage have a big impact on where you spend your ad money. Affiliate, PPC, and Content Marketing all have different objectives and outcomes. Content, for example, may convert at a lower rate in the short term but is an important promoter of brand awareness.
The term “acquisition” is defined as follows: While CPA is most commonly used to describe the cost of recruiting paid customers, it is also used to describe secondary initiatives such as newsletter sign-ups or direct mail lists. The use of CPA as the overall metric that connects secondary conversions to the primary conversion: making a sale, is considered best practice.
Cost per acquisition can be tracked in a variety of ways for online businesses, including:
- To produce link codes for social or affiliate marketing, use UTM parameters.
- Data from AdWords PPC campaigns can be exported.
- Internal campaigns can benefit from the use of promotional codes and the creation of personalised links.
- Set up a customer relationship management system.
- Include a question on lead forms asking customers how they learned about a campaign, which can assist fill in attribution gaps.
Learn More: CONVERSION RATE OPTIMIZATION