You likely devote a lot of time and money to your marketing efforts. But how you are measuring their effectiveness is equally important. If you aren’t, you may be allocating much of your marketing budget toward techniques that cost more than the revenue they bring in. You also may not be investing enough in methods that genuinely work for you.
Measuring your cost per acquisition (CPA) gives you actual data that shows the return you’re earning from your marketing activities. The knowledge you glean can help you better optimize your campaigns so you make the most of your spending.
Let’s look at a few reasons why calculating your CPA is beneficial.
Maintain Control Over Your Advertising Budget
Expanding your client base is no small feat, especially when your organization is new or trying to reach an unfamiliar market. You’ll likely try various techniques, which can take a heavy toll on your marketing budget.
While using multiple advertising methods isn’t necessarily a bad idea, measuring your cost per acquisition for each strategy can help you learn which techniques are working and which ones aren’t. No company wants to spend money on ineffective actions — that money could be put to better use elsewhere.
Once you begin measuring your CPA for each campaign, you’ll be in a position to evaluate your marketing strategies. You’ll have data points you can use to assess your techniques, and you’ll be able to direct your efforts toward methods that work rather than methods that don’t.
Examine the Profitability of Your Marketing Campaigns
Ideally, every marketing strategy you use will result in a profit. The profit equals the amount that exceeds your advertising spend plus other expenses associated with creating your product or services.
If you’re not seeing a profit from your marketing efforts immediately, don’t worry. Some advertising activities may take longer to see a profit, so it’s essential to evaluate the context of your strategy when determining whether it’s profitable.
For instance, if you’ve recently created social media accounts for your business, growing your following will likely take time. Regularly posting and running social media ads will help you expand your audience base, but you may not see the complete results from your efforts for several months.
In this case, tracking your CPA over time would be better. Improvements to your CPA mean you’re making progress, and you’ll likely see increased benefits over time.
Optimize Your Strategies for the Most Benefits
Evaluating your CPA across different marketing strategies can alert you to the most cost-effective methods, so you can put more of your advertising spend toward them. Efforts that continuously bring in customers but don’t cut too much into your profits are the ones that will prove most valuable to your organization.
You should measure your CPA for each different marketing technique you use. You can also evaluate your CPA as a whole, so you can see how reallocating your spending toward cost-effective strategies helps improve the overall profitability of your techniques.
For instance, if you’re running cost-per-click (CPC) ads, working with social media influencers, and placing television commercials, you’ll want to measure the CPA for each activity as well as the CPA as a whole.
If one solution results in a much lower CPA than the others, it’s best to concentrate your marketing efforts there rather than on activities with lower (or non-existent) profitability.
Understand Whether Marketing Is the Right Investment
Sometimes, organizations can’t earn a return on their marketing activities no matter which technique they try. If that’s the case for your organization, your problem may not be your strategies but the products or services you offer.
Rather than concentrating your spending on marketing, you’d want to invest your money toward improving your products so customers want to buy them. No client will purchase a product or service if it doesn’t provide some sort of benefit they stand to gain.
You can resume your marketing efforts once you feel comfortable that your product or service benefits your clients. If you’ve made the right changes, you should begin to see a positive CPA for your advertising strategies.
Measuring Cost per Acquisition Helps You Make Better Business Decisions
Companies that measure CPA and other important metrics for their marketing activities benefit in several ways. They learn which advertising strategies are the most profitable, and then they can adjust their spending to focus on techniques that work rather than those that don’t.
With the data they need to make decisions, organizations can better optimize their marketing campaigns to meet their business objectives.
