Cost per acquisition is a catch-all metric that marketers use to measure the effectiveness of their advertising and marketing efforts. It is handy in its simplicity, telling marketers how much they spend on average to bring in each new customer.
But if you stop and break it down further, there are a lot of different things that go into your cost per acquisition. And that is important, because when we aim to reduce that cost, we have to know all the different levers we can pull.
So what are all those factors that impact cost per acquisition?
- Look and feel of your ads. Everything from the design to the headline, copy, and call to action will determine how people engage and what percentage of them click.
- Advertising spend. Obviously the money that you spend on advertising is a key factor in the equation. On a more micro level, individual bid management for online ads will impact the overall cost.
- Advertising channels. Different channels (Facebook vs. Outdoor vs. TV vs. Paid Search) will have different costs and metrics that will all add up to a blended cost per acquisition.
- Conversion rate. Everything from your landing pages to your sales pipeline will go into setting your conversion rate – the rate at which you turn visitors into customers. There are so many levers to pull here that there is an entire area of online marketing dedicated to it – CRO.
- Variable marketing costs. In addition to direct advertising spend, you pay for your outbound emails, your salespeople, and many other things that go into getting a new customer. All of those are factors that add into the total cost per acquisition.
- Brand visibility. How well known your brand is will make people more or less “sellable” and will impact the overall conversion rate.
- Word of mouth. If there are people out there doing your marketing for you, that will lower your cost per acquisition.
- Pricing and Promotions. Different prices and offers will change the buying habits of your prospective customers, and may make your offering more appealing.
This is not an exhaustive list by any means. But it is a starting point, meant to illustrate how one simple metric is actually not so simple when you take a deeper look. As marketers, it is on us to understand all of the different factors that go into a successful outcome so that we know all of the opportunities we have to make a positive impact.