What’s A Good Cost Per Acquisition (CPA)? Ask The PPC


it can be really hard to come to terms with it Paid Media KPIs and their respective budgets.

The most important factor is to understand what the customer value is and how many leads you need to get the customer.

This month’s Ask the PPC question asks us to find out how we come up with cost per acquisition (CPA) and how to use them to build campaign budget/strategy. Galle asks:

“In PPC, is there a relationship between the actual value of the product/service and the CPA?

If so, how can this insight be used when planning a campaign budget.

encourage!”

In short, what is a good CPA? let’s take a look.

Relationship Between Customer Value + CPA

All paid media campaigns act as an auction.

Depending on the competitiveness of an idea (search term or target audience), you may be forced to pay a premium or receive a discount.

Different products and services have different auction prices.

For example, some of the most expensive costs per click (CPC) in the legal industry are related to the cost of services.

The average personal injury case costs the firm about $5,000 to $6,000, so paying $200 to $400 per click can still yield a positive ROI.

If the conversion rate is good (35%-40%), it is reasonable to expect a $600 to $700 CPA on a $20,000 expense. Given this scenario, the ROAS (profit on advertising spend) would be 8.34x.

This will be an all-star account.

Most conversion rates will be closer to 10%-25% (ie, sale/deal done).

Setting realistic expectations for CPA and ROAS directly affects the success of campaigns.

if there isn’t Budget to get enough clicks a dayWill not be able to return or opt out of campaign results learning period,

Make sure you are incorporating customer lifetime value into your CPA and ROA goals.

If you sell a $15 product that invites a monthly subscription, make sure you’re considering the average lifetime of a customer.

An annual client will cost $180 and allows for a higher CPA.

What is a good CPA?

A good CPA (cost per acquisition) will bring customers in at a profitable price while remaining competitive enough to keep the brand in high-priced auctions.

The CPA must be high enough that ad networks can still bid high enough to maintain a top of page impression share of around 65%.

Even then it should be low enough to maintain the gross margin.

When you’re setting up your CPA, make sure you’re considering the following:

  • Do you trust your conversions?
  • Are all conversions the same?

Based on these answers, you would use CPA/ROAS-oriented Bidding or Pasting with a Manual,

You will receive a potential CPA when you opt for Smart Bidding. This number is based on your historical conversions and past CPA.

While this can be a good starting point, often, it will come down to the low/high.

Make sure you set a CPA that you are happy with which will give the campaign a chance to grow.

final conclusion

A good CPA allows the campaign to perform while enabling real-world ROI.

Customer value is important in determining a good CPA and directly affects the campaign budget.

Have questions about PPC? submit via this form Or tweet me @navahf with the #AskPPC hashtag. See you next month!

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Featured Image: Paulo Bobita / Search Engine Journal





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