really hard to come up with Paid Media KPIs and its associated budget.
The most important factor is understanding the value of customers and how many leads are needed to generate customers.
This month’s Ask The PPC issue asks us to explore how cost-per-acquisition (CPA) is calculated and how to use them to develop campaign budgets/strategies. Galle asked:
“In PPC, is there a correlation between the actual value of the product/service and the CPA?
If so, how can this insight be used when planning event budgets.
cheers! “
In short, what is a good CPA? let’s see.
Correlation between Customer Value + CPA
All paid media campaigns are conducted through auctions.
Depending on how competitive the idea (search term or target audience) is, you may be forced to pay a premium or get a discount.
Different products and services have different auction prices.
For example, the legal industry has some of the most expensive cost-per-clicks (CPCs), which are related to service costs.
The average personal injury case is worth about $5,000 to $6,000 to a company, so paying $200 to $400 per click still achieves a positive ROI.
If the conversion rate is good (35%-40%), it is reasonable to expect a CPA of $600 to $700 on a $20,000 spend. In this case, ROAS (return on ad spend) would be 8.34x.
This will be an all-star account.
Most conversion rates will be closer to 10%-25% (i.e. a sale/transaction occurs).
Setting realistic expectations for CPA and ROAS directly impacts the success of the campaign.
if there is not Budget to get enough clicks in a daythe campaign will fail to deliver results or exit study period.
Make sure you incorporate customer lifetime value into your CPA and ROA goals.
If you sell a $15 product and invite monthly subscriptions, make sure you’re considering the average lifespan of your customers.
An annual customer is worth $180 and allows for a higher CPA.
What is a good CPA?
A good CPA (cost per acquisition) will attract customers at a profitable price while remaining competitive enough to keep the brand in high-value auctions.
The CPA should be high enough that the ad network can still bid enough to maintain a top-of-page impression share of about 65%.
However, it should also be low enough to maintain gross margins.
When setting up your CPA, be sure to consider the following:
- Do you believe in your transformation?
- Are all transformations equal?
Based on these answers, you will use CPA/ROAS oriented Bid or stick with the manual.
When you choose Smart Bidding, you’ll get a potential CPA. This number is based on your historical conversions and previous CPA.
While it can be a good starting point, usually it comes out low/high.
Make sure you set a CPA that you will be happy with, which will give the campaign room to grow.
last point
A good CPA allows campaigns to perform while delivering real ROI.
Customer value is critical to determining a good CPA and directly impacts campaign budgets.
Questions about PPC?by submitting this form Or tweet @navahf with the hashtag #AskPPC. See you next month!
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Featured image: Paulo Bobita/Search Engine Magazine
