What’s A Good Cost Per Acquisition (CPA)? Ask The PPC
It might be difficult to develop paid media KPIs and their corresponding budgets.
The most critical component is knowing how much a customer is worth and how many leads you need to generate.
This month’s Ask The PPC topic encourages us to investigate how we calculate costs per acquisition (CPAs) and how we utilize them to develop a campaign budget/strategy. Galle inquires:
“Is there a relationship between the real worth of the product/service and the CPA in PPC?”
If yes, how might this knowledge be used to campaign budget planning?
In a nutshell, what is a good CPA? Let us investigate.
The Relationship Between Customer Value and CPA
All paid media campaigns are based on an auction.
You may be obliged to pay a premium or receive discounts based on the competitiveness of an idea (search phrase or target audience).
The auction prices for various items and services vary.
For example, the legal profession has some of the highest costs per click (CPCs), which correlate to service expenses.
Given that the average personal injury case is worth $5,000 to $6,000 to the business, paying $200 to $400 each click can still result in a good ROI.
If the conversion rate is good (35 percent -40 percent), a $600 to $700 CPA on a $20,000 spend is appropriate. The ROAS (return on ad spend) in this case would be 8.34x.
This is an all-star account.
Most conversion rates will be between 10% and 25% (i.e., the sale/deal occurred).
Setting reasonable expectations for CPAs and ROSS has a direct impact on campaign success.
If there is insufficient funding to generate enough clicks in a day, the campaign will be unable to provide results or exit the learning period.
Make sure your CPA and ROA targets account for client lifetime value.
If you offer a $15 product that requires a monthly subscription, make sure you evaluate the typical customer lifetime.
A yearly client is worth $180, allowing for a higher CPA.
What Is A Good CPA?
A successful CPA will bring in clients at a profit while keeping competitive enough to maintain the brand in high-value auctions.
CPAs should be high enough that ad networks can still bid enough to retain a top-of-page impression share of roughly 65 percent.
However, it should be low enough to sustain gross profits.
When determining your CPA, keep the following factors in mind:
- Do you have faith in your conversions?
- Are all conversions equal?
Based on these responses, you’ll either utilize CPA/ROAS bidding or remain with a manual.
When you choose smart bidding, you will receive a prospective CPA. This figure is dependent on your past conversions and CPA.
While it might be an excellent starting point, it is frequently low/high.
Set a CPA that you’ll be satisfied with and that will allow the campaign to develop.