Any business owner knows that acquiring leads is the main way to achieve business growth. After all, without customers to serve, your business wouldn’t be a business.
Fortunately, there are a methods that aid in capturing qualified leads and turning them into real customers. And you don’t have to spend an arm and a leg to do so either!
The method we are going to discuss is CPA marketing.
Knowing the basics of CPA marketing will not only give you a cost effective way to generate more leads, but also help you understand how well your business is doing.
In this blog, we will teach you what CPA means and how to use it to inform your decision making when it comes to your marketing.
Let’s get started!
What is CPA Marketing?
CPA stands for Cost per Acquisition. This means how much it costs to get someone to complete a conversion event (lead, purchase, etc.)
CPA Marketing is utilizing your CPA as the main KPI (Key Performance Indicator) and optimizing your marketing around lowering your Cost per Acquisition.
Why Is CPA Marketing Important?
CPA marketing is important because the lower your CPA, the less you have to spend on your business marketing and the more money you can save your business.
We know every business owner wants a good ROAS (Return on Ad Spend) but to achieve that you have to invest in good marketing techniques first.
Having a Cost Per Acquisition lower than your product cost should be the goal of your business’s marketing strategy. This will ensure that you are seeing the most return on your investments and ultimately, setting your business up for success.
Many marketing platforms have campaigns designed to achieve a certain cost per acquisition. Platforms like Google, allow businesses to reach a wide range of people based on their ad rank instead of their bid.
If you have enough data and information in your ads, you can use one of those automated campaigns very easily.
Even without data, there are ways we can show you how to achieve a great CPA in a few simple steps.
For example, we helped one of our clients lower their service-based business’s CPA by 50% just by changing a simple bidding setting on Google Ads. As we mentioned before, platforms such as these make optimizing your business’s CPA very simple.
That’s because they make it easy to generate more results just by changing a few things around.
On the other hand, you can also use techniques outside of these platforms. Here are a few simple ways you can organically optimize your ads to help boost your ad ranks and lower your CPA.
Simple Ways To Optimize Your CPA Marketing Ads
By utilizing a marketing funnel
We used a powerful marketing funnel that helped nurture leads through the purchasing cycle for one of our ecommerce clients. Using the funnel helped us acquire more qualified leads and encourage them to convert into paying customers.
The results? We were able to lower this client’s CPA by more than 70%!
And this is a major deal for any business that has felt the strain of the costs it takes to acquire customers for their business.
Create engaging ad content
When your ads spark your consumer’s interest, they are more likely to click on it. To do this, you can create ads that make your audience curious without giving too much about your offer away.
Maybe an engaging video that leaves them with a cliff-hanger and entices them to click on it for more information.
However, you choose to spark interest with your content, make sure you clearly communicate the benefits so your audience is eager to click and learn more.
Pay attention to your keyword usage
Keyword relevancy and a solid keyword strategy are important parts of determining an ad’s rank.
When you include relevant industry keywords in your ads, then search engine crawlers will notice them and rank them with a higher quality score. The higher your quality score, the higher up your ads will rank on search engines.
This is due to the fact that search engines, such as Google, want quality content on their search engine results pages. Therefore, they tend to favor ads that have higher quality scores. These ads are typically rewarded with higher rankings and lower CPA costs.
We say all this to say, the more relevant your ads are to your industry keywords, the better it is for your CPA.
Don’t just sell the product or service
When we say don’t just sell your product or service, we mean that can’t be all there is to it.
To make your ads attractive enough to get clicks, you have to do more than just try to “sell” your product or service. In general, no one likes to be sold to. Thus, it’s important to make sure your ads not only logically appeal to your audience, but also appeal to them emotionally.
When your ads have the ability to evoke emotional appeal, they have the ability to connect more with your audience. And in turn, receive more clicks. This is because emotions stimulate the need for action more than logic does.
So, when you factor that in, your ads will perform better, helping to lower your CPA in return.
Construct a landing page for your ads
So you’ve gotten leads to click on your ads, but a part of acquiring new customers is actually getting them to convert.
A landing page designed specifically for that ad offer will help create these conversions. Your landing page should display engaging text and information, as well as links that don’t interfere with your visitors’ ability to convert.
For instance, design your landing page in a way that only allows visitors to leave if they convert. This is just one example of what you can do, but the most important part is developing a landing page that aids your ads to convert your traffic.
Key Metrics to Consider Before Relying on CPA Advertising
CPA marketing starting to sound pretty good to you? That’s great!
However, before you decide to dive into CPA marketing head first, there are some metrics you have to consider and understand first.
Understanding these key metrics will allow you to gain a deeper understanding of CPA marketing and how it will work for your business strategy.
And because we wouldn’t want you to rely on CPA marketing without knowing all the details first, we listed the main metrics below that you should consider before you get started.
Some platforms have automated CPA settings that you can utilize with your advertisements. However, automated strategies only work if you have specific tracking codes on your site for each platform you are trying to use, each conversion action, and enough information in your account.
If you don’t have an ample amount of information, then you can run a non-automated test using advertising best practices.
We mentioned Google Ads earlier because it is the most commonly used platform for CPA marketing–mainly because it’s already a huge search engine. But that isn’t the only platform you can use. Facebook is also a powerful CPA platform you can use to run your automated ads, but we’ll get into that in a moment.
Google has a specific automated bidding strategy that is called “Target CPA.” It uses historical data from your account and other data points to optimize your bid. It sets the bid low enough to reach your target CPA.
Let’s say you are a business that sells multivitamins. You are looking to target your average CPA to be $5. You want to use the keyphrase “best multivitamin” but this causes an issue.
The keyphrase “best multivitamin” has an average CPC (cost per click) of $5.40. You may be saying to yourself “40 cents isn’t that much,” but you have to keep in mind that even if 100% of the click on your ad were to convert, you are still $.40 over your target CPA.
This means Google won’t show your ads. And this is really bad if you spent all that money trying to increase your visibility by populating on Google.
Google’s Target CPA bidding strategy works most efficiently when there is already data in your account. That being said, we recommend that you have an absolute minimum allowance of 15 conversions or purchases in a 30 day period before initiating the Google Target CPA.
Facebook on the other hand works quite differently.
Facebook ads use a “Cost Cap” capability. This means you are able to set a maximum amount you are willing to spend on any conversion action and it will spend that amount.
Similar to Google’s Target CPA strategy, it pulls data from your Facebook account and other data points to optimize the delivery of your ads.
When it comes to reaching your bidding maximum on your ads, Google Ads allow a little bit of wiggle room. Facebook Ads on the other hand do not. The maximum you set is as far as you can go and there is no exceeding that.
But for Facebook we recommend having a little bit more information in your account before running ads. For Facebook we recommend having 50 conversions in 7 days to be able to optimize the CPA effectively.
It sounds like a tall order but it’s actually not when you remember that conversions don’t always have to purchase.
The type of conversion you set solely depends on your audience, which is the next metric to consider.
Segmenting Your Audience
We talked a little bit about how we helped one of our clients use a marketing funnel to lower their CPA, but the main point is that it’s very unlikely any person that just learns about your business will automatically make a purchase from you.
Needless to say, it’s crucial to not only have one overarching CPA goal, but also have multiple smaller CPAs to get someone to fulfill specific actions.
Each stage in the customer journey should have specified CPAs to help track conversions along the process. All of which should be less expensive than your overall CPA goal.
When you are advertising, you should break up your campaigns into separate audiences with their own budgets and target CPA.
But before we dive any deeper, we have to address that CPA is a “law of averages.” This means we have to also address the correlation between conversion rates and CPA, which go hand in hand.
Conversion rate is the percent of people who convert on your page.
Let’s look at another example.
Imagine you’re a photography studio who sends a Facebook traffic campaign to your website. If you get 100 people onto your site and 10 of those people sign-up for emails, or in this case, convert, then your conversion rate would be 10%.
You spent $30 to acquire these 10 emails subscribers. This means your CPA is $3 for this section of the customer journey.
Now, you can develop a strategy that allows you determine how much you need to spend in order to reach your goal of maybe 100 email subscribers.
With this goal, you would have to get 1,000 people onto your site and this would cost you about $300. As you can see, knowing your CPA and conversion rate will help you know how much you can expect to spend on your ads and how much to budget.
Reminder: cold audiences are always going to have a higher CPA than a warm or hot audience. Therefore, be sure to segment your audiences accordingly, and provide a reasonable CPA for each ad group/ad set.
Figuring out if your audience is receiving your ads well or whether or not your automations are even working can be determined by looking at your frequency.
Frequency is how often people see your ads.
If an algorithm doesn’t have enough information or your Target CPA is too small, it will continuously present your ads to the cheapest people at the cheapest times.
A high frequency with a low click-through-rate means your audience is too small. On impression priced platforms like Facebook, your CPA is going to be too high.
When this happens, it’s best to just turn those ads off and take another look at them. Maybe remove higher cost locations, or if you’re running multiple ads at a time, turn off the ones with a higher CPA. This will help you to lower your CPA.
CPA marketing is an excellent tool to keep your margin and revenue up. When used correctly, all you have to do is:
- Use the automated strategies when applicable
- Segment your audience types
- And keep an eye on that Frequency.
If you do all that, CPA Marketing will help you lower your cost per acquisition. It’s true because we were able to lower a service-based business’s cost per acquisition by 50% using these same methods.
If you’re ready to do the same for your business, we’re ready to help! With our help, we’ll show you how you can make your marketing more effective and how you can reduce your ad spend with CPA marketing! Contact us to get started!