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As more and more businesses move online, the cost of advertising has risen, making it more difficult for companies to acquire customers at a profitable Cost per Acquisition (CPA)
How inflation is impacting Marketing Spend?
*Graph below source - The CMO Survey,Christine Moorman, 2022
To fully realise the Return on Sales and Marketing (ROSM) companies must continuously analyse and optimise their marketing campaigns to ensure they are driving the desired results at an affordable CPA.
*Organisations Losing a Record $29 for Each New Customer Acquired
*SimplicityDX
**Increasing customer retention rates by 5% increases profits by 25% to 95%.
**Frederick Reichheld of Bain & Company
While CPA is often measured as a one-time cost to acquire a customer, it is important to consider the lifetime value of that customer. A customer who makes a single purchase may have a higher CPA than a customer who makes multiple purchases over time, but the latter may ultimately be more valuable to your business.
Uplift your understanding on CPA
Calculating Cost Per Acquisition (CPA) can be challenging for a number of reasons. Here are some common challenges that businesses may face:
1. Tracking conversions:
In order to calculate CPA, businesses must be able to track when a customer completes a specific action, such as making a purchase or filling out a form. This can be challenging if the conversion process is complex or if there are multiple touchpoints along the customer journey.
2. Attribution modeling:
It can be difficult to attribute a conversion to a specific advertising channel or campaign, particularly if a customer interacts with multiple channels before completing a conversion. Businesses may need to use advanced attribution modeling techniques to accurately allocate conversion credit.
3. Time frame:
The time frame over which CPA is calculated can impact the accuracy of the metric. For example, if CPA is calculated over a short time frame, such as a single day or week, it may not accurately reflect the long-term value of a customer.
4. Data quality:
Accurately calculating CPA requires high-quality data, including accurate tracking of conversions and advertising costs. If data is incomplete or inaccurate, CPA calculations may be unreliable.
5. External factors:
External factors, such as changes in consumer behavior or market conditions, can impact the accuracy of CPA calculations. Businesses may need to adjust their CPA goals and strategies in response to these external factors.
Uplift your view and accuracy of the impact of Sales and Marketing investment
No single model is perfect, and businesses may need to use multiple models to get an informed understanding on Return on Sales and Marketing. Choosing the right marketing attribution model depends on the business goals, the complexity of the customer journey, and the available data.
Marketing attribution models are used to analyse and measure the impact of marketing campaigns on customer behavior and conversions:
1. Last-click attribution:
This model gives all the credit for a conversion to the last touchpoint before the conversion. It is a simple model but may not accurately reflect the impact of earlier touchpoints in the customer journey.
2. First-click attribution:
This model gives all the credit for a conversion to the first touchpoint in the customer journey. It is also a simple model but may not reflect the impact of later touchpoints.
3. Linear attribution:
This model assigns equal credit to each touchpoint along the customer journey. It provides a more balanced view of the impact of each touchpoint, but may not accurately reflect the relative importance of each touchpoint.
4. Time decay attribution:
This model assigns more credit to touchpoints that are closer to the conversion and less credit to earlier touchpoints. It assumes that touchpoints closer to the conversion are more influential in the customer's decision-making process.
5. U-shaped attribution:
This model assigns more credit to the first and last touchpoints in the customer journey, and less credit to the middle touchpoints. It assumes that the first touchpoint is responsible for initiating the customer journey, while the last touchpoint is responsible for closing the sale.
6. Algorithmic attribution:
This model uses machine learning algorithms to assign credit to each touchpoint based on its impact on customer behavior. It can provide a more accurate and nuanced view of the impact of each touchpoint.
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