A Basic Guide to Cost Per Acquisition (CPA)June 18, 2019
The click metric dilema
In the paid acquisition world, clicks can seem like the holy grail. But if you really think about it, clicks only tell you if people arrive to your content. They don’t reveal whether they stayed or not.
But how do you know if your content is engaging and emotionally resonant enough to persuade your audience to stay and ultimately buy your product or service? A metric that’s arguably the most indicative of this is conversions — if your creative convinced someone to download or even buy something, then it was worth consuming.
In your advertising campaigns, the best way to measure your content’s converting capabilities and, in turn, its resonance is cost per acquisition. Read on to learn more about what exactly it is, the formula for calculating it, how its bidding process works, and some principles for crafting creative and convincing ad copy.
Cost Per Acquisition (CPA)
When brands choose the cost per acquisition pricing model while advertising on online advertising platforms, they pay for every acquisition, like a sale or form submission, their advertisement campaign generates.
Most acquisition marketers prefer the cost per acquisition pricing model because they can set their definition of an acquisition before they start advertising and only have to pay when their desired acquisition or action happens.
Cost Per Acquisition Bidding
Cost per acquisition auctions aren’t like your typical auction for antiques. Advertising platforms, like Google, want to level the playing field when it comes to leveraging the size of their reach, so instead of the highest bidder always winning the auction, the bidder with the highest Ad Rank always wins.
AdRank is calculated by multiplying your maximum cost per acquisition bid with the quality score of your ad, which is calculated by measuring your page’s relevance to the keyword, user experience, and click-through-rate. This means organizations can’t acquire the top ranking for any keyword they want just because they have the biggest ad budgets. Their content has to be engaging.
Image Credit: WordStream
Google wants to incentivize the best advertisers to advertise the best content on their search engine results pages, so they reward ads that have high quality scores with higher ad rankings and lower cost per acquisition.
In the same vein, they also want to discourage bad advertisers from advertising bad content, so advertisers with low quality scores will usually only acquire a high ad position if they pay a huge cost per acquisition bid. If they want to pay lower a cost per acquisition bid, they’ll have to settle with stooping at the bottom of the ad rankings.
To generate as many conversions as possible within the limits of your advertising budget, consider using Google’s target CPA bidding. Target CPA bidding leverages machine learning to analyze your campaign’s historical conversion data, recommend an optimal average target CPA, and automatically optimize all your eligible bids to meet the average target CPA you set for all your campaigns.
If you use target CPA bidding, some of your conversions may cost more than others because your quality score or the competition in your ad auction might fluctuate, but Google will try its hardest to keep your cost per acquisition as close to your average target CPA as possible.
Cost Per Acquisition Formula
To calculate your advertising campaign’s cost per acquisition, take your total advertising spend and divide it by the number of acquisitions generated.
How to Optimize Your Cost Per Acquisition Costs
Since your quality score, which is a metric that measures how positive and relevant of an experience your content provides, is the most influential determinant in securing a top ad ranking and, in turn, generating more conversions, the best way to optimize your cost per acquisition costs is crafting compelling ad and landing page copy.
When you sit down to write ad or landing page copy, your goal should be to write something so captivating that it can grab the attention of a distracted millennial slouched in front of the TV, with their smartphone in one hand and a slice of pizza in the other.
So what’s the process for persuading your audience to ignore that pizza, click on your ad, and convert on your landing page? Check out this three-step process for crafting compelling ad and landing page copy.
1. Pick your audience’s curiosity
A little intrigue goes a long way in marketing. Humans are biologically driven to investigate our world rather than respond to it. And if you can evoke enough curiosity in your audience so they can’t help but satisfy it, they’ll click on your ad. So don’t reveal too much about your offer — but make sure to highlight its benefits in a clear and convincing way.
2. Sell a feeling
Psychology tells us that emotions drive our behavior, while logic justifies our actions after the fact. Marketing confirms this theory — humans associate the same personality traits with brands as they do with people. Choosing between two alternatives is like choosing your best friend or significant other. The people we decide to live our lives with make us feel something.
This is also the reason why pitching a product’s features is a lousy attempt at persuasion. Features only appeal to the logical part of your brain, which science suggests doesn’t drive action nearly as well as appealing to the emotional part of your brain does. So don’t just get creative with your copy — get emotional too.
3. Design a simple yet convincing landing page.
Just because you’ve grabbed someone’s attention with your ad doesn’t mean your work is done. You still need to design a compelling landing page that clearly conveys the value of our offer.
In order to do this, consider piquing your audience’s curiosity with an intriguing headline and subheading, scrapping any external links from your landing page so visitors can only leave your paid acquisition funnel if they exit the page or convert, and test out video, which can explain the value of your offer in a more engaging way than text can.
Instead of chasing clicks, pursue conversions.
Marketers will chase vanity metrics until the end of time, and you might feel pressured to do the same, especially when your peers clamor on about their astronomical growth in views or clicks.
But if you ever feel tempted to jump on that train, remember, in marketing, the goal is to persuade someone to take your desired action. So incentivize your brand to resonate with your audience — that’s the thing that actually keeps people on your content and prompts them to act. And make conversions, not clicks, your carrot.