Every industry has its own lingo and direct marketing is no different. However, the direct marketing industry has a special affinity for acronyms. Indeed, someone somewhere will likely say something like this today:
“Our CR tanked because the USP driving our CTA didn’t speak to B2C.”
Translation: The conversion rate (CR) of our marketing campaign declined because the unique selling proposition (USP) utilized for the call to action (CTA) wasn’t appropriate for a business-to-consumer (B2C) audience.
Acronym proliferation aside, there are two industry terms of vital importance to direct marketers everywhere:
- CPA, or cost per acquisition
- CAC, or customer acquisition cost
The Difference Between CPA and CAC
While sometimes used interchangeably, CPA and CAC measure very different things. Cost per acquisition is the variable cost associated with acquiring each new customer. If you spend $10,000 on Google ads and 100 customers are acquired, the CPA is $100.
Customer acquisition cost, on the other hand, has a much broader scope as a metric. For CAC, additional variable marketing costs are also considered such as ad agency fees, team salaries, the cost to create the advertising creative,and so forth.
The distinction becomes immediately apparent when you look at industry benchmarks. Depending on the industry and the marketing challenge at hand, a typical CPA might range anywhere from $50 to $150. Calculate customer acquisition cost, on the other hand, and it tells a completely different story. For example, a Gartner survey of tech-company CEOs revealed a median CAC of $27,000 for that industry sector.
Your First 3 Steps to a Lower CPA
While CPA and CAC are both critically important metrics, they serve distinct purposes. Customer acquisition cost is particularly useful when evaluating the strategic direction of a company’s marketing efforts. However, CAC is not as helpful when trying to measure something very specific –such as the relative performance of two different ad campaigns. For that type of granular analysis, you need CPA.
In marketing, as in golf scores, the lower the CPA the better. As the cost to acquire each customer goes down, the ROI of your marketing efforts increases. The question is, how do you drive a lower CPA?
There are literally dozens of things that can be explored, from retargeting tactics and keyword bidding strategies to re-engineering the customer’s shopping cart experience. However, more than anything else, these three tactics have the potential to make an immediate and material impact on your CPA.
CPA Solution #1: Change Your Ad Design
Your ad is the first thing a customer sees. Why not start there? Ad headlines, key selling propositions and design execution are arguably the most important variables when it comes to CPA.
Start by A/B testing different ads and watch what happens to the CPA. Even subtle adjustments to the call-to-action, the placement of a button, images, font sizes and colors can have a dramatic effect on ad conversion rates and,ultimately, your CPA.
CPA Solution #2: Change Your Landing Page Design
Next up, your landing page. Assuming someone clicks on your ad, the landing page will be the second thing they see. Better make sure it’s as effective as possible.
Here again, look at your landing page with fresh eyes and consider whether the design, messaging and mechanics are inviting the customer to respond. A/B tests of different landing page designs will quickly show you what works best –and help drive a lower CPA.
CPA Solution #3: Incorporate Video
Time and again, video is proven to be a highly effective tactic for driving customer response and engagement. According to the researchers at Hubspot, 86% of video marketers say video has been effective for generating leads and 81% report that video has made a positive impact on the company’s bottom line.
No matter what form of direct marketing you’re engaged in, if you haven’t explored adding video to your content marketing strategy, it’s time you did.Product demos, customer testimonial and case studies are just a few of the ways video can be used to drive higher response and engagement while lowering your CPA.
Taylor: Using Data to Lower CPA
Taylor is a leading provider of personalized data-driven marketing campaigns such as our Marketing Advantage Program. The Marketing Advantage Program uses data to maximize the impact of our customers’ marketing outreach efforts–reducing cost per acquisition along the way:
New Customer Acquisition
Reach and convert customers actively shopping for your products and services online.
Purchase Intent Triggers
Use geotargeting,purchasing triggers, demographics and sophisticated analytics techniques to find the customers most likely to purchase your products and services.
Deploy proprietary data intelligence to reach new movers 2-3 weeks sooner than other new mover sources.
Put your brand in front of your competitors’ customers by actively targeting those known to be shopping your competition online or in-store.
Want to lower the cost per acquisition of your marketing programs while increasing the number of new customers? Contact the Marketing, Data & Analytics team at Taylor to learn more about the Marketing Advantage Program.