CPA or Cost-per-acquisition, is the cost you pay per successful acquisition of a preset goal for your ads. These conversions can be any number of things: a user sign up, a specific page visit or duration, etc.
This post is meant to help you immediately start optimizing your CPA, but first it's key to understand the fundamentals and recognize the importance of CPA.
A little background
Optimizing CPA lets you budget your campaigns directly. CPA is not measuring partial engagement like CPC or CPM. CPA tells you the average cost of an explicit goal you identify for your campaigns. At AdStage, we use sign ups as a conversion goal. If someone sees our ad, we want them to sign up. Other advertisers may want users to view certain pages or sign up for a newsletter. Different campaigns should have different goals.
Paying via CPA is not option on most networks, but it can always be measured. AdWords is the only major network with CPA as an available cost model. Even in the case of AdWords, it's only available given certain requirements. From Google's support page, here are the requirements:
- "Your campaign uses AdWords Conversion Tracking or is importing data from Google Analytics.
- The campaign has received at least 15 conversions in the last 30 days. This conversion history enables the system to make accurate predictions about your future conversion rate. So, the more data we have, the more accurate we can be.
- The campaign must have been receiving conversions at a similar rate for at least a few days."
The reason CPA is not available on most networks is that a large part of the CPA equation relies on the advertiser's actions. This is why even Google specifies key requirements that make sure your CPA goals are basically in line with what your previous ad performance has shown it will be. Otherwise, it's either risky for Google to allow CPA bids, or their optimizer can't accurately place bids near your CPA maximum bid. Regardless of where CPA cost models are available, it is much more important to understand that CPA is influenced mainly by the advertiser - the networks can't ultimately do anything to ensure CPA goals.
This leads to another important point. Where CPA comes in really handy is when an advertiser knows what the customer's action is worth. Say your company value's a sign up (or new user) at $10. As long as your CPA is below $10, you should continue your campaigns and keep optimizing to lower CPA. If the cost is above $10, you need to optimize CPA before your advertising will pay off.
So what can you do?
Our CEO and co-founder, Sahil, had this to say on optimizing CPA:
"Improving a conversion has two steps - you want your ads and targeting to hit the right people who are likely to convert and you need to properly educate people about what to expect after they click over. Be clear about the offering, the process to get started, etc. Then, once they've been primed appropriately, the experience takes place on the landing page. Here, the content needs to meet the expectations that have been set by the targeting/ad unit they clicked on. This landing page needs to be optimized elegantly around holding the users hand to the point where they successfully complete a conversion (signup, purchase, etc.). That's where landing page A/B testing can make a massive difference."
Testing is key! Once you get to the point of optimizing CPA, you probably have a handle on the other characteristics of ad campaigns. Clicks, CPC, and CTR don't really matter as long as your CPA is below the value of your customer. That is of course if conversions are your goal, which is the right goal in our opinion. No matter how targeted the ad placement may be, users may wind up at a landing page that isn't relevant enough, clear enough, or right for the particular user. Your campaigns must do everything to make the complete experience perfect for your targeted users.
Here are 3 steps to help you start optimizing CPA today:
- Make a campaign with ads specifically targeting your product. (For AdStage, our current product is the dashboard. If we talk in generalities like "improve your advertising", that doesn't really pinpoint what the user will get from us. Instead, we might say "Try out our free ad analytics dashboard now".) Tell the user what the product is and incentivize them with a free trial or promotional discount.
- Refine your landing page to the essentials. You don't need to rebuild your page, but if it's unclear how to sign up or if it's not obvious what your company is offering in relation to what the user saw in the ad, make changes. The customer should have a general idea about what they are looking at on your site immediately, and if they stick around for any longer than that, they should be able to see exactly what using your product will be like and how it will benefit them.
- Lastly, put multiple goals in place. There are lots of ways to measure engagement. I'd suggest to start with goals for: a sign up, visiting more than one page on your site, and spending more than 2 minutes on your site. Even if your only goal is for someone to sign up, someone viewing more than one page or spending time on your site, means they're interested on some level. If you have many people viewing pages and spending time on your site, but not many sign ups, maybe the landing page doesn't tell them enough or maybe it takes them too long for them to figure it out. Either way, you can fix it. Give the user a call to action and try to make it a no-brainer for them to sign up.
Every network has different benefits. Facebook will get your brand in front of a huge number of people. LinkedIn has a distinct audience of professionals in different fields. And AdWords and BingAds show your ads to the largest audience in the world of people searching the web with terms related to your company.
Not every impression or click will result in a conversion, but you want people to see your brand and product in different contexts. Someone may see your ad on a social network and not pay much attention. But when they use Google and see your ad for the second (or third or forth) time, they will be more familiar with you, even if they don't know it. And that will help drive conversions.
Track and optimize CPA in your AdStage dashboard by signing up here.
If you have any thoughts about CPA or know how an advertiser can improve CPA, please let us know. We would love to hear your thoughts!