{"id":12458,"date":"2017-02-16T13:30:06","date_gmt":"2017-02-16T21:30:06","guid":{"rendered":"https:\/\/oroinc.com\/b2b-ecommerce\/blog\/kpis-to-track-b2b-success-part-iv.-cost-per-acquisition"},"modified":"2023-01-04T03:10:06","modified_gmt":"2023-01-04T11:10:06","slug":"kpis-track-b2b-success-part-iv-cost-per-acquisition","status":"publish","type":"post","link":"https:\/\/oroinc.com\/b2b-ecommerce\/blog\/kpis-track-b2b-success-part-iv-cost-per-acquisition\/","title":{"rendered":"KPIs to Track B2B Success: Cost per Acquisition | OroCommerce"},"content":{"rendered":"

Today, we\u2019re posting the final installment of our four-part blog series on the major KPIs to be tracked by B2B companies. We have already covered <\/span>customer retention and churn<\/span><\/a>, <\/span>customer lifetime value<\/span><\/a>, and <\/span>lead funnel performance indicators<\/span><\/a>. This series will finish with the overview of the Cost per Acquisition metric frequently used by B2B eCommerce businesses to evaluate enterprise performance.<\/span><\/p>\n

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Cost per Acquisition Overview<\/b><\/h2>\n

Cost per acquisition (CPA) is a KPI that measures the total cost of acquiring a new paying customer, also known as Customer Acquisition Cost (CAC). The goal of measuring CPA is to analyze how much money does a business have to spend to acquire a new customer while also showing executives which sales and marketing efforts have the best ROI when tracking for each channel. <\/span><\/p>\n

While CPA can be tracked on a global scale where total sales & marketing costs are divided by the amount of newly acquired customers, our discussion will focus on optimizing CPA across different marketing channels.<\/p>\n

Cost per Acquisition Calculation<\/b> Formula<\/b><\/h2>\n

Apply the <\/span>Cost per Acquisition calculation<\/span> formula for each marketing channel separately to identify how much it costs to win a deal via this particular channel:<\/span><\/p>\n

CPA<\/b> = <\/span><\/p>\n

Total costs over a certain time period<\/b> per specific marketing channel<\/b> \u00f7<\/span><\/p>\n

Number of clients<\/b> acquired<\/b> through this marketing channel<\/b> over the same period<\/b><\/p>\n

What’s So Difficult About CPA?<\/b><\/h2>\n

The Cost per Acquisition is a key metric for understanding the efficiency of marketing budget spend and estimating the revenue impact brought by certain marketing channels. <\/span><\/p>\n

Normally, organizations perform a number of marketing promotions originating from different marketing channels (e.g. content marketing, pay-per-click aka PPC, SEO, direct mail listings, email campaigns, events, social media, etc.). These channels in turn have different CPA metrics. The lower the CPA, the better particular channel is. But it gets tricky when we start using the <\/span>Cost per Acquisition calculation<\/span> for different channel costs.<\/span><\/p>\n

Many business owners love PPC advertising and deem this channel the most effective, simply because with every click and impression calculated and reported, it is extremely easy to calculate how much it took for a sale to happen. But the realization many business owners need to face is that SEO, for example, can be cheaper in the long term if they measure its CPA properly.<\/p>\n

Consider leveraging metrics like <\/span>CLV (customer lifetime value)<\/span><\/a> as well as the <\/span>sales cycle length<\/span><\/a>. These two metrics will help you pinpoint the right cadence for CPA KPI measurement and help recognize the customers with highest return probability. Mind that different marketing channels may yield positive results within different timeframes: some may turn out to be effective immediately (like pay per click advertising) while others may have a delayed and cumulative effect (like SEO efforts, and content marketing). That is why it is so important to calculate your CPA for the timeframe of at least one average lead-to-customer conversion cycle for this particular marketing channel, for example – monthly for PPC, but quarterly for SEO.<\/span><\/p>\n

It makes no sense to measure the CPA for SEO one month after you launched your website and hired an SEO specialist. In fact, SEO efforts for a new website should be tracked for at least a 6 month duration after the launch. One of the main reasons to do so is the fact that SEO CPA will tend to gradually go down with time, as SEO has cumulative effects. So in 12 months you may find that although you are still spending the same $5k a month on SEO, you now get twice as many sales from this channel per month as you used to 6 months ago. With PPC on the other hand, your budget directly correlates with the outcome every month no matter how long you do it.<\/p>\n

Another example is email marketing. This is typically the most attractive marketing channel, as it usually has the lowest CPA. But it would be unwise to direct all your marketing budget to this channel and switch off PPC, PR, SEO and all the other more expensive channels. If you did that you’d soon find that you miss out on new business opportunities. This leads us to another very important realization – in order to be able to correctly measure the ROI and CPA of a marketing channel, it is important to trace the entire history of customer interactions with your business to make sure you don’t just give all the credit to the last marketing channel during the lengthy sales cycle.<\/span><\/p>\n

\"cost<\/a><\/p>\n

Image source<\/span><\/a><\/em><\/p>\n

Tracking CPA<\/b><\/h2>\n

There are various ways to track CPA, these could be either of the following:<\/span><\/p>\n