Methods of Calculating Cost Per Acquisition
Before tackling how to calculate the cost per acquisition, let us first understand what the term refers to. Cost per acquisition pertains to marketing where a marketer only pays when an individual viewing an advertisement decides to purchase or subscribe for a product or service. The certain action that must be executed is solely the choice of the promoter. Cost per acquisition is also referred to as pay per action. And while oftentimes individuals use cost per acquisition to refer to this entity, not all pay per action ads are treated as cost per acquisition. Instead, acquisition pertains to making a buying decision or completion of an application form.
Types of Cost Per Acquisition Ads
There are various forms of cost per acquisition advertisements that very reliant upon the action the promoter wants to execute. To add up to the act of making a buying decision, the consumer may also have to fill out an application form or download something for the CPA to be deemed effective. In some ad campaigns, an action is made by just enlisting for a newsletter.
Another form of cost per acquisition is the cost per lead. This is another great way for marketers to obtain prospective clients. It typically involves the clients enlisting up for something, such as further news and updates. Data about the lead may just comprise of email data or may involve a multi-page form necessitating the user to accomplish extra demographic data.
Calculating Cost Per Acquisition
First, identify the CTR or click-through-rate. CTR is defined as the amount of time someone clicks on your advertisement or link and is redirected to the landing page of the product or service site.
Next, figure out your individual CTR. The conversion rate pertains to a number of acquisitions you've made on average in the past. In simpler terms, this translates to the amount of CTRs that were changed into paying clients.
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