What is an Acceptable Cost Per Acquisition

February 17, 2009 by Evan

When you run an online business, or any business for that matter, you are inevitably spending money to acquire new customers. What you are willing to pay for each new customer is entirely up to your business model. Some companies can afford to pay up to $100 or more in marketing cost to acquire a new customer, depending on the value of the customer to the company over the life-time of the relationship. Every online campaign you run, whether it be search engine, shopping engine, email marketing, affiliate marketing, or even organic SEO will have a cost-per-acquisition attached to it. It’s advisable that you have a good internal tracking and reporting system in place so you can see the clicks and sales from each source of traffic to measure your “effective” cost-per-acquisition. I will attempt to touch on some of the more important aspects of a good cost-per-acquisition strategy.

Every company needs to be focusing on driving traffic to their website from a variety of online sources. Most companies find that pay-per-click traffic from Google, Yahoo, and MSN converts the best, however the acquisition cost from PPC search can be very high depending on your particular industry. Over the years, as more advertisers have jumped into the PPC fray, online merchant’s acquisition costs have continued to rise. In order to combat the rising costs of acquiring new customers, companies should focus on things like improving their ad copy and improving the conversion rate of their websites.

Improving website conversion rates is definitely the best way to lower your average cost-per-acquisition and make your marketing campaigns more effective, allowing you to spend more money and acquire more customers. Having on-site conversion optimization in place, that rotates in different variations of graphics, tag lines, bullet points, etc and measures the overall best combination, can yeild improved conversion rates and lower your overall cost-per-acquisition. “Tweaking” your website to make it more “sticky” can help you retain more of your visitors so you can re-market to them later, which will help lower your acquisition costs.

There are many ways to make your website stickier, so that you retain more visitors. Some of these ways include:
- Newsletter Sign-up Box - helps capture visitor data
- Email this page to myself - captures email data
- Email this page to a friend - viral exposure
- Bookmark this site - increases repeat visitors
- Print this page - allows visitors to print and save your site
- Referral programs - rewarding customers for referring others
There are definitely other ways to make your site a stickier site that I will discuss in another post in the future. Making your site stickier with added functionality is a great strategy for lowering your overall cost-per-acquisition and capturing more of your visitor’s data for future follow-ups.

As you grow your online business you are going to want to test and re-test different traffic sources, keyword groups, creative variations, ad copy, and landing pages. I highly recommend building an internal tracking system to handle and measure all of your campagins. When you are measuring the effectiveness of your online campaigns, you can test tons of new things every month, see which are working and which are not, keep the good campaigns and kill the rest. Always make sure you are getting the ROI you are looking for with your online campaigns by measuring the cost-per-acquisition. If the campaign is exceeding your acceptable CPA goals you can either kill the campaign or work a little harder to make your site convert better! I hope you liked this post, feel free to contribute your comments on cost-per-acquisition best practices. I look forward to hearing from you!

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