17 Effective Ways to Reduce Cost Per Acquisition
July 13, 2016
Cost per acquisition (CPA) refers to the amount of marketing or advertising money spent to convert or acquire leads who click on your site or respond to your call to action (CTA).
In simpler terms, ask yourself: how much of your marketing budget has to be spent to get a paying customer? To find out what your CPA is, use the formula: CPA = cost/conversions.
Reducing CPA can increase your ROI within a relatively short period without having to incur the additional cost of traffic acquisition. By prioritizing the reduction of acquiring new customers, you’re able to control cost from the outset.
More often than not, marketers focus on sales or gaining traffic before optimizing costs. They begin a project by thinking about how they can make more money, often neglecting cost optimization until many resources have been effectively wasted.
Reducing CPA from the very beginning is akin to low-hanging fruit because it’s less difficult to start off controlling costs than to come up with ways to increase conversions. Overall, it’s better (and relatively easier) to think of ways to reduce marketing and conversions costs before the sales numbers start pouring in.
Because “search marketing” is now considered to be one of the most effective ways to reach a particular demographic, lowering CPA has never been more relevant.
Effective Strategies to Reduce CPA
Here are a few best practices you can implement to reduce your acquisition costs in your PPC marketing campaigns.
1. Thoroughly Review Efforts
Before cutting costs, review your previous efforts. This sounds simple, but so many marketers just keep moving without looking back at what has worked and—more importantly—what hasn’t. Critically analyze your past efforts. Are your current projects generating the best results possible? Is there a particular channel that is producing the best (or worst) results?
Assessing reports and acting upon them bases your decisions on sound, real-life data instead of on a gut feeling. Be sure to also identify which channels are driving the best quality leads and not just the majority, as quality is more important than quantity. In most cases, cost per conversion (CPC) is a far more influential metric than CPL.
2. Define Your Sales Funnel
Marketers usually know who their best leads are, but having a clear understanding of where a prospect is in the buyer journey is key to making those leads cost-effective. That’s where your sales funnel comes in.
You are defining the stages of the sales funnel—from the open top of the funnel where prospects have a basic awareness and curiosity about your company, to the narrow bottom of the funnel where prospects finally become loyal customers and advocates. Once you’ve figured out how your sales funnel looks, you can align your marketing and sales processes, providing the right content to prospects according to their position in the funnel.
3. Optimize Your Landing Page
As the first page that visitors see after clicking on your ad, your landing page has a huge impact on conversions. When analyzing the effectiveness of your landing page, consider doing an A/B test that analyzes the success rate of changing a single characteristic.
Your “Test A” landing page can be used to drive all traffic to the same generic page, regardless of the type of ad you’re running. Whereas, “Test B” can use a more targeted approach.
Run both landing pages by splitting the amount of traffic 50/50 between the two, and then analyze the results. Doing so will give you a better picture of which landing page can boost conversion rates and lower CPA in the long run.
4. Leverage Online Video
Recently, Adobe stated that 51.9% of marketing professionals worldwide named video as the type of content with the best ROI. Video search is also typically less competitive than other types of searches. To lower CPA, you can target all of your highly competitive search terms to YouTube.
This can be done in tandem with your other search campaigns to dominate most searches with less competition. YouTube searches can also be highly targeted based on keywords, age group, gender, target audience, location, and other demographics.
5. Use Retargeting Techniques
Retargeting or remarking allows you to reach out to people who previously visited your site by showing them relevant ads on other sites they visit within the Google Display Network.
You can connect with potential leads as they browse other sites by displaying ads that will entice them to go back to your site, and hopefully, convert into a paying customer.
Retargeting works by adding a piece of code called a retargeting tag on your website. Anyone who visits your site will then be tagged and added to your retargeting list.
These are essentially hot leads which you can go back to with compelling offers. Using retargeting techniques can be highly profitable and will definitely help to increase conversion rates and reduce your acquisition cost.
6. Run Retargeting Campaigns for Visitors Who Abandoned Your Shopping Cart
Of the various ways you can use retargeting in your marketing efforts, the one audience you should never miss are those who have abandoned your shopping carts.
They are the most important of your retargeting segments as these prospects have a strong inclination to actually buy something from your website.
With the right messaging or an enticing enough offer, this segment has a much higher chance of conversion after retargeting.
7. Temporarily Stop Targeting Locations That Generate Little to No Sales
The Pareto principle applies to most situations, and this is no exception. In this case, 80% of sales originate from 20% of the locations, while the other 20% come from 80% of the locations.
It’s better to focus your budget and marketing efforts on locations, mostly cities, which can generate more sales than the others. Once your revenue becomes more liquid or you have a bigger budget to spare, you might consider going back to those no-sale zones again to capture a bigger piece of the pie on your sales chart.
8. Improve Your Quality Score
Quality score is defined as “Google’s rating for quality and relevance of both your keywords and PPC ads, and is used to determine your cost per click and multiplied by your maximum bid to determine your ad rank in the ad auction process.” (Source: Wordstream)
Once you have successfully created tighter and more relevant keyword groups, as well as enhanced the user experience, it will likely improve the effectiveness and clickability of your ad.
In turn, this enhanced clickability and relevance will help improve your Quality Score—leading to lower costs per click, lower cost per conversion, and pricing discounts.
9. Regularly Check Negative Keywords in Your Search Terms Report
You should always review for any irrelevant or unqualified searches in your search terms report. Look for keywords that are not in line with your marketing objectives and omit them.
If you’re working with a new brand or just starting to build your online presence, you might need to review your reports much more regularly compared to those who have already established a formidable online presence.
The idea behind negative keyword evaluation is to make sure that your ads aren’t targeting users who you know aren’t relevant to your business’ offerings.
10. Update Your Ad Copy
Take a closer look at your current ad copy. Is your messaging aligned with your ad objectives? How is it doing compared to your best performing campaigns?
You might need to introduce small changes to your CTA or current copy to help you better target your qualified leads. Start by using more action-oriented language in your messaging to leave a stronger impression. Add urgency to your ad copy to compel visitors to act positively in your favor.
11. Lower Your Bids for Keywords
Run a Google Experiment on your keywords to see how ad rank impacts your clickthrough and conversion rates.
Adjust the keywords you’re using based on the results, and drop keyword bids that aren’t working and eating up your marketing expenses.
12. Put a Temporary Stop on Non-Converting Keywords
Make sure that you’ve thoroughly analyzed your target cost per conversion, as well as your site’s conversion rate as your basis for pulling the plug on specific keywords.
You should also evaluate the profitability of keywords, even those that have not led to a direct conversion or acquisition, as these might have the potential to bring in leads somewhere down the line.
While you’re reviewing your keywords, you should seek out the top performers and utilize your Search Term Report to look for new keywords or other match types related those that are working well.
13. Optimize with a Clear Objective in Mind
It’s tempting to optimize your website as soon as you can, even without a clear objective planned. This type of random optimization happens when you do some tweaks here and there every couple of days, or introduce certain changes as a knee-jerk reaction to what you see on your website—all without taking a closer look at your analytics results.
Random optimization is easier. There’s no need to go into an often tedious, long drawn out process of planning, preparing, and aligning your objectives with your optimization efforts. However, this type of “on the fly” optimization can, more often than not, have a negative impact. These losses can be seen in time wasted, sales opportunities overlooked, or money thrown down the drain.
You’re better off planning your next strategies way in advance. Start by diligently mapping out your daily, weekly, monthly, quarterly, and annual goals and objectives. This way, you can effectively manage uncertainty and mitigate risks in an efficient manner.
Doing so gives you a competitive edge over those who rely on random optimization to respond to urgent seasonal changes. It’s better to have a clear plan in place instead of planning and implementing strategies at the eleventh hour.
14. Make an Effort to Increase Your Email List
Email marketing might be old school, but it’s the one marketing approach that delivers the most consistent results. Aside from that, it also has the highest return on investment (3800%), with the lowest cost per acquisition rates compared to other more sophisticated or high-tech marketing channels available today.
So, it would be a mistake for you not to include this cost-effective method along with all the other marketing campaigns you’re currently running.
Make sure that when you collect information from website visitors, you always try to, at least, get their email addresses. The more contacts you have on your email list, the less money you need to spend on renting ad platforms like Google, Facebook, social media platforms, and the like.
When you have successfully gathered a formidable email list, don’t just let it sit. Make sure that you nurture your list and continue delivering something valuable to your subscribers. This is a tried-and-tested method of forming a relationship with your clients, and promotes loyalty among your email subscribers.
15. Optimize Your Checkout Process
On average, the checkout abandonment rate among online shoppers is at 68%. That’s a high rate considering that the top reason that people don’t push through with their purchase is largely attributed to hidden charges.
Shoppers are put off by extra charges that are not declared at the beginning of the online shopping journey. Turning this around is as simple as being straightforward about the total amount of the purchase, including shipping fees right from the beginning.
Other turnoffs are technical in nature – time-outs, crashes, and screen freezing—all of which create a negative buyer experience to the point where people end up abandoning your site altogether. Fixing these issues can have a significant impact on lowering your cost per lead acquisition rate.
16. Put a Temporary Stop on Any Unprofitable Paid Campaigns
Are you currently running paid ads that have been bleeding money for the past three months? Pause them.
Ad groups, keywords, and other paid ads that do not generate any sales for months should be stopped or paused until you develop a data-backed explanation as to why these campaigns did not increase conversions.
Once you’ve identified the culprits and tweaked them until they’ve been optimized, you might consider revisiting these campaigns to discover new optimization tactics.
17. Optimize Your Ads Running on Mobile Devices
A mobile-optimized ad enhances the user experience when a potential lead views and interacts with it on a mobile device. Remember, just because the ad can be rendered on a mobile device doesn’t automatically make it mobile-friendly.
How do you know that your supposedly mobile-friendly ad doesn’t enhance, but in fact, detracts from the user experience? Check your conversion rates.
Did they improve after you introduced your mobile ads? If not, then chances are it isn’t truly mobile-friendly. Increase your chances of success by optimizing the user experience with a mobile ad that doesn’t merely render correctly in a mobile browser, but elevates the buying experience on a mobile device.
Things to Keep in Mind
As you probably already know, there is no cookie-cutter solution when it comes to reducing acquisition costs. Many of the tips above might work for you while others might not. It all depends on your unique situation. Your efforts must consider industry quirks or exceptional cases applicable solely to your organization.
But, the important thing is to sit down and take the time to discuss these tactics with your team. Apply these tips when you can, and always keep track of how your project is performing.
The most efficient way to optimize cost is to use is these tips and the rigors of A/B testing whenever you can. Monitor and analyze how your project is doing and use the data to update your paid advertising strategy. Find the best combination of tactics that will work for you to optimize costs and reduce your CPA.
By continually testing, monitoring, analyzing, and optimizing, profits can be greatly increased while acquisition costs are greatly reduced. Finding the right combination of tactics that work specifically for your business will generate quality leads more efficiently than ever before.