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Influential Factors Affect Your Company’s Cost Per Acquisition

By Scott Ginsberg, Head of Content, Metric Digital

“Nothing happens until a sale is made.”

Thomas Watson, the legendary president of IBM, made this observation nearly seventy years ago. And it’s still applicable today.

Especially when it comes to ecommerce marketing.

Today we're going to explore the critical metric of cost per acquisition. Now, there are a number of components that affect your company’s final cpa. We’ll explore several of these factors, some of which you can’t control, but most of which can be positively influenced with the right strategy.

Product Lifecycle. It’s difficult for any ecommerce company to prosper if they sell a single purchase experience. Give customers the opportunity to purchase from you again and again. For your target cpa, start thinking about sustainable profitability. Up sell with a complimentary item. Think about creating a commitment to turn a single purchase decision into a repeat purchase behavior. Subscription commerce is a smart benchmark for product lifecycle. They turn a single purchase into twelve. Or more.

Product Positioning. What story are you telling with your price? Do you explicitly highlight the features that build a picture of your primary and secondary value propositions? And as it relates to product market fit, does your brand communicate clear proof that you’re selling something people want to buy? These are just a few of the strategic differentiators that will make your product stand out, and ultimately drive down cost per acquisition.

Scale. Even if this term sounds like a buzzword that’s been played out, scale is a general nod to growing larger. To which most ecommerce companies aspire. Now, scaling your brand’s cost per acquisition is not necessarily a good thing, as cpa increasing often means margins decreasing. However, the advantage to having a higher cpa is, your company has more room to experiment. And with that increased spend, you’re likely to earn more customers. How might your company lift what’s profitable in order to get more?

Influencer Strategy. Whether you’re in a niche or generalized vertical, having a notable influencer promoting your brand could lead to highly efficient conversions solely based on that person’s social capital. And, with minimal effort from your brand itself, beyond managing the deal with the influencer, your featured products that struggled to move in the past will start flying off the shelf in the future.

Social Proof. Do ad creative and other marketing assets leverage public relations quotes and customer testimonials/reviews to reinforce social proof? If not, you’re missing a critical piece of credibility. Social proof is a proven tactic to cut through the noise of the social media feed and build trust before a user ever clicks on your ad.

Engaging Content. Do you have a breadth of content including pictures, copy, video, gifs and so on? Remember, paid social creative with motion tends to drive down account wide CPMs and thus CPA. Particularly if you sell commodity products, it’s necessary to add texture, motion and depth wherever possible.

Campaign Management. Is your company using a certified, highly experienced agency who specializes in your specific industry? Or did you pawn off your digital marketing to a random cheap independent contractor who plays kickball with your second cousin? The difference will be the account manager’s ability to optimize at every opportunity, and the willingness to engage with your company both thoughtfully and transparently.

Optimizing Purchase Funnel. This broad category includes (but isn’t limited to) factors like site experience, check out flow, onsite photography, and of course, your shipping time. Amazon has trained the world well. Nobody wants to wait very long to receive their package anymore. Any outdated purchase processes that requires more than a few fields, or more than one page, is becoming harder and harder to justify.

Urgency Drivers. One aspect of behavioral science that has a dramatic influence on buyer behavior is urgency. For example, the scarcity around a limited product run, a crowdfunding campaign that ends in sixty days, or the first twenty customers who buy get a free pony. If you want to gain the psychological upper hand, build scarcity. Appeal to loss aversion. In your copy, sprinkle time related words. You might indicate low stock warnings in the descriptions of your products. All of which create urgency.

Email Optimization. Do you have an automated email flow that includes a strong browse abandonment and abandoned cart message? Ideally, these messages would be sent out a few hours after the customer was shopping. But nothing too soon or aggressive. Otherwise it comes off as creepy. Also, your welcome flow is key. Each communication should provide real value to the prospect. Something that educates or inspires them and increases the probability of purchase.

Customer Lifetime Value. It’s not only an overall important business metric, but a guiding principle and a filter for running your ecommerce enterprise. Customer lifetime value plays a big part in your brand’s ability to offer a diversity of products that stimulate repeat purchases. Are you thinking beyond the first sale? Are you willing to pay more to acquire a customer initially, knowing that they will become loyal fans forever?

When it comes to your brand’s cost per acquisition, keep these factors in mind.

And you’ll do more than make sales, you’ll make a difference.

For your brand, and for your customers.

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Scott Ginsberg Head of Content, Metric Digital The Metric Digital Blog A Blog on All Things Digital Marketing