The basics of Ecommerce Cost Per Acquistion
Lucky you. You have stumbled upon a article about Ecommerce Cost Per Acquisition (CPA), that was written by a Certified Public Accountant (CPA). But I promise that I will not use accounting lingo. Anyway, you probably know what it is anyway. So, this article will focus on trying to convince you that it is worth tracking your CPA. Most of the technology you are using is already equipped to provide this type of report.
Calculating CPA is Easy
Calculating Ecommerce Cost Per Acquisition is simple. Simply take your monthly advertising expenses for the month and divide that by the number of new customers gain for the month. Therefore, if you only advertised on one site or one app, then you are done. But you don’t. And before we move on, I would like to mention that integrating Google Analytics with Shopify will provide you with everything you ever wanted to know.
Make Sure the Ad Buy does not Kill your Profit Margin
If is possible that you acquire most of you customers from one website. Say Facebook for example. But at what cost. Analyzing the Cost Per Acquisition will tell you if the products sold on Facebook are profitable. It is possible that you can make more money off of 10 people from Twitter, than you can from 10 people on Facebook. Even if those people 10 people bought exactly the same thing. Basically, it is possible to lose money on selling a blue shoe on Facebook, while you make money selling that same shoe on Twitter.
Once you Know your Cost Per Acquisition
Once you know your cost per acquisition for your ecommerce site, you can make an adjustment to your ad buy. Or you can adjust the ad. It is also possible that even though the margins may be lower on one site, it is still within an acceptable range. But do not ignore that sites where your ad buy eats up your margin.
Other things to Consider with Ecommerce CPA
So, the cost to acquire a new customer may be profitable or it may result in lost revenue. However, the type of product you sell may also impact your ad buy decision. For example, having a high cost per acquisition may be just fine if your product if often repurchased. Ecommerce sites that are selling unique items that a customer on buys once, typically have to look at their ad buy more frequently. Constantly having to look for new customers can be expensive. That is why most ecommerce sites will also sell items that complement their main product line. It gives the customer a reason to return to the site.
Ecommerce CPA Summary
You have already embraced technology by started a Ecommerce business. So there is no reason to stop there. These platforms are capable of providing all kinds of useful information. And it will help you run more profitably. There are companies out there that specialize in this. But again, you will have to determine how much it would cut into your profit. When you are starting out, it is best to do it on your own. Things are less complicated and these types of programs are easier to implement while small. Then adjusting and tweaking as you grow.