ROI vs. CPA – Finding A Better Measurement Technique Part1

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‘Cost per Acquisition (CPA) or Return on Investment (ROI)’ is the usual answer that you will get if you ask any advertiser ‘How do you measure your pay per click performance?’ However, the answer doesn’t make clear as to which optimization technique is the best to evaluate the performance of your pay per click campaign?

Using Cost per Acquisition as a preferred technique to measure your pay per click performance may limit the tracking process, making the association between actual revenue and conversion rate confusing to the advertiser. However, using an ROI (return on investment) method, while determining the success rate of the campaign, helps improve the PPC campaign management. The pay per click campaign can become even more effective if this ROI technique is combined with the search engine marketing process of maximizing profits for each keyword.

The point can be understood better after going through this example. Consider a situation where you have 2 conversions possible – one worth $10 and the other worth $20. Now if you take an average ($15) and optimize to that level, you may be losing money by only selling products worth $10. So, it is always a better idea to use ROI to measure your pay per click campaign performance. However, if CPA is the only option left in this world and you don’t know how to measure the performance effectively with this method, then you can follow some simple CPA practices to make better your PPC campaign management.

First make sure all your transactions take place online and then calculate the mean order value and deduct the mean variable cost to maximize your CPA. If you consider your online conversion as a lead that needs offline sales, then you need to multiply this Cost Per Acquisition with the mean offline conversion rate. This will define your eCPA (effective Cost per Acquisition).

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