At first glance, it might seem like a low cost per action (CPA) is the dream. It tends to be the goal for most businesses, whether this is in conjunction with a lower CPC, CPL, and more.
Interestingly enough, doing this can impact the quality and volume of your leads drastically. You might be lowering costs, but compromising too much in other parts.
It might seem logical to cut campaigns that are delivering higher CPAs and ramping up efforts on campaigns with lower CPAs, but as an experienced Google Ads management agency we’re here to tell you why this might not necessarily be the best for your business.
What can happen if I focus too much on my CPA?
There are a few reasons why this might not necessarily be the best - the two main ones are quality and volume.
Quality
Regardless of whether you’re generating online sales, leads, or member signups, not all conversions are equal.
When you cut costs, chances are you’ll also cut the quality of your conversions too.
Let’s use leads as an example.
If you have one Facebook campaign costing $100 per lead and another campaign costing $50 per lead, it might seem like the obvious decision is to switch your budget to the campaign with the lower CPA.
If you do this, however, you risk losing out on higher quality leads from the first campaign which lead to 3X higher sales compared to your other leads.
Because of this, it’s clear that it might not be as simple as just investing more money in the lower CTA cost campaign!
The same goes for eCommerce - in which some sales might have a higher cost per sale, but they in turn might also have a higher average order value, higher lifetime value, or a higher profit margin.
Overall, you might want to reconsider optimizing for a lower CTA campaign, as you might be turning off campaigns that are delivering better results and ramping up ones that aren’t as successful.
Volume
The other key reason that always targeting a low CPA isn’t the best course of action is because of volume.
By optimizing for the lowest CPA as your primary goal, the volume you generate will inevitably drop over time.
This is because you’ll only be able to target the lowest hanging fruit per se - the most targeted audience, or the most broad search keywords.
This is what will significantly impact growth - you won’t be able to scale up your campaign volume with less targeted audiences, keywords, or channels - you’ll always have higher cost per actions regardless of the offered volume.
So, what should I be doing instead?
Don’t continuously focus on a lower cost per action.
It might be the right approach to take in some circumstances, but it’s definitely not a one size fits all technique that should be used across the board.
To make sure that you make the right decision, here are our top three tips for increasing your performance to see real results for your business.
Work out your numbers
You need to establish your key business goals before moving forward with anything else, like determining which campaigns are the most successful.
Campaign success will look different for everyone - some might be focused on profit, others, on sales, and others, on sign-ups.
By determining what is the most important to you, you can determine the individual success of your campaign.
An important aspect of this is numbers - it is a numbers game, after all!
Establish what your profit margins are, what your lifetime value is, and any other important figures for your business.
By doing this, you’ll be well informed and able to make the right decisions as to how to optimize your campaigns and budgets to fit your specific business goals.
Measure quality per source
As mentioned earlier, the quality of your leads are an important part of determining whether or not to keep a campaign running.
Leads that are more costly might feel like an inconvenience, but in reality, are likely providing you with higher quality leads that are likely to spend more, provide higher lifetime value, or both.
A good way to determine whether you should be targeting a lower CPA or not is by first measuring the quality per source.
Whether it’s the lead quality itself, the profit margin for each online sale, or any other metrics of measurement, it’s clear that you need to be monitoring and reporting on this regularly.
Using this information to your advantage will help you in optimizing your campaigns and guiding you to the most success for your business goals.
Make sure your data is sufficient
It’s all fun and games to work quickly and make fast paced decisions in an equally as fast paced environment, but meaningful data is just as significant.
You need to be waiting until your data is significant enough to help you in making any major decisions with your campaigns, like shutting them off completely or adjusting budgets in a drastic way.
By waiting for this to take place, you’ll be able to have enough evidence to ensure you’re making the best possible decision for the best possible results.
It’s one thing to immediately assume a lower CPA is best - and it’s definitely not bad! - but it’s also not the be all and end all in measuring success on a campaign.
You’re all done, kid!
You’ve done it! You’ve officially learnt all there is to know about what a CPA is, why a low CPA isn’t necessarily the best, and the factors you need to consider when determining whether or not a low CPA is in your best interest.
Fact is, a low CPA isn’t bad by any means, it just isn’t the only metric you should be considering in your campaigns.
By focusing on the quality and volume of your campaigns as opposed to one specific metric, you’re guaranteed higher levels of success in your overall return on ad spend (ROAS).
If you’re still confused, we’re always here to help. Get a free proposal with Local Digital and we’ll put in the hard yards for you - making all the recommendations you need to have your campaigns thrive.
