Date of Publication: 2 Mar 2023

Improve ROI with CPA Model for Digital Media Budgeting

The Cost Per Acquisition (CPA) mode is probably the best model to plan and budget you digital media campaigns.

The emergence of digital media has changed the way businesses market their products and services. With the ever-changing digital landscape, it is more important than ever for businesses to have a comprehensive understanding of the digital media budgeting process and how to optimize it to maximize their return on investment.

This blog will discuss the CPA Model for Digital Media Budgeting and how to use it to understand and optimize your digital marketing efforts.

We will explore the factors affecting the CPA Model and its advantages. By understanding this model and its key components, businesses can ensure they are making the most of their digital marketing budget and getting the most out of their investment.

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Anirban Guha

Anirban Guha

Digital Marketing Expert | Media Strategist | Entrepreneur

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What is CPA Model for Digital Media Budgeting?

Cost per action (CPA) is a model of digital media budgeting that focuses on the cost associated with a desired action (or conversion) occurring on a website or other digital platform. This could include a purchase, sign-up, download, or any other measurable action. CPA is based on the idea that advertisers should pay only when their desired action has occurred. This model is also referred to as “pay for performance” or “performance-based marketing.”

The CPA model takes into account the cost of acquiring a customer or a sale through digital marketing. For example, if a company spends $500 on digital marketing every month, it can calculate its CPA by dividing the total cost of acquisition by the total number of customers acquired in that month.

If the company acquires 100 customers through digital marketing in that month, the CPA is $5 (500/100=5).

This CPA can then be used to calculate the future budget for digital marketing spends.

Now, if the company wants to acquire 1,000 customers in the next month, it will need to spend $5,000 (1,000*5=5,000).

This is the budget that the company should allocate to its digital marketing efforts.

The CPA model can also be used to measure the effectiveness of a digital marketing campaign.

If the CPA is lower than the budget allocated, it means that the digital marketing campaign is more effective and efficient than expected. On the other hand, if the CPA is higher than the budget allocated, it means that the digital marketing campaign is not as effective or efficient as expected.

Actual CPA $4 (More efficient) < Budgeted CPA $5 < Actual CPA $6( Less efficient)

Factors Affecting CPA Model : Optimizing Cost Per Aquisition

1. Target Audience:

Different audiences have different levels of interest in various products and services. It’s important to target the right audience to ensure a higher CPA.

The eminent question that comes to your mind is, How do I research the right audience for my digital marketing campaign?

1. Identify your target market:

Start by understanding who your target audience is. Think about the demographic characteristics such as age, gender, location, income, education, and interests of your ideal customer.

2. Understand their online behaviors:

Research the online habits of your target market. What websites do they visit? What social media platforms do they use? What type of content do they consume?

You could use,

a) Google Analytics: measure website traffic and track user behavior

b) Social Media Analytics: measure the engagement and track user behavior on social media platforms

Paid Tools are,

    1. Sprout Social: It is a social media management and engagement platform that helps businesses grow their presence on social networks like Twitter, Facebook, and Instagram. It includes features for monitoring conversations, scheduling posts, tracking analytics, and more.
    2. Hootsuite Analytics: It is an analytics platform that provides insights into the performance of social campaigns. It provides detailed reports on website traffic, post engagement, and more.
    3. Brandwatch: It is a social media analytics platform that helps companies analyze conversations and trends across the web. It provides insights into topics, demographics, and influencers related to a brand.
    4. Keyhole: It is an analytics platform that provides real-time insights into social media conversations. It provides metrics such as reach, impressions, sentiment, and more.
    5. BuzzSumo: It is an analytics tool that helps companies discover and analyze content across the web. It provides insights into topics, influencers, and content trends.
    6. Iconosquare: It is a social media analytics platform that helps companies measure their performance on Instagram and Facebook. It offers insights into engagement, reach, and audience demographics.

You can also avail of free social media analytics tools,

    1. Facebook Insights
    2. Twitter Analytics
    3. Google Analytics

c) Online Survey: Use surveys to understand the needs and wants of your target audience.

Some Online tools that could be used are,

    1. SurveyMonkey: SurveyMonkey is a powerful and easy-to-use survey software platform that allows you to create and distribute surveys quickly and easily. It features a wide range of features such as customizable survey templates, advanced analytics, and automated sending and reminder emails. It starts at ₹1,999/ per month billed annually.
    2. Typeform: Typeform is a user-friendly survey software platform that is designed to make creating and publishing surveys fast and easy. It offers an intuitive interface, custom branding options, and a variety of question types to help you create engaging surveys.It’s free to start with.
    3. Google Forms: Google Forms is a free, web-based survey software that allows you to create and publish surveys quickly. It offers a wide range of features such as customizable templates, drag-and-drop design, and response analysis. Like all Google products you can sign up for free.
    4. Alchemer (formerlySurveyGizmo): Alchemer is a powerful survey software platform that offers a wide range of features such as customizable templates, data export, and integrations with other popular software. It is an enterprise model that starts at $55.
    5. SurveyPlanet: SurveyPlanet is a simple and easy-to-use survey software platform that allows you to create and publish surveys quickly. It offers customizable templates, real-time response analysis, and automated reminders and follow-ups. You can create a free online survey with unlimited questions and responses.

d) Customer journey mapping: Customer journey mapping is used to track and analyze the steps a customer takes when interacting with a business, from their initial contact to the end result.

The 3 levels and 8 stages of a customer journey map typically include:

Level 1 – Visitor Stage:

    • Stage 1 – Awareness: The customer gets a glance at you through search, PPC ads, social media etc.
    • Stage 2 – Engage: Now you are making customers stare at you. There is a difference between a person waving at you and you have an actual conversation. You engage with a blog post, a video, etc.
    • Stage 3 – Subscribe: at this stage you basically get them to share details with you using gated content (e.g. webinars, product demos, annual reports, etc) lead magnets (whitepapers, ebooks, free courses, etc.)

Level 2 – Customer Stage:

    • Stage 4 – Convert: Making subscribers make a micro commitment with time (e.g., having someone who has subscribed for the webinar to attain the actual event) and money (e.g. making the subscriber buy health check-up coupons for $7)
    • Stage 5 – Excite: It is the stage where the customer at the convert stage gets the “Ah-Ha!! Moment”, it is a combination of wonder and understanding. These are customers who are in awe and understand you from the convert stage.
    • Stage 6 – Ascend: The customers moving up the product/service upgrades

Level 3 – Advocate Phase:

    • Stage 7 – Post-Purchase: Customers leaving testimonials, making stories ( writing blogs or making videos about your products and services)
    • Stage 8 – Promoter: Customers who are now creating referrals. Successful customer refers.

These stages help to identify potential areas for improvement in the customer experience and provide insights into potential customer needs.

 For this, you can use,

    1. Hotjar: It is a great tool for mapping customer journeys, as it tracks website activity and provides heatmaps to visualize customer behavior. The basic module is free but you can always upgrade to paid subscriptions for more options.
    2. UXPressia: It is a cloud-based customer experience management platform that helps teams to visualize, share, present, and improve their customer journeys. They offer features like real-time online collaboration for multiple users, integrations with a variety of data sources, and a modern interface with an intuitive drag-and-drop environment.
    3. Lucidchart: This is a visual tool, that captures the customer experience. With customizable templates and extensive formatting options, this customer journey mapping software lets you easily visualize and share your findings, helping you target specific personas, increase customer engagement, and ultimately increase your organization’s revenue. Free plan and paid plan starting €8.95 per user permonth.
    4. Microsoft Visio: This is software used for creating a variety of diagrams and flowcharts. With this visualization tool, users can create simple or more complex customer data diagrams. It also offers a wide variety of built-in shapes, objects, and stencils to work with. The main idea behind Visio is to make diagramming as easy as possible for the user and therefore simplify the process of customer journey mapping. Note: this is a Microsoft product, sold as an addition to MS Office. Its Subscription plan starts at ₹ 395.00 per user per month.

3. Analyze your competitors:

Take a look at what your competitors are doing. What type of campaigns have they launched? What type of content have they created? What marketing channels have they used?

Some tools,

    1. Built With: To start analyzing your competition you should start by understanding his website. BuiltWith is a free tool that allows you to dissect your competitor’s website in terms of integrations, build, analytics employed, etc. Using BuiltWith in your competitive analysis will identify key market segments that your brand may be missing out on. Track your competitors and build a list of prospects.
    2. Woo Rank: The tool allows you to add three competitors, so you can perform a comparison of Technical SEO, Site performance and usability, Keyword usage, Backlink quality, and Social media engagement
    3. SEMrush: This is the ultimate competitor analysis tool because it’s an all-in-one digital marketing suite that covers SEO, PPC, keyword research, competitive analysis, social media, PR, content, and even more. The SEMrush software contains over 30 tools with the ability to analyze 3.7 billion keywords as well as 4 trillion backlinks.
    4. SpyFu: Originally named GoogSpy, SpyFu is a search analytics tool that shows users keywords that websites buy on Google AdWords. That means you can identify all the keywords that your competitors have bought, and every ad test they’ve run.
    5. Owletter: This competitive analysis tool captures, stores, and analyzes emails sent from a website. It means you can monitor your competitors’ email and discover what’s working for them, and what’s not. Using Owletter gives you access to many insights, including whether your competitors have a spam reputation, If they follow a schedule for sending emails, If they change their schedules according to season, Trending topics, Undiscovered opportunities, and more

4. Use data to identify trends:

 Use data to identify trends in your industry. What type of content is resonating with your audience? What type of campaigns are performing best?

5. Monitor your results:

Monitor the performance of your campaigns and adjust your strategy accordingly. Use A/B testing to see which elements of your campaigns are performing best.

 

2. Advertising Platform:

Different platforms have different CPA rates. It’s important to select the right platform to get the best CPA.

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3. Budget:

The amount of money you spend on ads is a major factor in determining your CPA. You need to find the right balance between cost and performance to get the best CPA.

There is no one-size-fits-all approach. Each company and industry will have different needs and goals when it comes to budgeting for different types of advertising.

Generally, it is recommended to begin by looking at the effectiveness of each type of ad and how it aligns with your company’s overall goals and objectives. Here, your competitor and industry analysis becomes very important. See how other players are performing across channels. Then match your presence and budget accordingly.

The acquisition parameters and cost will vary as per the stage of the customer journey. The higher the stakes higher would be the CPA. Your CPA for an Engaged Customer would be lesser than the CPA for a Convert Customer

Always remember the basic idea behind the CPA model is to optimize this cost of acquisition. Try combinations to work out the best possible result for each stage.

4. Ad Quality:

The quality of your ads can make or break your CPA. Make sure your ads are compelling and well-targeted to get the best CPA.

For example, if an advertiser has a low-quality ad, the conversion rate will be low due to people not being interested in the product or service being advertised. This will result in higher CPA as the advertiser will have to pay more for each lead.

On the other hand, if the ad is of higher quality, the conversion rate will be higher as people are more interested in the product or service being advertised. This will result in a lower CPA as the advertiser will have to pay less for each lead.

In the CPA model Ad quality is determined by 3 Factors:

  1. How likely is a person to click on your ad when he sees it? (Make creative alternatives for ad copies, images, and videos)
  2. How relevant is your ad to the person who sees your ad (targeting the ad to the right audience or mapping your ad with the right keyword)
  3. How is the landing page?

In short, higher-quality ads yield higher conversion rates, leading to lower CPA.

5. Landing Pages & CRO :

Your landing pages play a huge role in your CPA. Make sure your landing pages are optimized for conversions to get the best CPA.

How you design your landing page is key to lowering cost per acquisition.

Say for example you enter a store. The gatekeeper gets you a trolley and guides you to a set path so as expose different products racked up. You may have entered to buy toothpaste and end up buying a lot more. So the total purchase amount goes up. This is exactly what your landing page should do.

It should make your customers explore more after they have had a favorable experience with what they intended in the first place.

Cross-selling, upselling, offering high-margin substitutes, etc to maximize AOV (Average Order Value) depending on the stage of the customer’s journey.

Please ensure that the loading time of the landing page is at a minimum (never exceeding 3 sec) and the customer is at ease when navigating through the page.

This process of increasing the percentage of conversions is called CRO or Conversion Rate Optimization. CRO typically involves generating ideas for elements on your site or app that can be improved and then validating those hypotheses through A/B testing and multivariate testing.

There are a few tools that you can use to optimize your landing pages,

  1. Plerdy – It allows studying different aspects of user behavior to get a complete picture of how people navigate your website. You can record user sessions, collect clicks, scrolls, or other interactions, track specific actions, detect conversion bottlenecks, and more.
  2. Hotjar: As I have mentioned earlier it is it tracks website activity and provides heatmaps to visualize customer behavior.
  3. Optimizely: The path to increasing website conversion rate involves testing, discovering, and implementing a strategy to improve. Optimizely helps brands conduct tests for their websites across all devices and platforms. This helps in understanding what messages, imageries, and offers are working the best to help increase conversion, retention, and lifetime value.
  4. Google Analytics: It is a great tool and a must for all websites. It helps you understand quite literally everything that happens on your landing page. Every event, every acquisition, bounce rate and so many more elements are monitored.

6.  Seasonality:

Seasonality can have an effect on your CPA. Certain times of the year may be more effective for certain types of products or services.

For example, CPAs for online marketplaces are likely to go high during the festive periods as more and more brands and platforms would compete to maximize their impression share.

Monitor trends and adjust your campaigns accordingly to get the best CPA.

7. Competition:

It is important to monitor the competitive landscape to ensure your CPA remains competitive. You need to make sure that your campaigns are optimized to get the best CPA possible and that you’re targeting the right audience. Keep a close eye on what your competitors are doing in terms of advertising and marketing, as this can help you to identify potential opportunities or threats.

Advantages of CPA Model

  1. Cost Efficiency: CPA model allows advertisers to pay only when a desired action has been completed, resulting in a cost-effective solution that maximizes return on investment (ROI).
  2. Flexibility: CPA model gives advertisers the flexibility to choose from a variety of objectives and goals, such as cost per lead, cost per sale, cost per action, etc.
  3. Targeting: CPA model allows advertisers to target specific audiences, enabling them to reach their desired goals more effectively.
  4. Increased Efficiency: CPA model allows advertisers to track and measure performance in real-time, making it easier to make adjustments and optimize campaigns for maximum efficiency.
  5. Accurate Measurement: CPA model provides advertisers with an accurate measurement of the success of their campaigns, allowing them to make more informed decisions.
  6. Scalability: Advertisers can scale their campaigns easily and quickly without having to make any major changes, resulting in increased efficiency and cost savings

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About the Author - Anirban Guha

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Anirban Guha is an MBA graduate from Amity University, Noida. Starting his career with The Times of India Group, he has spent over 16 years in advertising and has been the founder-director of an award-winning digital marketing agency, Tejom Digital for over 6 years. He has worked with some of the top brands in India and beyond. He is an expert in creative design and digital marketing. He is passionate about helping businesses reach their goals. Beside his professional life, Anirban is an avid reader, a movie buff, a passionate gardener, an art enthusiast, and a foodie.

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