Have you decided to take on the challenge of starting your own business? If so, you are probably aware of the many challenges that come along with this endeavor. On one hand, you are excited to finally be pursuing your life-long dream of being your own boss, and building something that you can call your own. On the other hand, becoming a business owner is full of challenges, difficulties, and costs. In order to establish a successful business, you must consider factors such as: brand, marketing, cost of operation. The reason why many businesses fail is because their owners do not take the time to properly prepare for these challenges because they are eager to get on their feet and start making profit.
One of the challenges that many new business owners may encounter is a high cost per acquisition (CPA). This can lead to slower growth or even failure in some cases. Understanding what factors affect business CPA is important for the success of your business. Today’s blog will focus on what causes a high CPA, and some things that a business owner can do to lower their cpa.
What Is The Definition Of CPA?
Before we dive too deep into our discussion about CPA diagnostics, we first need to start by explaining the definition of a business CPA. It is defined as “a metric that measures the cost of acquiring a new customer or conversion through paid advertising or marketing efforts.” This is important for helping businesses to maximize their gross profit. Just like any other business expense, your CPA will also affect the amount of money that you can make from profit. This is one reason why it is important for business owners to lower their CPA.
With this in mind, however, it is also important to realize that a higher CPA may not lower revenue for your business. In some cases, if a business spends a little bit of extra money on effective advertising and marketing, it will lead to more business. This is because consistently producing quality advertising can lead to greater customer consistency and interest. In the end, the short term sacrifice of spending a few extra dollars on promoting their products might lead to greater gross profit in the future. It’s kind of tricky…right? So how do new business owners know how to navigate CPA and utilize marketing strategies to help maximize their revenue and grow their business? We will now take a closer look at some specific high CPA diagnostics to get a better understanding.
Lack of Branding Creates A Problem
There are many issues that can cause a business to have a high CPA. One of them is the lack of branding for their company. Brand awareness helps lower CPA, and removes the necessity for excessive advertising efforts. For this reason, it is important for businesses to allocate time and money to focus on brand awareness. In some ways, you could also relate this problem to the identity of a business. The brand of a business relates to the company’s culture and identity. It is something that sets the company apart from its competitors, and provides something relatable for your customers. While the quality of a business’s product is certainly important, a unique and exciting brand will help you stand out from other businesses.
Some of the key factors that show the importance of brand awareness:
- First Impressions
- Word-of-Mouth Marketing
- Loyalty and Trust
- Differentiation Form Competitors
- Enhanced Perceived Value
- Easier Product Launches
- Social Media Engagement
While marketing and advertising efforts are important, efforts and resources that are directed toward branding will help save your business money in the long run. Once you have a reputation and identity established, customers will rally around your brand with little or even no CPA. This is because you have created something that your customers want to share with others.
The Creative Strategy, Messaging, And Offer
This section of the article will speak directly to online marketing and advertising strategies. The first issue to address is the importance of producing a marketing campaign that is creative and piques the interest of the consumer. Creative strategy is “the plan behind an ad’s visuals and messaging.” It ensures that all aspects of the ad are well-aligned with the goals of your company’s brand, and tailored for the audience that you intend to reach. Some elements to consider when assessing your creative strategy for Meta Ads include:
- Objective
- Target Audience
- Core Message
- Design Elements
You may have the most amazing product waiting for them on your website, but if the ad you have produced is boring and generic, the customer may never click on your website and see your product. For this reason, it is important that your company focuses efforts on ensuring that your marketing efforts are creative and aesthetically pleasing to your potential customers.
The next factor that should be addressed is the massaging that your business uses in your online ads. Brand messaging refers to the “words, tone and overall communication style.”
A key aspect of brand messaging is the ability to deliver a strong and consistent message when using Meta Ads on various platforms. This will help to grow trust among your customers, strengthen your brand identity, and improve ad performance. This is why brand messaging is so important for achieving a lower CPA.
Some key elements that relate to brand messaging include:
- Taglines and slogans
- Brand voice and tone
- Core brand values
- Product positioning
- Call-to-action
Messaging plays an important role in lowering your business CPA because it increases the chance that those interacting with Meta ads will actually buy your product. Essentially it is likely to take less interactions with your ad in order for you to make a sale, thus improving your gross profit. On the other hand, if many people are interacting with your ads, but only a few are purchasing the product, you could struggle to break even or potentially lose money that is being invested into the ads.
Last but not least, present your customer with an offer. Learning how to carefully craft the perfect offer to your customers is an important part of getting them to take the action that you want. If the offer is not tailored to their needs or budget, it is highly unlikely that they will accept your offer and purchase your product.
The reason that it is important to have an optimized and appealing advertising strategy from top to bottom is because any deficiency in your plan and approach could cost your business money. This is due to Meta advertising costs for brand marketing. For business owners that use Meta ads, it is important to have a clear understanding of how they will be charged for using the platform. Awareness of these costs will also underscore the importance of creating quality content that will catch the eye of the consumer and convince them to purchase your product. The more things that you do right, the more interested the customer will be in your product. The actions described in the graph represent:
- Cost PerClick (CPC)
- Cost Per Thousand Impressions (CPM)
- Cost Per Lead (CPL)
- Cost Per Download (CPD)
Use Social Proof-ing To Help Improve Credibility
When most people think of advertising, their mind probably goes to flashy ads that try to tell you how amazing their product is and why you should buy it. The problem is that people get tired of seeing these kinds of ads. A business can say whatever they want in an effort to get somebody to buy their product and help them make money. That is why it is important to know the reasons why social proof improves marketing. Social proof refers to the psychological phenomena in which people assume how others will act to reassure themselves that their behavior is correct in a particular situation.
Several types of social proof that you can use in marketing include:
- Celebrity - Endorsement from a celebrity.
- Crowd wisdom - recommendation from a large group of people.
- Expert - Endorsement from an expert in the industry.
- User - A product user makes a recommendation.
- Certification - A company or product receives a recommendation or approval form an authoritative figure.
- Wisdom of well-known people - When someone you know well recommends the product.
It is important to understand that people’s opinion of your business matters a great deal. Choosing to ignore the thoughts of your target audience can lead to high CPA because you are spending money on ads that people don’t care about. Through social proofing, you can receive feedback, and work to shift the focus of your marketing strategies to better suit the needs and interests of those that will buy your product.
Tracking And Measurement
Tracking and measurement issues could be causing a high CPA for your products. Being able to properly interpret Meta Ads data is crucial for optimizing the earnings from your product. While they are an important part of building a successful business, Meta Ads can be misleading and harmful if they are not properly understood. Some of the pitfalls that Meta Ads reporting can create for business owners include:
- Focusing only on vanity metrics
- Ignoring attribution windows
- Not segmenting data
- Overlooking custom metrics
There are a couple of ways that you can track CPA metrics for your business. One of these metrics is the conversion rate. This metric shows how many potential clients have taken a desired action such as: making a purchase or signing up for a service that your business offers. Another metric that can be used is the average order value (AOV). This metric shows the average amount spent by a customer during a transaction. This metric can be especially useful in the world of e-commerce because small changes in AOV can have a large impact on profit.
Follow-Up Communication Helps Retain Customers
The last element that we will discuss is the idea of follow-up communication. This is more important than you might think. Follow-up communication improves customer relationships because it shows them that you appreciate their business. When you follow-up with your customers, it helps to build trust, and increase the likelihood that they will recommend your products to their friends or family.
This is important for lowering your CPA because it provides you with the opportunity to acquire a new customer without spending money on more ads and marketing. Never underestimate the power of word-of-mouth communication. It can also help you retain your current customers as well. Research consistently shows that the retention of existing customers will save a business more money than acquiring new ones.
Woodside Ventures Provides Advice To Start Your Business
Anyone that has started their own business knows that it is not an easy task. While starting a business can be very rewarding, there are a lot of things that must be carefully considered along the way. If you need some help growing your business, Woodside can provide marketing advice that will help your business succeed. Please feel free to reach out if you have any questions, and we will be happy to help you make your dream come true. Whether you need help designing your website or searching for the best local SEO strategy, Woodside can provide you with valuable insights to help your business take off!
