Don’t Overlook the Basics

March 8th, 2010

Feeling data rich and insight poor? We’re inundated with data. It’s everywhere. We have performance data from our marketing efforts. We can slice and dice it every which way. Drill down into minuet detail. Yet, the sheer volume can sometimes be more confusing than helpful. Making it easy to overlook the obvious.

I was talking to a marketer today who was struggling to glean some insights from a mass of campaign data. He had an impressive amount of data on every imaginable part of the campaign, but he simply didn’t know what the data told him that was of value in moving to the next step of a comprehensive rollout plan. After a few minutes I asked him about the overall CPA (cost-per-acquisition) of the campaign versus that of various segments within the campaign. I could literally hear him slap his head and sigh. Because of all the rich data he had at his fingertips and could mine, he overlooked a basic metric that could provide a simple insight into ROI.

Make sure you look at the basics first, before you do the data deep dive. Looking at cost-per-acquisition is a great place to start. CPA, also referred to as cost-per-action or cost-per-sale, is a metric used to measure your spend rate per conversion and answer the question “How much do I have to spend to get a sale?”

CPA is a metric that matters because you need to know if the cost to get a new customer is within your margin or if you are investment spending. Plus it’s a quick and simple way to look at the effectiveness of a campaign and its parts. And it’s one of the easiest to measure. Cost-per-acquisition (CPA) = Cost of campaign/Number of sales.

So let’s say you spend a total of $20k and you get 250 sales.  Your overall CPA is 20,000/250 = $80. And if your margin per sale is $99, then you are making more than you are spending on the overall campaign. You can then dissect each part of the campaign in the same way to see the effective CPA of each piece. Below is an example of a CPA on a PPC campaign.

In this instance we see that the PPC campaign had a lower CPA than the campaign overall. You can look at each piece of your campaign to see how each stacks up and deep dive into the other metrics to see if there tactics you should cut or can optimize in some way.

If you start from this simple premise, you may save yourself from spending too much time looking at data that simply doesn’t matter.

Here’s a nifty little CPA calculator from ClickZ to calculate your CPA from your search campaigns (with cost-per-click [CPC] pricing) versus your display campaigns (often priced by cost-per-thousand [CPM]).

For more on turning data into intelligence, check out this article from our quarterly newsletter.