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Metric Deep Dive: CPA
June 28, 2022

Metric Deep Dive: CPA

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In marketing, it seems like there are endless acronyms and metrics we track across our campaigns, and across channels. But when it comes to generating leads and turning those leads into customers, one important metric that's on every marketer's mind is the cost per acquisition or CPA. Your cost per acquisition (CPA) is simply the cost of gaining a new customer through a specific marketing campaign or marketing channel. Depending on the objective of each campaign, you may focus more or less on this metric.

But whether your goal is to increase sales, raise brand awareness, or anything else, you'll want to keep an eye on your direct mail cost per acquisition over the long term. This simple metric provides insight into the health of your marketing campaigns and helps allocate future budgets toward channels and campaigns that are going to drive ROI.

Needless to say, nerding out on CPA metrics with us is a worthwhile endeavor.

CPA: What should you expect?

It can be difficult to determine what a typical cost per acquisition is, especially when comparing across channels. Many marketing professionals wonder what a good CPA is and whether they are ahead, behind, or right on the money.

First, let's look at industry standards and break down CPA rates by marketing channel. An analysis by Search Engine Land reported that the average Google search and display CPA was about $60 in 2016. Tech companies boasted the lowest Display Network CPA at about $19, while the dating industry managed a super-low rate of about $7 per acquisition on the Search Network. Industries with the highest pay-per-click CPAs included law, healthcare, and industrial services.

A 2022 report by StartupTalky tells a different story, with tech companies ranked as having the highest overall acquisition costs (nearly $400). The report ranked travel, retail, and consumer goods as the industries with the lowest costs ($7, $10, and $22 respectively).

WebFX reported the average costs associated with each marketing channel:

  • TV: $342,000 per 30 seconds
  • Radio: $3 to $500 per minute
  • Magazines: $250,000 per ad
  • Newspapers: $113,000 per ad
  • Email marketing: $4000-10,000 initially, and about $500 per month

They found that the average direct mail cost per acquisition was just $52. Though these aren't precise CPA calculations for specific brands, it gives a ballpark for what marketers can expect to pay.

With that said, it's important not to get caught up in hypotheticals and estimates. Regardless of your industry's standard or how competitors are performing, your goal should be continuous improvement. By figuring out your average CPA, you can begin tracking your numbers and taking steps to beat your old average.

Marketers need not get caught in a cycle of complacency, merely making sure to meet their usual CPA. Instead, it's about creating an iterative process and finding ways to lower your cost per acquisition year over year. This is a surefire sign of a flourishing multichannel marketing campaign that attracts new customers at every touchpoint.

A Harvard Business Review survey showed a 49% rise in sales and over 100% rise in inquiries when customers received both print and digital correspondences.

It's a common mistake for newer companies to assume that the lower the cost per acquisition, the better. While low CPAs are generally the goal, a CPA that is consistently very low could indicate a lack of investment in company growth.

The old adage "it takes money to make money" rings true here. Marketers need to strike a balance between reasonable, steady growth and low-enough CPAs. Having quick access to other metrics like your customer lifetime value (CLV) and customer acquisition cost (CAC) can help determine whether your CPA is decent.

How to calculate direct mail cost per acquisition

Figuring out your direct mail cost per acquisition is simple: Take the total amount spent on a direct mail campaign and divide it by the number of new customers gained through that campaign. Similarly, to calculate your overall customer acquisition cost across all campaigns and channels, take the total amount of marketing spend and divide it by the number of customers gained in total.

CPA is the zoomed-in customer acquisition metric and CAC is the big-picture customer acquisition metric. Knowing both will help you strategically manage your ad budget, make sound spending decisions, and take healthy risks with your print and mail campaigns.

Seasoned marketers know they need access to accurate metrics in order to make these calculations. It's also ideal if the metrics are calculated automatically and delivered through a real-time analytics platform that tracks your direct mail advertising campaigns for you.

Optimizing direct mail cost per acquisition: All you need is the data

At first glance, it can seem like tracking social media or email campaigns is much easier than tracking direct mail campaigns. But direct mail platforms have made it much easier for large companies to reduce their margin of error, which has historically been high (eg. from people changing addresses, leaving jobs, etc).

Every enterprise strives to be data-driven, and with real-time analytics, marketers can now measure print campaigns with the same precision as digital campaigns. Some of the direct mail metrics you can track include:

  • QR codes: QR codes are incredibly effective for direct mail tracking. See how many website visits or purchases came from QR code users.
  • Landing page visits: Brands can set up a unique URL for a specific campaign.
  • Calls: If you dedicate a phone line for campaign-specific calls, you can track this metric.
  • Customer Lifetime Value: It's often said that attracting new customers is more than double the cost of maintaining current customers. Tracking your CLV and testing out ways to increase it can dramatically support any sized business.
  • Campaign ROI: Most importantly, brands can see how well their direct mail strategy is working overall. Do the results justify the budget?

With direct mail services, brands can optimize their direct mail spend, raise their mailing efficiency, and make the most of their list with address verification APIs.

Figuring out how to decrease your direct mail cost per acquisition rate unlocks a whole new layer of marketing efficiency. Though response rates and revenue are typically higher among existing customers, new customers are the lifeblood of any enterprise that is looking to scale.

Direct mail isn't making a comeback; it simply never stopped being effective through the dawn of the digital marketing age. Now brands have an opportunity to launch highly effective omnichannel campaigns that reach customers through many avenues – both digitally and in print.

Marketers still invest heavily in direct mail

Marketers are relying on offline channels more than ever these days to reach customers on non-saturated channels. In fact, we've found that 29% of marketers are using direct mail to target existing customers, 27% are using it for new customer acquisition campaigns, and 21% to mitigate customer churn. See how the marketing team at Marley Spoon uses direct mail to mitigate churn and increase CLV.

Interested in learning what actually moves the needle for your direct mail cost per acquisition? Download Lob's 2022 State of Direct Mail, a survey of over 150 enterprise leaders that illuminates best practices for today's direct mail marketers.

Want to learn more about direct mail ROI? Join us for a webinar on Breakthrough Strategies for Improving Direct Mail & Out-of-Home ROI.

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