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Pay Per Performance Advertising

Cost Per Acquisition

by Seth Cotterell

It costs money to get new customers, that's a fact. They don't just fall out of the sky into your lap. Companies spend billions of dollars on advertising every year and they spend a considerable amount of time tracking the cost of their advertising campaigns to its relative success. This is known in business circles as cost per acquisition.

More about Cost Per Acquisition

The concept of cost per acquisition is easy enough to understand, but in practice it is much more difficult to measure. You must decide what costs you're going to consider in the equation. You obviously want to factor in all marketing costs and then divide that by total new customers to determine the cost of a single new customer. Sometimes, though, it is difficult to distinguish a new customer from an old customer, especially in the fast paced modern business environment.

It can also be difficult to decide what costs are directly related to advertising and should be factored into this equation. Are you going to factor in just the cost of the initial campaign from development to execution, or will there be additional follow up costs? These are only two of the many things to consider, so you can see how complicated this can get.

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