Your CPAs Are Only Going Up
Investing more in customer acquisition, while keeping media execution efficiency constant, guarantees that your cost to acquire each marginal customer is going to increase; CPA’s only go up. The reason the cost of acquisition goes up is because your media has to work harder and harder to acquire the more marginal prospects. Your lowest CPA is going to be associated with acquiring those customers who are already predisposed to buy from you. As you work to acquire more difficult to influence prospects, such as those who may not even know who you are, it costs more to influence them and transform them into customers.
You can conduct your own thought experiment to test the concept. Imagine you own an ice cream truck on the boardwalk of a beach on a hot summer day. The first, easy prospects, flock to the truck when you announce your arrival by playing a tinny melody. To get those beach goers that want ice cream a little less, you may have to wait around for a while until they get the urge to amble over to the truck. To get still more customers, you might send somebody to walk the beach wearing a sign-board and shouting, “Get your cold ice cream!”
What media and price promotions would you have to do to get everybody on the beach to buy an ice cream cone from your ice cream truck? Even the most expensive promotion you could do – free ice cream for all – probably wouldn’t get everybody off of their beach blanket.
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This article also appeared in Chief Marketer in May 2016.