Cost-Per Acquisition (CPA): Max Your Marketing Budget

Look for spikes and

trend lines

Cost Per Acquisition

If you use a local ad agency to manage your marketing ask for a statement on current CPA – cost per acquisition. This number is a simple formula of marketing dollars spent divided by the number of store visitors converted to buyers, and your agency will have these numbers in your file.

 

If you manage your own marketing, calculate the CPA within your promotional sphere – newspaper ads, TV and radio spots and so on. DON’T factor in other operational costs like rent, salaries, benefits, HVAC and other routine retail expenses. If you’re only interested in return on promotion, then focus on your promotional expenses.

 

Use a decent time frame to evaluate CPA.

Twelve months is an easy number to use since you can examine tax records to mine the data you need.

 

First, add up all of the marketing and promotional expenses for a single year. That’s direct mail, newspaper and electronic media, web server costs, content development costs – add up all of the capital you’ve laid out in a 12-month time frame.

 

Then, add up the number of new clients acquired during that same time frame, month by month. The result of that simple math will give you your marketing CPA – how much you spent in marketing dollars on each new customer.

 

Simple and effective.

 

Analyze customer traffic

Examine your CPA for spikes and sales trend lines. For example, August is rarely a robust month for sales because folks are on vacation and have fun in the sun on their minds. Making an appointment for a hearing aid evaluation is the LAST thing they’re thinking about.

 

Look for correlations between marketing activity and CPA trend lines. If you see an increase in new customers during a one-month cable ad spot, that’s a promotional outlet that’s working. But, if your direct mail piece only led to two new clients, direct mail (especially in August) is just throwing your promotional budget down a rat hole.

 

No impact.

 

Chart Your Way To Marketing Success

Once I’ve collected this data I make a simple L-shaped chart.

 

The horizontal line lists all of my marketing activities month by month and the vertical line represents number of new clients on a month by month basis. Again, all of this information is in your client d-base or with your advertising agency so it’s not hard to develop a 12-month graph showing advertising/marketing activities and customer increases and decreases.

 

I’ll give you an example. My stores in Vermont always see a slight drop off in visitor traffic, and therefore sales, during December and January. Of course, December is a notoriously slow month for hearing aid sales. Hardly the Christmas gift you want to unwrap during the holidays.

 

And despite the excellent snow plowing we receive (snow falls so we’re always prepared in Vermont), January is slow because of holiday hang-over and the cold temperatures we experience during a typical Vermont winter.

 

My charting showed that I gained the most new clients in the months of March, April, May and June, with sales tapering off in July and August, only to pick up again in September, October and November – the months before winter really sets in up here.

 

Spikes and Trend Lines

These are the two things I look for during my regular CPA analysis – spikes and trend lines.

 

Spikes indicate a sudden jump in activity with more store visitors and increased sales, usually correlated to a special promotion, like a coupon sale, a health fair or a new outreach program.

 

It’s very simple to correlate spikes with specific promotional activities and to determine which activities deliver the biggest impact on store traffic.

 

Spikes are a sure-fire indication of a winning marketing tactic.

 

Trend lines provide a different perspective. These take place over a longer term and are, therefore, more difficult to analyze. A chart showing a series of upward spikes is positive and a chart indicating slow, steady growth also indicates that your overall marketing strategy is working.

 

Or not. If your chart shows a negative trend line, even though you have some sharp spikes to point to, it’s time to re-evaluate your marketing strategy. Downward trend lines in a CPA graph indicate that it’s costing you more for each customer.

 

Time to make some changes to your marketing strategy.

 

Example? When the new telephone books come out I see a gradual increase in store traffic, regardless of season, when sales activity is compared against year over year. That yellow pages ad is the ballast in my marketing, delivering a regular, steady stream of new store visitors.

 

Max Your Marketing

If it isn’t working, don’t try to fix it.

 

If your weekly newspaper quarter-page ad doesn’t cause a weekly spike, it’s not giving you the pop you should expect from marketing dollars. It may be time to contact the newspaper marketing manager to work out a solution – and maybe a lower price per insertion. (Newspapers will negotiate rates in this age of the world wide web and instant news 24/7 so make a call – especially if you don’t see a weekly spike the day the ad appears, or the day after.)

 

If you don’t see a spike, your expensive newspaper ad is lining the bird cage.

 

My chart shows spikes when I drop coupon-based ads in the local newspaper. So my print ads almost always include a free hearing evaluation and a discount on a hearing aid purchase. This gives my clients more buying options and me more fitting options so coupon advertising is a win-win proposition for all.

 

On the other hand, if you can’t establish a trend line and you don’t see a spike during the 30-day run of a local cable advert, put your marketing dollars to work regardless of what the cable station’s marketing rep says.

 

The Best CPA Charts

The best CPA charts show exactly what promotional activities draw more store traffic. It may also give you a picture of your best sales months – times of the year to increase marketing activity. (If you own a store in the wintry north you may want to cut back on marketing during your historically low-volume months. Use the time to plan and implement next year’s marketing strategy.)

 

It starts with collecting data: dollars spent on advertising and number of sales.

 

Next, create a simple X/Y graph divided into 12 month segments.

 

Use the horizontal axis to plot marketing expenses. Amortize annual or on-going expenses monthly.

 

Use the vertical axis to plot number of new customers, again, on a month by month basis. You now have a clear picture of your CPA at any time of the year. You also have empirical data upon which to direct future marketing based on what’s worked best over the past 12 months. (Don’t forget to include your web site as part of your marketing costs, amortized over 12 months.)

 

With this data in hand, you can more precisely pinpoint tactics that deliver the lowest CPA.

 

And that will grow the success of your hearing aid retail outlet.

 

To learn more about marketing your hearing aid business, visit us at hearingtutor.com for the latest in industry news and low-cost, license-free marketing materials to boost your store’s sales.

 

John M. Adams III

www.hearingtutor.com