The Clickable Search Engine Marketing Blog

What if you only paid search engines for keyword ads when visitors they lure convert to customers?  That is the goal behind the cost-per-acquisition (CPA) model.  Instead of just paying to get people in the door, you only pay for people that make a purchase. CPA models help allocate funds where they will have the biggest impact on your bottom line.  
 
The default option in most search networks is cost-per-click (CPC).  You pay every time someone clicks on your ad.  If I was a candy store owner managing my paid search through CPC, I might bid $.50 on the keyword "candy" and $.50 on "chocolate".  Many stop at this point and say: "I got 200 visitors to my Web site.  100 came from "candy" and 100 came from "chocolate".  We can spend more money and get more visitors."
 
A lot of people see great results with this model.  Get people to our Web site and they will buy something.  Right? 
 
Lets do the math. 
        100 "candy" clicks x $.50 = $50.00
        100 "chocolate" clicks x $.50 = $50.00
                                        Total = $100.00
 
I spent $100.00 on advertising and we got people to come to my site.  Now let's figure out what it actually cost me to get a customer with the two keywords. 
 
Let's assume one of the people who found my site through the keyword "candy" made a purchase and five of the people who found me through "chocolate" made a purchase.  Now I can figure out how much each of these terms cost me per customer.
 
        $50.00/1 "candy" customer = $50.00/customer        
        $50.00/5 "chocolate" customers = $10.00/customer  
 
There is a lot I can do with this information to get more from my advertising spend.  I could decide to only spend money on the keyword "chocolate".  I could lower my bid on the term "candy".  I could also split my advertising budget so that more is spent on "chocolate" and less is spent on candy.  In any case I now know what it costs me to get a customer not a visitor.
 
To start managing your paid search marketing under a CPA model, the first thing you need is a value for conversions.  If you have an e-commerce site you can pull the data directly from the transaction into your search marketing account.  If you do not have an e-commerce site, you can estimate a value to conversions.
 
You can then start managing your campaigns on profit instead of traffic.  It is a whole new way of looking at search engine marketing. In fact, this is a best practice that Clickable guides customers through upon signup and via simple wizards, especially our “Set Goal Values” wizard. Clickable’s ActEngine then uses these data and other inputs to make recommendations to drive maximum profit.

Trace, Clickable SEM Guru

Note: Clickable employees volunteer several hours a week to helping other search marketers succeed. “Clickable Gurus” participate in numerous online search communities to provide straightforward answers to numerous questions, and, each week, one of the gurus posts a search marketing tip to the Clickable Blog.