đŸ€–đŸš€ Quick guide: Why CPA matters for customer acquisition

The Hyper Growth Blueprint.

Author

Elliott Botterill
August 01, 2023

Read time: 4 mins


Welcome back đŸ«Ą

This week’s Hyper Growth Blueprint covers:

  • 🧐 CPA
 WTF is it & WHY is it important

  • 🎯 The 2 different types of goals you should have

  • 📉 8 ways to reduce your CPA

  • đŸ€– Mega-Prompt of the Week

Let’s go
 👇

Most business owners know the term CPA.

Fewer understand it.

And almost none apply it correctly.

It’s a hot topic nearly everyone I speak to about ads asks me about.

So I wanted to demystify it for you today and explain why you should aim to have the biggest CPA possible & how to calculate it in 2-mins or less.

CPA = your Cost Per Acquisition.

It’s the average cost to acquire a new customer or lead.

Naturally
 the lower it costs you to acquire a customer, the better
 right?

Well


Most businesses don’t give themselves a chance of succeeding at marketing because they don’t properly understand the concept of CPA.

When it comes to advertising you are exchanging cash for eyeballs.

If you’re only willing to exchange a few pounds
 you’ll only get a few eyeballs
 and therefore few results.

If you’re willing to exchange thousands of pounds
 you’ll get millions of eyeballs
 and therefore more results.

I’ve seen several businesses give themselves completely unrealistic CPA targets that strangle the business before it’s even had a chance to get off the ground.

As a business owner, you should have 2 separate CPA goals


The goal of the business = have the highest CPA possible.

The goal of your marketing team/agency = deliver you the lowest CPA possible.

Striving to create a business that enables you to spend more to acquire customers than your direct competitors is the key to market domination.

Think about it
 if you & I had identical businesses, but I could only afford to spend £100 on a new customers



but you (through upsells, cross-sells & other means) could afford to spend £250



you’d eat me alive all day!

‘He or she who can afford to spend the most to acquire a customer will win’

Elliott J. Botterill

Of course - we don’t want to waste money.

So once you have your CPA target, it’s then the job of your marketing team to deliver you the lowest CPA possible.

Hopefully that has clicked
 now let’s explore how to calculate it


CPA is calculated like this
 👇

The CPA Equation

But now let’s look at how to decide on what your CPA should be in your business.

How we calculate CPA in 3 mins


Now it’s time to get practical


Here are 8 ways we reduce CPA for our clients


  1. Use AI to create new iterations of winning ad copy every week to combat ad fatigue.

  2. Combine winning audiences into the same ad set (this increases reach & scale).

  3. Combine winning creatives into dynamic creative campaigns on Meta.

  4. Use AI to send hyper-personalised follow up to increase response rates & upsells.

  5. Utilise cost caps on Meta & Target CPA bids on Google - these advance bidding strategies fight to maintain your CPA.

  6. Contrary to a lot in the space who preach consolidation - we will aim to spread our budget across a portfolio of winning campaigns to increase our resilience to CPA fluctuations.

  7. 24/7 optimisation rules - we have these running in the background to kill our losers quicker and save on wasted spend

  8. 80/20 the account every week
 i.e we identify the 20% of ads driving 80% of the results & kill everything else.

All of these contribute to the aggregation of marginal gains in an ad account


(shoutout to my Atomic Habits fans âœŒđŸŒ)


but the biggest lever to reduce your CPA is always to test NEW:

  • creative

  • landing pages

  • lead magnets, titles, and covers

  • offers

  • guarantees


 because this is the BIG high-impact stuff that reeeeeally moves the needle.

Mega-Prompt of the Week đŸ€–

My team and I spend 100s of hours each week using AI.

Every week I’ll be sharing one of my favorite prompts with you.

To unlock permanent access to this segment, all you need to do is refer 2 people to this newsletter using your special link below.

The Value Equation - Alex Hormozi Special

This is an epic prompt that trains the AI on Alex Hormozi’s Value Equation so you can use it to analyse your business and your offer.

Seriously epic stuff
 enjoy! 

In Chapter 6 of $100M Offers, Alex Hormozi introduces the value equation. Most entrepreneurs think that charging a lot is wrong, but you should “charge as much money for your products or services as humanly possible.” However, never charge more than what they are worth.

You must understand the details of value to charge the most for your goods and services. Further, you should price them much more than the cost of fulfillment. The Value Equation quantifies the four variables that create the value for any offer:

The four variables that create the value is based on the perception of reality. 

Thus, your prospect must perceive the first two factors increasing and the second two factors decreasing to perceive value in their mind:

The Dream Outcome (Goal: Increase) – “the expression of the feelings and experiences the prospect has envisioned in their mind; the gap between their current reality and their dreams”.

Perceived Likelihood of Achievement (Goal: Increase) – the probability that the purchase will work and achieve the result that the prospect is looking for.

Perceived Time Delay Between Start and Achievement (Goal: Decrease) – “the time between a client buying and receiving the promised benefit;” this driver consists of long-term outcome and short-term experience.

Perceived Effort & Sacrifice (Goal: Decrease) – “the ancillary costs or other costs accrued” of effort and sacrifice; supports why “done for you services” are almost always more expensive than “do-it-yourself”.

I am going to give you a business and niche. I want you to outline this value equation for this business. Do you understand?
In Chapter 6 of $100M Offers, Alex Hormozi introduces the value equation. Most entrepreneurs think that charging a lot is wrong, but you should “charge as much money for your products or services as humanly possible.” However, never charge more than what they are worth.

You must understand the details of value to charge the most for your goods and services. Further, you should price them much more than the cost of fulfillment. The Value Equation quantifies the four variables that create the value for any offer:

The four variables that create the value is based on the perception of reality. 

Thus, your prospect must perceive the first two factors increasing and the second two factors decreasing to perceive value in their mind:

The Dream Outcome (Goal: Increase) – “the expression of the feelings and experiences the prospect has envisioned in their mind; the gap between their current reality and their dreams”.

Perceived Likelihood of Achievement (Goal: Increase) – the probability that the purchase will work and achieve the result that the prospect is looking for.

Perceived Time Delay Between Start and Achievement (Goal: Decrease) – “the time between a client buying and receiving the promised benefit;” this driver consists of long-term outcome and short-term experience.

Perceived Effort & Sacrifice (Goal: Decrease) – “the ancillary costs or other costs accrued” of effort and sacrifice; supports why “done for you services” are almost always more expensive than “do-it-yourself”.

I am going to give you a business and niche. I want you to outline this value equation for this business. Do you understand?

That’s all for this week folks.

Take it easy,

Elliott âœŒđŸŒ

P.S. If you want some help looking at your CPA, hit ‘reply’ and let’s have a chat


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