“Double Your Profits, Dominate the Competition and
Develop a Highly Valued Business…While Working
Less and Having More Fun”
Click Here and Learn About The Secrets That Elite CEOs and Business Owners Use to Leverage Their Time & Money
What is Your CPO?
One of the most important metrics a business owner must know and track is the CPO, or Cost per Order (also called CPA, or Cost Per Acquisition).
CPO tells you how much is costs to get an initial order from a new customer. For instance, if you spend $10,000 on a marketing campaign and receive 100 orders from that campaign, your CPO for the campaign is $10,000/100, or $100 per order.
CPO tells you if your investment in marketing is paying off or not. In the above example, if your gross margin is at least $100 per order, you are covering your marketing and direct product costs (Cost of Goods Sold) with your marketing expenses. If your gross margin is more than $100 per order, you are losing money with every order.
Now, some business money figure that it is okay to lose money on that first order, because they expect future orders from repeat customers to provide profit. They look at the lifetime value of a customer compared to what it takes to get that customer in the first place. That may be a viable strategy, but the best businesses make money right up front from a first-time customer, and don't settle for an unprofitable first order.
If your CPO is too high, then you have a few options:
- Get rid of marketing campaigns that are not bringing in enough business.
- Renegotiate rates with vendors to bring down costs.
- Find new, lower cost marketing campaigns to test (and then roll out if they are successful).
- Test new marketing copy, including the offer you make to customers.
- Improve your selling process so that your conversion rate from leads to customers improves. That way, you convert more customers and need fewer leads.
- Launch products that have higher gross margins, and therefore allow higher costs to get a new order.
The above assumes that you fanatically track the source of each order, and that you understand that marketing is an investment that must be monitored carefully. Think of every marketing campaign as an investment in your portfolio, and be merciless about removing campaigns that don't work while filling your portfolio with campaigns that do.