'Customer Acquisition Cost' Matters More Than 'Conversion Rates'
This week I was putting together a report for a client whose advertising I manage. They sell a $20,000 service and were interested in understanding their conversion rates from Google Ads and Facebook Ads.
A conversion refers to a new client paying for their service. Not just a lead, but an actual transaction of $20,000.
Conversion Rates: Facebook vs Google
Conversion rates from Facebook Ads are 0.04%.
That means 1 in 2,500 website visitors from Facebook Ads actually purchased the service. Google Ads conversion rates came in at 0.4%. 1 in 250 site visitors who came from Google Adspurchased the service.
Let that sink in for a second.
People who come from Google Ads are 10x more likely to purchase their service than someone who came from Facebook Ads.
Based on that information, what should we do?
Seems like a no-brainer, dunnit? Stop the Facebook Ads and re-allocate that budget toward Google!
Afterall, Google Ads visitors are 10x more likely to purchase!
But really, we don't have enough data to make any decision. Conversion rates are meaningless without comparing costs per acquisition (CPA).
Cost Per Acquisition
Cost per acquisition (CPA) is how much it costs to acquire a new client.
This is where things get interesting.
We were spending $730 to acquire a new client from Google Ads and $470 from Facebook Ads.
Clients from the Google Ads are costing 55% more than those from Facebook!
The reason for the CPA gap is that the costs per click in each channel were drastically different.
Google Ads averaged $2.92 cost per click.
Facebook Ads averaged $0.19 per click.
Despite Facebook Ads' much lower conversion rate, Facebook Ads are still more profitable than Google Ads!
Abandoning Facebook Ads due to lower conversion rates would be a foolish move. We'd be turning off one of our most profitable sources of sales!
Bottom line: Conversion rates are an important metric, but keep your focus on Cost-Per-Acquisition.