Armed with these three factors -- cost-per-click, clicks-per-acquisition and number of acquisitions, you are now ready to do the math.

DOING THE MATH

Putting it all together to determine the cost-per-acquisition is now very simple. The formula is:

Cost-Per-Acquisition = Cost per click x Number of clicks per acquisition

This methodology assumes that a click is a click; it doesn’t matter if the click came from a banner or PPC or Yahoo or Search.com. It assumes that all clicks are equal. The reasoning behind this is that for branding purposes, your listings, banners and other ads all should present the same message - in a similar manner. It also assumes that it doesn’t matter where the ad is displayed, a click is a click. You should now apply the above formula to each of the media you are using. By assuming that the number of clicks-per-acquisition is the same for all media, you’ll have a good idea of what each media is costing -- per order. In 2002 Yahoo banners which were running around $70 for every 1,000 impressions, or a CPM of $70. So each time a banner was displayed, the cost-per-impression was $0.07 ($70 / 1,000). At first, this doesn’t sound too bad – until you do the math. A good click-through rate on a banner campaign is 1%, so let’s use that. In this case, if you were to run 1,000 banner impressions, you would get 10 clicks (1% of 1,000), for a cost-per-click of $7.00 ($70 / 10 clicks). If it took 100 clicks to get an order, your cost-per-order would be $700 ($7.00 x 100 clicks-per-order). This is extremely high for most types of offerings. Only a year later, it’s funny how things change. Yahoo have reduced the price of banners to $3 CPM.” Using the same assumptions as above, the cost-per-impression was now $0.0033 ($3 / 1,000), the cost-per-click is $0.33 ($3 / 10 clicks) and finally the cost-per-order is $33 ($0.33 x 100 clicks-per-order). Dragon Fire Communications will discuss with you the best strategy for your business click here for further information.