Not only is spending a portion of your marketing budget on landing pages beneficial to your bottom line, there’s a way to predict how much you should be spending to optimize your Cost Per Acquisition (CPA).
And today I’ll share that with you.
Today I’ll expose exactly how much of your marketing oyster should be shucked off on those slippery little suckers we call landing pages.
(If I’ve got you thinking of the scene in Pretty Woman where Julia Roberts flips a snail off the table, then you know I’m adequately controlling your thoughts).
According to information from Omniture (a world leader in web analytics), you can achieve a 25% improvement in conversion rate by using a promotion-specific, standalone landing page (vs. sending paid search visitors to your homepage).
Assumptions: Taking 25% as our base conversion improvement value, let’s also set $10,000 as our monthly marketing campaign budget.
Our goal is to analyze the effect of taking a portion of the monthly marketing spend and using it to pay someone (anyone really) for the purpose of conversion rate optimization (CRO).
If you assume that 100% of the budget is spent on generating traffic via paid search (Google AdWords in this example), what happens when you reduce that amount? Obviously the traffic will drop in direct proportion to the drop in budget.
Now, what if you spend 10%, 20%, 30% of your budget on optimizing your landing page instead of paying for traffic? In this case, 10% equates to $1,000, which will buy you a couple of days of concerted effort toward improving your landing page.
What effect will this have on your average CPA?
The table below shows what happens when you start taking cash away from traffic to put into improving your conversion rate through optimization strategies, and how much money you should be throwing in this direction.
| Campaign Budget | Conversion Costs | PPC Spend | CPC1 | Visitors | Conversion Rate2 | New Customers | CPA |
| $10,000 | $0 | $10,000 | $0.40 | 25,000 | 1.00% | 250 | $40 |
| $10,000 | $1,000 | $9,000 | $0.40 | 22,500 | 1.25% | 281.25 | $35.56 |
| $10,000 | $2,000 | $8,000 | $0.40 | 20,000 | 1.50% | 300 | $33.33 |
| $10,000 | $3,000 | $7,000 | $0.40 | 17,500 | 1.75% | 306.25 | $32.65 |
| $10,000 | $4,000 | $6,000 | $0.40 | 15,000 | 2.00% | 300 | $33.33 |
1 Average cost per click according to Google
2 Estimated conversion improvement of a successful test. Note: these numbers are also based on a diminishing percentage improvement per dollar spent. (25% initial increase by using a landing page followed by a compounded rate that bumps conversions by 25%, but is really only a 20% overall improvement in the second level – 25/125 equates to a 20% improvement).
What these numbers say is threefold:
Your own private sweet spot (?) will depend on how successful your CRO efforts are, perhaps you’ll only achieve a 5% increase per $1,000 spent. The only difference is that you’ll have a different chart and a different sweet spot. The important thing to learn here is that there does exist a point where you optimize your expenditure based on optimization efforts.
Find your sweet spot and you find the key to a minimized CPA.
Now ain’t that sweet!
RT @unbounce: How much of your marketing spend should you use for page optimization? Find out here – http://bit.ly/ttfjz – #CRO #landingpage
Your blog just give amazing tips, thanks a lot !
[...] pages and conversion rate optimizationConversion rate optimization (CRO) is the process for improving the return on investment (ROI) of your marketing activities. Landing pages act as the “marketing glue” between [...]
Great post Oli !
Thanks for this concept of sweet spot
[...] an article published on the Unbounce blog, the company has found that a well optimized landing page can lead to a 25% increase in your sales; they also go on to explain how segmenting a percentage of your budget could be your best option [...]
Oil,
Great post! Really like the analytic, but simple approach to thinking about the cost to acquire a customer.
[...] you’re just digging in, it doesn’t take long to realize that spending your time on Conversion Rate Optimization (rather than only focusing on search or PPC for example) can dramatically reduce your CPA. No [...]
[...] you’re just digging in, it doesn’t take long to realize that spending your time on Conversion Rate Optimization (rather than only focusing on search or PPC for example) can dramatically reduce your CPA. No [...]
[...] you’re just digging in, it doesn’t take long to realize that spending your time on Conversion Rate Optimization (rather than only focusing on search or PPC for example) can dramatically reduce your CPA. No [...]
[...] want to spend too much, throwing money down the toilet. But if you can find the proper balance, the conversion economics sweet spot which maximizes your spend while producing an optimal cost per acquisition (CPA), this is precisely [...]
This article goes beyond typical / average analysis. Landing pages are indeed extremely important.
That’s a good way to look at it. In a way it almost seems like selling CRO short as the lower CPA will last a lot longer than one month (since this example looks at 1 month of PPC spend).
Do you find that customers of CRO services only need it every once in a while or do they use it on an ongoing/monthly basis?
You should definitely keep doing it on a regular basis. This is just to illustrate the benefit in a conceptual way.
[...] win the test, you’ll be afforded more leeway in the future while educating the HiPPO’s about the value of scientific experimentation & testing vs. random ideas. You’ll also start making more money for the company, which any smart HiPPO [...]