Cost per subscription/order
Cost per subscription/order is the marketing expense divided by the total number of new purchases in a given period
Cost per subscription or order, also known as cost per acquisition, is a crucial business metric applicable to several areas of digital marketing and ecommerce. It represents the cost to acquire a new customer or subscription. In other words, it tells you how much you are investing to gain a new customer or subscriber.
Formula
Cost per subscription/order = Total Marketing Expense / Total Number of New Subscriptions or Orders
Example
Suppose your ecommerce website spent $500 on marketing in a month and received 20 new orders. Thus, the cost per subscription/order for that month is $500/20 = $25.
Why is Cost per subscription/order important?
The significance of cost per subscription/order lies in its ability to measure marketing campaign effectiveness. It's an essential metric for ecommerce businesses to understand how efficiently they're utilizing their marketing budgets. High cost per order/subscription indicates that a company is spending more to acquire each customer, implying that their marketing methods are probably not efficient.
Which factors impact Cost per subscription/order?
Numerous factors can affect the cost per subscription/order, including the industry type, competition levels, product type, target audience, and marketing strategy.
How can Cost per subscription/order be improved?
- Optimizing Marketing Efforts: Running highly targeted campaigns can potentially increase conversion rates, lowering the cost per subscription/order.
- Returning Customers: Encouraging repeat business can significantly decrease the cost per order since encouraging loyalty often costs less than acquiring a new customer.
- A/B Testing: Regularly testing different areas of your business, such as pricing, product descriptions, or website layout, can help you fine-tune the customer experience and potentially reduce your costs.
What is Cost per subscription/order's relationship with other ecommerce metrics?
Cost per subscription/order has a direct correlation with several other ecommerce metrics. For instance, it can greatly impact the overall profitability and return on investment rate. A lower cost per order often results in higher profit margins, given the price of the product or service remains constant. It also influences the customer's lifetime value. If the cost to acquire a new customer is high, it could potentially drive down the lifetime value of a customer if they don't purchase enough to cover the acquisition costs.