Cost per metrics – glossary definition
A type of metric used to measures the efficiency of a given marketing program. CPO (cost per order) and CPA (cost per new customer acquired) are two popular examples. These metrics used to be quite popular until ROI metrics replaced them as the best practice. The problem with “cost-per” metrics is that their use can lead to erroneous decision making. For example, consider two programs like so:
Program A – with a cost per order of $100
Program B – with a cost per order of $50
Using CPO, you would decide to fund Program B. But Program B delivers orders worth $100 to your company versus Program A which delivers orders worth $1000 to your company. On an ROI basis assuming all other things are equal, Program A an ROI of 10x or 1,000%. while Program B delivers an ROI of 2x or 200%. “Cost per” metrics communicate only the cost-side of program economics; they tell you nothing about the revenue and contribution side, as needed to make go/no decision on which program to continue.
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Related posts:
- Cost per Order
- Customer Placement Value (CPV) – glossary definition
- Cohort Analysis – glossary definition
- Customer Life Expectancy (CLE) – glossary definition
- Metrics – best practices
Related posts:
- Cost per Order
- Customer Placement Value (CPV) – glossary definition
- Cohort Analysis – glossary definition
- Customer Life Expectancy (CLE) – glossary definition
- Metrics – best practices
