Cost per order (CPO) the one number you can't live without...

Years ago I was taught about the value of using a cost per order metric.  Today the notion of what it costs to obtain an order is all but lost on marketers and too many executives - but it shouldn't be.  Here's why:
  • Cost per order is a business metric that tells you how much you spend to get that next order.  In an unloaded basis (marketing expense only) it tells you how much money you spend in order to get a transaction that produces revenue.
  • Cost per order establishes a wonderful benchmark in telling you how much your company should spend to acquire that next new customer or that next order depending on whether you are thinking about new customer acquisition or customer loyalty and retention.
  • Cost per order is easy to use when establishing budgets for marketers.  Mr. VP of Marketing how much money do you need for next year?  Well, Mr CFO, how much revenue do you want and what are you willing to spend to get it?  I know exactly what my cost per order is...you tell me how many orders you want and I'll tell you much money I need.
  • Cost per order offers consistency for comparison across marketing sources.  Things like print, direct mail, email, social media, outbound telemarketing and other channels become a lot easier to compare when you establish your cost per order for each source.
  • Cost per order let's you know in a heart beat whether or not your latest campaign was profitable.  Many businesses survive on just a handful of customers but spend all their marketing dollars chasing customers that are never profitable and doing marketing that is fun but makes sure the company gets squeezed on the bottom line.

Cost per order - it's a great metric.  One you should never be without - especially if you're running a SaaS business, a publishing company, a mail order company, an e-commerce company or any other business that is highly transactional, measurable, interactive and can be personalized...

www.irgilyeat.com

 

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