Keeping Your Cost Per Acquisition in Budget

cost per aquisition

Cost per acquisition can be a difficult expense to keep within a given fixed budget. While CPA is an issue in most industries, it is especially troublesome in the SaaS industry given the nature and design of SaaS on the whole. As a result, many SaaS people are scrambling to find ways to keep their CPA within acceptable bounds. There’s always a lot of talk about cutting corners in other departments such as customer service or CRM to throw more money at CPA, given customer gain is vital to continued progress.

This is a bad idea, as skimping on those departments will result in the CPA being exacerbated, as they indirectly feed into overall customer acquisition themselves. So, shifting existing funds around among departments and expenses doesn’t work, so what does? Is there a way to keep CPA within a budget, while making the customer acquisition strategies remain effective? Is there hope?

Well, like many things in life, we can’t expect miracles or cure-alls in anything, including this. So, a 100% fix of any situation isn’t going to happen. That said, though, there are some things we can do to combat the severity of CPA overflow, while maybe not completely abating it entirely.

The first thing to do is to look at the expenses that make up customer acquisition. They are numerous and not all immediately obvious, and herein may lie one of the problems itself. One of the expenses isn’t directly visible as a CPA element necessarily. Overhead is a problem, and it’s overhead in free/demo use of the service by prospective customers that causes it. They’re incrementally ballooning the cost per unit, which gets passed on to the paying customers, or gets eaten bitterly by the company itself. And while the cost itself may not be immediately visible as a CPA element, its end result affects the overall CPA, resulting in mysterious numbers pushing CPA past its budget margins.

If you are experiencing these mysterious bursts of cost seemingly from nowhere, then you most likely need to factor this overhead into the budget. You can’t abate this one without rebuilding your demo and free use policies, but now you can at least account for it.

But, let’s talk about your free or demo policy, because it’s the other big one that’s hard to address. Are you supporting a long-term free version with hopes of conversion, or do you have a limited demo? If limited demo, consider limiting it to 15 days rather than 30, to cut this overhead a little. If you’re freemium, consider a monthly recurring revenue engine to account for the freemium overhead and therefore raising your CPA budget rather than trying to constrict it.

Finally, there’s marketing. It may be time to look at your marketing and outreach and see if you’re targeting the right demographics the right way with it. If you’re making a lot of noise (which costs money0, but it is falling on deaf ears, well your CPA is going to be really high. It takes a lot more energy to climb uphill after all.

Cost per acquisition can’t be easily addressed, so you’ll find trying to raise the budget by remodeling your plans, and accounting for things in the budget you may not, may be the only real choice you have. This is one of those rock and a hard place scenarios, but one you can at least get control of.

Omri is the Head of Demand Generation, as well as the Lead Author & Editor of the SaaSAddict Blog. Omri established the SaaSAddict blog to create a source for news and discussion about some of the issues, challenges, news, and ideas relating to SaaS and cloud migration.