Average Cost per Visitor
Visitor acquisition costs often spiral out of control when left untracked. While tracking these costs can be difficult in the long run the effort is worth it.
Definition
A function of the total sum of marketing costs, the average cost per visitor is defined as:
Total Acquisition Marketing Costs / Visitors = Average Cost per Visitor
For most companies the tricky piece is summing acquisition marketing costs, owing to the fact that few companies are accurately tracking these numbers on anything more granular than a quarterly basis. It is recommended that you limit the summation to online marketing activities only unless you strongly brand your URL in offline marketing materials. By adding up the costs of search, email, banner, partner and feed-based marketing activities a fairly useful KPI can be generated.
This indicator is a good candidate for segmentation by marketing channel. For example, you may want to calculate the average cost per visitor for your email, banner and search based marketing efforts.
Presentation
Because this KPI is dollar-based little usually needs to be done regarding presentation to attract stakeholder interest. Especially if the average cost per visitor is high, most executives and managers will pay close attention to this indicator.
Expectation
Ideally visitor acquisition costs are low and contribute to a well-run, high margin business. Unfortunately the ideal case is rarely observed. It is worthwhile to set the expectation that the company will work diligently to lower visitor acquisition costs and carefully critique each marketing channel.
Action
If cost per visitor suddenly increases it is worthwhile to compare this increased cost to average revenue per visitor and relevant conversion rates. If cost per visitor is going up but revenue or conversion are flat or decreasing something has gone awry. The converse is also true: if your acquisition costs drop suddenly you want to make sure that this fortuitous event has not happened at the expense of revenue or other measured value.
Phil Aaronson added the following ...
I shudder a little bit when I see “New”. Its certainly important, but its confusing. Usually this is in conjunction with some time window. Like what’s my average acquisition cost per new visitor THIS month or quarter or whatever. The analyst will in general have the total number of visitors for that month and the expectation is that new + repeat will equal the total. But it depends, right? You can argue that some “new” become “repeater” within the time frame. Are they counted in both camps?
And where it’ll really get you no matter how careful you try to be, is in a trend report of these two. Here you’re doing this same thing in a sequence of windows of time. And here you’re really likely to count visitors as both new (in one time period) and repeat (in a later one) and the sum across the time periods won’t cross check. Is that the phone I hear ringing? :)
Ug, I hate new :) I think we tried to introduce the concept of New, Repeat and Returning to differentiate but that sort of went over like a lead balloon.
I hate new :)
Xavier Casanova added the following ...
If you can do it, it’s best to further segment this and get:
- Average acquisition cost per new customer
- Average repeat purchase cost per customer
Acquisition/Retention are 2 important variables to consider IMHO to make this KPI useful. More actionnable too.