The marketing cost per acquisition percentage (MCPA%) is an important metric for any business.
As the name implies, this metric is related to the cost per acquisition (CPA), also known as Cost Per Customer (CPC), and is a key measure of the efficiency of your marketing efforts. Calculating the MCPA% of your organization gives you insight into not only how efficient your marketing efforts are, but also whether your sales and marketing teams are performing as well as they should be.
Need a refresher on calculating Cost Per Acquisition? Check out our blog post on that topic.
This post should help you better understand MCPA% and how important it is to your business.
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Before we get too far into how MCPA% is used, we need to make sure that we have a solid understanding of exactly what it is. Your marketing cost per acquisition percentage calculates what percentage of your CPA is spent on marketing costs.
This is important because it shows you how much you’re spending on marketing compared to the total amount that you’re spending for each new customer that you bring in. You may remember that your CPA combines both your marketing and sales costs; the MCPA% shows you how those two costs are balanced within your CPA.
To calculate your MCPA%, you’ll need the same marketing and sales costs you used to calculate your CPA.
For marketing, this will include expenses, salaries, commissions, outside agency fees and the marketing department’s overhead; for sales, it will include sales salaries and commissions, any sales-related overhead and all of your sales expenses. Don’t forget to include bonuses, program and advertising spend and any other relevant costs in the appropriate categories as well.
Once you’ve collected the numbers, add up all of your marketing costs. Divide that total by the combined total of both your sales and marketing costs. This will give you a decimal number, which you can multiply by 100 to come up with your percentage.
To give you an example, let’s say that your total marketing costs came out to around $200,000 after you added in all of your expenses. Sales costs came in at $300,000. When you add those together you get a combined cost total of $500,000. Divide your $200,000 marketing cost by this $500,000 total and you get the following:
$200,000 / $500,000 = 0.4
You can then multiply this by 100 and get a MCPA% of 40%, indicating that 40% of your total CPA was spent solely on marketing.
You’re already tracking your CPA, so you can evaluate how much you spend on average to bring in a single client or customer. Tracking MCPA% is important as well, because it gives you the data you need to analyze your spending patterns. When your CPA rises, it does so for a reason, and MCPA% helps you determine what that reason is.
Whatever timeframe you use to calculate your CPA, use the same timeframe to calculate MCPA%. If you don’t, your numbers will end up skewed and your percentage won’t accurately reflect your sales/marketing split in your CPA. Make a habit of tracking your MCPA% each time you recalculate CPA. You can even add the formula to your Excel spreadsheet so that MCPA% is calculated automatically each time you calculate CPA.
In case you forgot, that formula is:
Marketing costs / (Total sales + marketing costs) * 100 = MCPA%
When CPA increases, MCPA% shows you whether the increase was a result of marketing cost increases or sales cost increases.
An increase in MCPA% shows that the balance between marketing and sales costs has shifted in favor of marketing; it means that your CPA went up because you’re spending more on marketing than you used to. Likewise, a MCPA% decrease shows that the balance shifted in favor of sales and sales costs are going up.
Before you take drastic action, however, make sure that your company isn’t currently in an investment cycle. Investment costs can also drive up CPA, and slashing budgets during an investment cycle just results in your business suffering from a lack of much-needed funds for marketing and sales.
Of course, if CPA goes down then MCPA% is used to show which department has experienced increased efficiency during the tracking period. A decreased MCPA% shows marketing costs going down, while an increased MCPA% shows sales costs dropping.
Analyzing CPA and MCPA% gives you a lot of information on how efficiently your sales and marketing teams are using their available funding. Keeping an eye on the metrics and their associated trends will show you where you’re overspending and possibly where you’re under-spending as well, giving you an opportunity to change your spending patterns moving forward. This insight will not only ensure that your company is operating efficiently, but you’ll also save money that can be used for greater investments down the road.
If you want to find more great marketing metrics, why not try our guide to the 6 Marketing Metrics You Should Actually Care About?