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How to determine your cost per acquisition and why it matters to rehab marketers

October 16, 2017
by Gerald Ong
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Measuring lead generation is a necessary—and often a forgotten—step in evaluating the rate at which individuals reach your rehab facility through its digital marketing materials. Now, as our industry develops ethics guidelines for marketing, how can you ensure your facility adheres to ethical standards when measuring the success of its marketing efforts?

Evaluating a single campaign is overwhelming without using proper measurement. If you had to report on your cost per acquisition (CPA) for your marketing efforts, how easily could you crunch the numbers? Honing in on a measurement tool, like CPA, gives you a better understanding of what tactics foster engagement among treatment seekers and improves and builds upon your facility’s messaging. Ultimately, it helps you analyze which tactics are helping your rehab center save more lives all while adhering to ethical principles.

If you’re wondering what you can learn by calculating CPA, consider the following three points.

1. Determining your facility’s CPA measures the revenue impact of each marketing tactic.

Whether you choose to run a social media campaign or list your rehab facility on an authoritative directory page, measuring lead generation helps you make strategic and informed decisions in choosing the best marketing options for your facility. Though there are several ways to do this, utilizing a simple calculation like CPA tells you the exact dollar amount spent on digital marketing efforts and the rate of its effectiveness by dividing the amount spent on said marketing tactic by the amount of admissions that resulted from it.

Consider this: You spend $3,000 on a Facebook ad campaign that generates 200 calls with three admissions. In this scenario, your cost per acquisition is $1,000 ($3,000 spent divided by three admissions). It’s important to note that while the general numbers show your CPA equates to $1,000, word-of-mouth referrals from each initial admission can reduce your CPA significantly. 

For example: After spending $3,000 on your Facebook ad campaign and securing three admissions, you determine your CPA is $1,000. However, from those three admissions, each individual referred a loved one to your facility resulting in a total of six admissions. Now, you have a CPA of $500 ($3,000 spent divided by six admissions).

Essentially, you doubled the amount of people you helped into treatment without having to increase your investment. As demonstrated by our hypothetical example, word-of-mouth referrals reduced your CPA by 50%. However, this can be difficult to measure if your facility doesn’t track these type of referrals.

Similarly, evaluating your allowable CPA can help you make effective marketing budget decisions. Your allowable CPA is the dollar amount you’re willing to spend to acquire a new client based on your facility’s client lifetime value (CLV)—that is the amount of revenue you gain from an average client during the time he or she stays at your facility.

Consider this: Let’s say your average client stays in treatment two months at a cost of $15,000 per month. Your average CLV is $30,000 ($15,000 multiplied by two months), in which case your allowable cost per acquisition would be $4,500—15% of $30,000. Most facilities usually allocate 10% to 20% of their CLV toward their allowable cost per acquisition.

Determining your allowable CPA is a proactive approach to setting marketing budget parameters that make the most sense for your business. In the case of the Facebook ad campaign, above, which performed with a CPA of $500, you’d be well-below your allowable cost-per-acquisition of $4,500.

2. CPA reveals quality versus quantity.

Often, the success of a marketing campaign is defined by the number of calls to your facility. While there are instances where measuring the quantity of individual calls is useful, measuring admissions is the most helpful for making smart budget decisions, as admissions indicate revenue for your facility.

Consider these two examples:

1.)You spend $3,000 on a Facebook ad campaign that generates 200 calls.

2.) You spend $3,000 to place your facility on a directory page that generates 100 calls.

Without analyzing number of admissions, we might assume the Facebook ad campaign was more successful based on the calls it generated. However, if we said the Facebook ad campaign helped three individuals into your facility while the directory page placement admitted five people, we notice a sizable difference in CPA. The Facebook ad campaign resulted in a cost of $1,000 per each admission, while the directory page placement resulted in a cost of $600 per admission. With the directory page placement, your facility was able to help more people at a significantly lower cost.

3. Leveraging CPA allows for business growth.

If calculated strategically, CPA will help you reach overall business growth and expansion goals. Whether its opening another treatment center, adding more beds, or implementing a new alumni program, leveraging a low CPA overtime means less money spent on marketing efforts and more that can be allocated toward said business goals.

Measuring the success of your facility's marketing efforts is a crucial step not only as a business but as an organization rooted in the mission of helping people. CPA ensures your facility maximizes its marketing budget by examining which tactic yields quality leads and is the most cost efficient. Among all of its many virtues, the most important of determining your facility's CPA is its ability to help you get more people into treatment and, ultimately, save more lives.

Gerald Ong is the sales manager for Recovery Brands