There are endless ways to calculate CPA and ROAS.
Or rather, endless different ways to determine what you should include in your conversions, and how you should distribute those against Paid and Organic marketing channels.
The two most common are:
1- Blended: Attributing total conversions back to both the Paid and Organic channels that drove them. This results in credit going to both Paid and Organic, and will cause Paid CPAs to be higher.
2- Paid Only: Attributing conversions back to only Paid activity. Re-distributing conversions from Organic to Paid. This results in credit only going to Paid activity, and will cause Paid CPAs to be lower.
And the truth is, it’s not an either or.
But rather, most companies should be using both approaches. Applying a different one depending on the use case.
See below for the list of common use cases, and which CPA/ROAS calculation makes the most sense given the end goal.
And of course for Rockerbox clients, this is extremely easy to create and see both views side by side. As we provide the ability to easily create a Paid only view, suppressing Organic touchpoints, redistributing that credit to Paid.
|Impact to CPA for paid channels
|Redistributed to Paid
Common Use Cases
1. Board and Exec Updates and Dashboards: Blended
We recommend using Blended CPA/ROAS here as it provides the best holistic view of how your business performs and enables you to quantify the role of Paid marketing on Organic.
This ensures that you’re able to explicitly quantify the role of Paid channels in driving increased volume against Organic channels. Thus eliminating any confusion or misplaced expectations that Organic channels will grow regardless of Paid spend.
(This is all too common when companies cut branding/top funnel spend and an exec/board audience does not realize the downstream implications that has on Organic channels. Of course it also adversely impacts bottom funnel Paid channels, but that’s a different conversation.)
We also recommend showing a few key metrics broken out across Paid and Organic (as well as all users vs new users vs existing users, if relevant). Including:
- % of conversions
- % of revenue
Including a breakout of Paid vs Organic enables you to show the differences in user quality. As users converting via Organic channels do not always have a higher AOV than Paid. (A common flawed assumption.)
2. Marketing Budgeting: Paid Only
- Overall Marketing Budget
- Budget by Channel
We recommend using a Paid Only CPA/ROAS when doing overall and by channel budgeting, as it provides the best way to capture the full impact of a given channel.
This means the only conversions that are allocated against Organic channels, are ones that have NO Paid touchpoints against them.
As otherwise, Paid channels will receive under-investment as the impact of Paid on Organic is not factored in anywhere, and it’s assumed the Organic channels will receive the same conversion volume regardless of spend levels (both overall, and on a per-channel basis).
3. Marketing Optimizations: Paid Only
- In-Channel Optimizations
- Cross-Channel Optimizations
- Budget by Channel
Similar to the rationale for using a Paid only CPA/ROAS for marketing budgeting, the same logic holds when doing optimizations.
One of the huge values of using a multitouch attribution model to optimize, is that you’re able to view true performance of each channel/placement/tactic (as it receives credit relative to impact).
And to that, using a Paid Only CPA/ROAS to optimize, ensures channels/placements/tactics that have an outsized overlap and impact on Organic channels, are not penalized, whereby that credit for the conversion is distributed to the Organic touchpoints as well.
The counterpoint here is that will risk over-funding some Paid channels that are more duplicative than additive against Organic channels (since that impact of Organic channels is being suppressed.)
4. User Behavior Analysis & Insights: Blended
With this type of analysis, it’s not about CPA/ROAS, but rather viewing the full path to conversion, and relationship across marketing channels.
And to that, it’s critical to have Organic touchpoints included along with Paid, to show how users move across both.