Cost per order (CPO), sometimes called cost per acquisition, is the dollar amount spent on advertising or marketing in order to end with a sale. The cost per order is an important part of any web-based business, especially those which are just staring out, or have a very strict budget. The cost per order price is figured by dividing the marketing expenses by the number of orders that the company prepares, and can be used to evaluate the effectiveness of a certain type of marketing, as well as seeing what type of marketing is working well with the targeted consumer demographics.
Cost per order figures are used in decision making for Internet companies. It can have an effect on many different parts of the company, from the employee benefits to how much the products cost. Some of the decisions that can be made based on cost per order figures include:
How much to pay employees who put products together or get them ready to be shipped
What types of equipment for product production can be used or purchased
Shipping methods that can be used to get orders to customers in a timely manor
The price asked for a product
The types and amount of marketing that can be used and utilized
While cost per order is a very important part of Internet businesses, there are experts that also suggest taking cost per order information with a grain of salt. The numbers can be misleading because they do not take into account factors like decision making time on the part of the consumer.