Answer:
With the given scenario, the only plan that will help Molly with her marketing goal to generate more sales is investing $40,000 to generate 2,000 conversions and a CPA of $20.
This is the only plan that actually generates more sales compared to her current marketing campaign with a total investment of $25,500, 1,500 conversions, and a CPA of $17.
Other plans given in the scenario do not actually generate more sales. And they also do not take into consideration Molly's willingness to increase CPA and investment in order to clear her outstanding stock.
However, the additional cost of acquiring 500 new customers (2,000 minus 1,500) at an additional cost of $`14,500 ($40,000 minus $25,500) with an incremental CPA of $29 ($14,500/500) is very exorbitant. This cost must be compared with the Customer Lifetime Value or CLV. This implies that consideration must be given to monitor if the new customers are there to make only a one-time purchase.
Explanation:
CPA or Cost per Acquisition is a marketing metric to gauge the cost of acquiring new customers who convert to patronize the firm's product.
It is an important measure that helps to channel marketing campaigns towards those customers that add value to the business.
