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Cost per Order
Cost per Order
Cost per order
, also called
cost per purchase
, is the cost of internet
divided by the number of orders. Cost per order, along with
cost per impression
cost per click
, is the starting point for assessing the effectiveness of a company's internet advertising and can be used for comparison across
and as an indicator of the profitability of a firm's internet
An internet retailer spent $24,000 on online advertising and generated 1.2 million
, which led to 20,000
, with 1 in 10 clicks resulting in purchase.
Cost per impression = $24,000 ÷ 1,200,000 impressions = $0.02
Cost per click = $24,000 ÷ 20,000 clicks = $1.20
Cost per order = $24,000 ÷ 2,000 purchases = $12.00
The purpose of the "cost per order" metric is to measure the advertising cost required to acquire an order. If the main purpose of the ad is to generate sales, cost per order is the preferred metric.
This is the cost to generate an order. The precise form of this cost depends on the industry and is complicated by product returns and multiple sales channels. The basic formula is:
Cost per order ($)
= Advertising cost ($) ÷ Orders placed (#)
Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; and David J. Reibstein (2010).
Marketing Metrics: The Definitive Guide to Measuring Marketing Performance (Second Edition).
Upper Saddle River, New Jersey: Pearson Education, Inc. <
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