Cost per order (CPO)

1. What is CPO (cost-per-order)?

For companies that sell products or services online, the CPO is an indispensable indicator for managing the marketing budget and maximizing profits.

The costs typically considered include:

• Ad spending (e.g. Google Ads, Facebook Ads)
• Commissions for affiliates or influencers
• Costs for creating advertising material (if directly attributable to a campaign)
• Marketing technology fees (prorated, if possible)

Costs that not directly related to the advertising campaign (e.g. general personnel costs, production costs, logistics costs), are usually not included in the CPO calculation.

2. Differentiation from other metrics (CPA, ROAS)

It's important to differentiate the CPO from similar marketing metrics:

• CPA (cost per acquisition/cost per action): Measures the costs per acquisition won or per defined action (e.g. lead generation, newsletter subscription, app installation). While the CPO himself specific to orders , the CPA may be more broadly defined. In e-commerce, the CPA may be relevant for acquiring new customers (costs per new customer), while the CPO looks at all orders (including from existing customers).
• ROAS (Return on Advertising Spend): Set the generated by advertising turnover in relation to advertising expenditure. While the CPO measures cost efficiency per order, the ROAS focuses on the return on sales of advertising spending. A high turnover per order can justify a higher CPO.

3. How is the CPO calculated? (formula and example)

Calculating the CPO is simple but requires precise data collection:

Formula:

CPO = total marketing costs of the campaign/number of orders generated by the campaign

Example:

• An online shop invests 5,000€ in a Google Ads campaign.
• 250 orders are generated via this campaign within the measurement period.
• Calculation: CPO = 5,000€/250 orders = 20€
• Interpretation: On average, it costs the company €20 to generate an order through that specific Google Ads campaign.

Important requirement: Accurate tracking is essential in order to be able to correctly assign orders to the relevant marketing measures (e.g. through UTM parameters, conversion tracking pixels).

4. What is a “good” CPO?

There is no universally “good” CPO score. Whether a CPO is rated as good or bad depends on several factors:

• Product margin: The CPO must be well below the average margin per order for the campaign to be profitable.
• Sector: In industries with high margins or high average order value (AOV), a higher CPO may be acceptable than in low-priced segments.
• Campaign goal: If it is primarily about acquiring new customers, a higher CPO can be accepted in the short term if the customer lifetime value (CLV) justifies this.
• Channel: Different marketing channels typically have different levels of CPO.
• Average order value (AOV): A higher AOV can make a higher CPO sustainable.

A CPO should always be assessed in the context of overall profitability and specific business goals.

5. Areas of application and optimization

The CPO serves as an important basis for strategic decisions and optimization measures:

• Campaign evaluation: Compare the effectiveness of different marketing campaigns, ad groups, or keywords.
• Channel optimization: Identification of the most cost-effective marketing channels (e.g. SEO vs. SEA vs. social media ads).
• Budget allocation: Reallocate marketing budget to channels and campaigns with the lowest CPO (taking into account scaling effects and goals)
• Conversion rate optimization (CRO): Measures to improve landing pages, the checkout process, or ad relevance can increase the number of orders at the same cost and thus reduce the CPO.
• Audience targeting: Targeting advertising more precisely to relevant target groups can reduce wastage and improve the CPO.
• A/B testing: Test different ad variants, images, or call-to-actions to determine the version with the best CPO.
• Product profitability: Analyze the CPO at the product level to understand which products can be promoted cost-effectively.

6. Benefits of the CPO

• Clear success indicator: Provides a simple and understandable metric for measuring the cost effectiveness of order-generating campaigns.
• Direct profitability relationship: It is directly related to profitability, as it measures costs per revenue-generating unit (order).
• Supports budget decisions: Helps with data-based allocation of marketing budgets.
• Good comparability: Allows you to compare efficiency across different campaigns and time periods (with consistent calculation).

7. Disadvantages and Limitations of the CPO

• Order value is not taken into account: A low CPO isn't always better when the average order value (AOV) falls at the same time. Looking at the ROAS is often useful as a supplement here.
• Customer Lifetime Value (CLV) is not taken into account: The CPO is a short-term metric. Cost-intensive new customer acquisition (high CPO when ordering for the first time) can be worthwhile in the long term if the customer has a high CLV.
• Attribution issue: The exact attribution of an order to an individual marketing measure can be difficult in complex customer journeys (see attribution modelling).
• Risk of over-optimization: Focusing too much on the CPO can result in brand building or opening up new markets being neglected, as these often have a higher CPO initially.
• Order quality: The CPO does not say anything about the quality of the order (e.g. return rate).

8. Conclusion

The cost-per-order (CPO) is a fundamental indicator in performance marketing and e-commerce for evaluating the cost efficiency of marketing measures with regard to generating orders. It enables direct control of advertising expenditure per sale and serves as an important basis for optimization strategies and budget decisions.

However, for a holistic assessment, the CPO should always be considered in the context of other metrics such as average order value (AOV), return on advertising spend (ROAS) and customer lifetime value (CLV). Accurate data collection and a clear understanding of your own margins are essential to effectively use the CPO.

Related terms: Cost per Acquisition (CPA), ROAS (Return on Advertising Spend), Conversion rate, AOV (Average Order Value), CLV (Customer Lifetime Value), performance marketing, attribution modeling