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October 31st, 2018, 08:45 AM   #1
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this one is challenging me!

Hi Guys,

Nebwbie here, I'm excited to join this forum!

I have a maths challenge which is beating me and would really appreciate some help please!

So...my company sells products online.
We pay Facebook to advertise our products.
We are currently trialling different price points for a particular product to see which price point converts to sales better and makes us more profit.

The factors are:

Product price - The price we charge for the product

Cost Per Acquisition (CPA) - Facebook charges us for each impression (every time it shows our advert to a user) but we convert that to a CPA, which is how much it has cost us to get that sale. Clearly the CPA is a product of he conversion rate.

Conversion rate - the number of people who click on our advert and purchase the product)


We are currently split testing one of our products at two different prices. We want to try to establish which price makes us more profit.

The problem is we are unsure whether to include both CPA and conversion rate in our calculations.


The examples are as follows...

Selling price: £12
Conversion rate: 11%
Profit without the CPA taken account of: £3

Selling price: £15
Conversion rate: 5%
Profit without the CPA taken account of: £5


Because we are driving traffic from the SAME Facebook advert to two different priced offers, we unfortunately only know the CPA for the OVERALL campaign, which is £2.50

Finally, my question: How do we go about calculating which of these prices makes us the most profit???

THANK YOU!!!

Rob.
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October 31st, 2018, 09:49 AM   #2
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You seem to be saying that for every 11 sales at a profit of £3 each, you make only 5 sales at a profit of £5 each.

Also, the campaign cost seems to be unreasonably high. Perhaps you should offer purchasers a reward for recruiting other purchasers.
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October 31st, 2018, 12:12 PM   #3
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Yes, I am saying that...but the CPA plays a part in the profitability too....that's the tricky part...

(And we're more than happy with the advertising cost and strategy!)

Thanks,

Rob.
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October 31st, 2018, 05:43 PM   #4
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Has the campaign already ended? If not, how do you know the overall CPA?

You asserted that the CPA is a product of the conversion rate, but there are two conversion rates, and you are charged per impression, regardless of which price is paid for the product. Without further information, there's no unique "correct" way of recalculating the profit to take the CPA into account separately in relation to the two prices.
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