KEY METRICS BEFORE TESTING
Out of all metrics breakeven CPA and breakeven ROA are the two most important to
understand before taking a product to market.
CPA is cost per conversion, in our case we are converting for purchases (cost per
purchase). Figure out what your average profit per order is and that is your breakeven CPA.
Breakeven ROA is the ratio in which spend to revenue will breakeven.
When you’re looking for a product it’s important to understand what type of CPAs and
ROAs you are going to need to be able to be profitable. For example if you have a $5 product
and you wanna market up three times to $15 you only have a $10 CPA this means that you’re
gonna have to get under a $10 CPA in your ad account to be able to be profitable on your front
end margin. Instead I would recommend a beginner to take a $5 product and mark it up to $25
or $20 giving them a $15-$20 margin. It is much easier to achieve a $15 or $20 CPA then it is a
$10 or sub $10. But if your products perceived value is only $9 it clearly won’t work. So you
need to find a product that's going to balance out and makes sense to have a $15-$20 margin,
you can’t just put it there because you want that margin, then you will be over priced
comparatively in that niche. A good way to be able to achieve this is to bundle products together
giving you a bigger margin because of a higher perceived value, while discounting.
Breakeven ROA is just as important if not more important. If your breakeven ROA has a
2.1 it is going to be much more difficult to become profitable than if your breakeven was around
a 1.4. Make sure you count for everything when you’re calculating your breakevens, calculate
processing fees, shipping, product cost etc. etc. As a beginner I would definitely recommend
being below 1.6 to 1.7 breakeven ROA, now that being said it doesn’t mean just because your
product is at a 2.0 breakeven it’s not gonna work. Some products will function at a 3.0 ROA, on
a higher ticket offer if it’s $100 and it cost 50 you have a $50 margin if the perceived value is
there and you can make it impulsive then it will do great but these are just kind of metrics to
keep in mind and to make sure it easier as a beginner.