Varos Glossary

Cost Per Sale

What is the Cost per Sale?

A company's cost per sale (CPS) is the sum total of all the money it spends on advertising divided by the number of product sales it generates. It's a kind of internet advertising in which the advertiser only forks out cash when the ad directly leads to a sale. Marketing at a cost per sale, the cost per purchase formula, the average cost per sale, the cost of sale calculation, and pay-per-sale advertisements are all topics covered below.

  • Cost-per-sale marketing often referred to as pay-per-sale advertising, is a kind of internet promotion in which the advertiser only hands out payment when a sale is produced directly as a result of the ad. This type of marketing is also known as pay-per-sale advertising.

It's an approach to marketing known as "pay-for-performance," and its primary goal is to increase a company's bottom line by increasing sales.

Cost Per Purchase Formula

A customer's lifetime value may be determined by multiplying the cost per purchase by the channel's cost-per-acquisition ratio. A campaign's ROI may be determined by dividing its entire cost by the total number of sales generated by the campaign. 

This is the formula:

  • Cost Per Purchase= Total Expenditure / All Orders

Average Cost Per Sale

The cost per sale is the typical expense incurred by a company for each sale that results from its advertising activities. The ROI is determined by dividing the entire cost of the marketing campaign by the total number of sales achieved.

The whole marketing budget divided by the total number of sales yields the average cost per acquisition.

Calculating the Cost of Sale

Including all marketing, manufacturing, and administrative expenses, the cost of sale is the overall cost spent by a firm in order to accomplish a sale. It's crucial in figuring out how profitable a company is and where savings might be made. Use this method to determine your selling price:

  • Cost of sale= Purchasing Price + Advertising Expenses + Operating Expenses

Pay Per Sale Advertising

Digital advertising that charges solely for sales made as a direct consequence of the ad is known as PPC advertising. For companies, this strategy is ideal since they only spend money when they see an increase in sales. Affiliate marketing, influencer marketing, and pay-per-click advertising are all examples of pay-per-sale advertising strategies.

The Pros of Pay-Per-Click Advertising

  • Performance- An example of a kind of advertising known as "performance-based" is "cost per sale" advertising, in which the advertiser only forks out money if and when a sale is made. This ensures that the company's advertising is directed toward its primary goal of making money.
  • Cost-effective- Profitable Since companies only pay for actual sales that come from advertising, cost-per-sale marketing is a great kind of advertising.
  • Increased ROI- A firm only has to pay for the sales that it directly creates when it uses cost-per-sale advertising, which means that the company's return on investment may increase as a result.
  • Targeted advertising- A company's ability to target certain audiences that are more likely to make a purchase may significantly increase the likelihood that the company will generate sales via the use of cost-per-sale marketing.

Key takeaways

  • The cost per sale (CPS) is the total amount spent on advertising as a percentage of total product sales. This kind of online marketing requires payment from the advertiser only in the event that the ad results in a sale.
  • A cost-effective and performance-based advertising approach, cost-per-sale marketing may boost a company's return on investment and help them target specific customers. 
  • The average cost per sale, cost of sale, and cost of goods sold are all metrics that may help organizations improve their marketing strategies for maximum return on investment.