Why should average order value (AOV) be carefully considered when implementing a target CPA bidding strategy?

Average order value (AOV) should be carefully considered when implementing a target CPA bidding strategy because it directly impacts the profitability and overall return on ad spend (ROAS) of the campaign. Target CPA bidding aims to achieve a specific cost per acquisition (CPA), regardless of the revenue generated from each conversion. If the AOV is significantly lower than the target CPA, the campaign may be generating conversions at the desired cost, but the revenue generated from those conversions may not be sufficient to cover the advertising costs and other business expenses. For example, if the target CPA is $50 and the AOV is only $40, the campaign is losing money on each conversion. Conversely, if the AOV is significantly higher than the target CPA, there may be an opportunity to increase the target CPA to drive more traffic and conversions while still maintaining a profitable ROAS. Analyzing AOV in conjunction with CPA allows for a more informed bidding strategy that takes into account the overall profitability of the campaign, not just the cost of acquiring a customer. Therefore, AOV should be a key factor in setting and adjusting the target CPA to ensure that the campaign is generating a positive return on investment.